Doctor “Pay to Perform” Launched by Medicare

Laboratory testing plays a key role in guidelines measuring outcomes

CEO SUMMARY: Medicare’s just-announced physician “pay-for-performance” program will be a positive development for laboratories and pathologists. One consequence is that physicians will be measured on how effectively they use recommended lab tests in certain areas of care. This will give physicians a motive to work with laboratories which offer added-value lab testing services.

HEALTHCARE’S 800-POUND GORILLA just barged into another crowded room. On January 31, 2005, Medicare announced its first “pay-for-performance” program for physicians.

The design of this program should be beneficial to clinical laboratories. At the same time, however, this pay-for-performance program is another step closer to the time when laboratories and pathologists will participate in their own pay-for-performance arrangements—both with Medicare and private payers.

Ten Large Medical Groups

The Center for Medicare and Medicaid Services’ (CMS) new initiative is a demonstration program for physician group practices. Ten large medical groups are participating. Each group has at least 200 physicians. Collectively, these ten groups represent 5,000 physicians serving an estimated 200,000 Medicare beneficiaries.

Groups will continue to receive fee-for-service reimbursement for their Medicare patients. During a three-year period, performance payments from Medicare will be funded by the savings attributable to improved patient care.

These savings will be calculated by comparing the physician groups’ improvement and comparing that to Medicare’s average growth rate in spending for the region around that participating physician group. A bonus of up to 5% of the measured savings in the pool will be paid to the physician group. Calculated on this basis, Medicare’s physician pay-for-performance plan is expected to be revenue neutral.

Officials at CMS hope the plan provides incentives for the medical groups to “use electronic records and other care management strategies that, based on clinical evidence and patient data, improve patient outcomes and lower total medical costs.” The emphasis is on early detection and preventative care, to prevent chronic dis- ease complications and avoidable hospitalizations while improving the overall quality of care.

The quality measures to be used in this program are listed in the table on page 14, opposite. There are 32 measures that address common chronic illnesses as well as preventative diseases. CMS developed these measures in concert with the American Medical Association’s Physician Consortium for Performance Improvement, the National Committee for Quality Assurance (NCQA—the health insurance industry’s accrediting body), and the National Quality Forum.

Ten Medical Groups

The ten medical groups participating in this program were selected on a competitive basis. The list is published in the sidebar opposite, on page 14. It reflects geographical diversity as well as medical groups functioning in a variety of healthcare settings, such as integrated delivery systems (Geisinger Health System, Danville, Pennsylvania), academic centers (University of Michigan Faculty Group Practice, Ann Arbor, Michigan), and stand-alone clinics (The Everett Clinic, Everett, Washington).

There is a key issue in Medicare’s physician pay-for-performance program that will impact the laboratory industry. That issue involves the specific performance measures used to evaluate physician effectiveness. Many of these measures will require the physician to order the right test at the right time for his/her patients—then act appropriately based on the lab test data and other clinical indications.

THE DARK REPORT recommends that laboratory administrators and pathologists study this list of 32 quality measures. It is highly likely that these specific quality measures will eventually be embraced by private health insurance companies and employers funding health benefits.

Medicare, the AMA, the NCQA, and the National Quality Forum identified these 32 measures as having the best potential to achieve two goals: 1) to improve healthcare outcomes by a significant amount; while, 2) at the same time reducing the overall cost of care.

Thus, as Medicare’s physician pay-for-performance program unfolds over the next three years, it will be closely monitored. Successes—and hopefully breakthroughs—in treating these common chronic illnesses will likely motivate Medicare, private payers, and employers to introduce these quality measures to other physician groups throughout the country.

For the laboratory industry, this is a beneficial development. Any number of these quality measures rely heavily on the proper use of testing and effective follow-up by the physician. In both subtle and overt ways, this provides a motive and an incentive for physicians to rely more heavily on the laboratory medicine expertise of pathologists, Ph.D.s, medical technologists, and other specialists in laboratory medicine.

THE DARK REPORT believes another upcoming event may have some links to this pay-for-performance program. On April 29-30, the Institute for Quality in Laboratory Medicine (IQLM) will publicly announce its national quality indicators for laboratory services. This will take place at a public meeting in Atlanta on those dates.

Lab Quality Indicators

The IQLM is an organization incubated by the Centers for Disease Control and Prevention (CDC). It is known that the IQLM development team developing the laboratory quality indicators will utilize a number of existing measures already tracked in the healthcare system.

Collectively, these initiatives demonstrate how swiftly the healthcare system is moving to give providers incentives to improve healthcare outcomes.

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