The federal government—particularly the Centers for Medicare and Medicaid Services (CMS)—is moving faster than anyone thought possible to implement “value-based purchasing,” which ties payment to quality of care and other outcomes. CMS has a congressional mandate to make value-based purchasing a reality by fiscal year 2009.
“As Congress looks at cutting physician payments, they’re very open to alternative payment methods like pay-for-performance,” says Patrick Torcson, MD, MMM, FACP, chair of SHM’s Performance and Standards Task Force, medical director, hospital medicine, St. Tammany Parish Hospital, Covington, La. “There’s tremendous political will behind this.”
Here is an overview of three CMS demonstration programs in various stages that will determine which new payment models may shape your hospital budget—and your salary—in the future.
CMS Gainsharing Demo: An Update
As reported in the October issue of The Hospitalist, CMS has been charged with establishing six three-year gainsharing pilot programs, including two in rural settings, by January 1, 2007.
CMS invited applications for the programs in mid-September, and applications were due by November 17. The six participating hospitals will provide gainsharing payments to physicians who help to save costs. The gainsharing payments will be based on net savings. Each hospital will propose multiple approaches that will both save costs and improve quality and efficiency of care.
“Gainsharing could be a better quality incentive payment model for hospitalists, [but] maybe not for other specialties,” says Dr. Torcson.
New “Gainsharing Plus” Demo—Participation Encouraged!
During Legislative Advocacy Day at the SHM Annual Meeting in Washington, D.C., in May, SHM members personally urged policymakers to broaden the concept of gainsharing and initiate demonstration projects like this that promote physician and hospital collaboration in improving care.
Four months later (in early September) CMS surprised the healthcare community with the announcement of an additional three-year demonstration program that goes beyond the traditional concept of gainsharing—one that will examine whether allowing hospitals to provide financial incentives for physicians to support better care can improve patient outcomes without increasing costs.
“SHM was pleased to hear that CMS was offering this program because we support the development of these payment models,” says Dr. Torcson.
Under the program, known as the Physician-Hospital Collaboration Demonstration (PHCD), hospitals would be paid their usual inpatient rate for the patients’ care but would be allowed to pay physicians a portion of the savings resulting from quality improvement and efficiency initiatives.
In the CMS release announcing this demonstration, former CMS Administrator Mark B. McClellan, MD, PhD, was quoted as saying, “The most costly and intensive physician services are provided in hospitals, yet our payment systems do not support steps by hospitals and doctors to work together to improve care. This demonstration program will support efforts to track and improve the overall episode of patient care, including follow-up and longer-term outcomes.”
The program will begin in 2007, and applications are due by end of business on January 9, 2007. SHM encourages members to explore the possibility of applying for one of the demonstrations with their group and their hospital administrators. Details on the PHCD are available at www.cms.hhs.gov (go to the “Medicare” page and then click the “Demonstration Projects & Evaluation Reports” page. Then click “Medicare Demonstrations).”
Of particular interest is the fact that CMS will allow participating hospitals to set the indicators to be measured. “What they’re asking for are proposals from the hospitals as to what they’ll explore—basing the program on whatever quality indicators the hospital can [use to] measure and demonstrate cost savings,” says Dr. Torcson. “CMS is providing no details regarding specific performance measures.”
Organizations eligible for the PHCD include physician groups, integrated delivery systems (IDSs), and regional coalitions of physician groups. A hospital may be included if it has an affiliation agreement with an eligible physician group. CMS has stated that preference will be given to projects developed and implemented by a consortium of physician groups and their affiliated hospitals. No more than 72 hospitals across all projects will be included in the demonstration.
“This raises the bar that any physician group has to be pretty far along already in measuring quality indicators and performance reporting,” says Dr. Torcson. “It will take a lot of infrastructure to report, measure, [and so on]. I’ll be very impressed with any group that is that far along with performance measurement and reporting. I hope a hospitalist group can be among those that step up and apply.”
Dr. Torcson believes that, while CMS did not specify hospitalists, a hospital medicine group would be uniquely positioned to participate. “Hospitalists are perfect for this,” he emphasizes.
Premier Hospital Demo: Mission Accomplished!
CMS’ first pay-for-performance demonstration program is complete. The Premier Hospital Quality Incentive Demonstration officially ended in September. CMS partnered with Premier, Inc., a nationwide alliance of not-for-profit hospitals, for the three-year demo. At the end of each of the three years, CMS rewarded the top-performing hospitals with cash bonuses. Performance was based on 33 evidence-based quality measures for inpatients with heart attack, heart failure, pneumonia, coronary artery bypass graft, and hip and knee replacements. (The individual measures were compiled into an overall quality score for each clinical condition.)
“I wish all our projects went this well,” said Mark Wynn, director of the Division of Payment Policy Demonstrations, CMS. “We’re absolutely delighted. This program shows the efficacy [of] using pay-for-performance in hospitals.”
According to analysis from Premier, Inc., if every patient in the country with pneumonia, heart bypass, acute myocardial infarction, and hip and knee replacement in 2004 had received most or all (76% to 100%) of a set of widely accepted care processes, it could have resulted in nearly 5,700 fewer deaths, 8,100 fewer complications, 10,000 fewer readmissions, and 750,000 fewer days in the hospital. In addition, hospital costs could have been as much as $1.35 billion lower.
What’s next? Wynn says that CMS is “actively looking at lessons we can use” as the agency prepares a report to be presented to Congress in 2007. “We’ll make a specific recommendation regarding pay-for-performance.”
The Future Is Coming
“Value-based purchasing is here to stay,” says Dr. Torcson. “For the significant amount of money spent on healthcare, you have to see a certain level of quality in return. This hasn’t been so obvious in healthcare. Healthcare is just starting to look like the free market in this regard. There’s a place for both pay-for-performance and gainsharing. The CMS budget is big enough for both.”
SHM is involved in pushing for these changes and wants to prepare members for any new measurement criteria that develop. “We would like for the work of the SHM Performance and Standards Task Force to result in an SHM performance agenda,” says Dr. Torcson. “We want to be able to tell members what to expect when all of these demos become a reality and be able to provide relevant information on designing their programs so that they’re ready.” TH
Jane Jerrard regularly writes “Public Policy.”