This is the May 5, 2008, issue of Elder Law FAX, a free newsletter published by the Elder Law Practice of Timothy L. Takacs.

Medicare Physician Group Practice Demonstration Aims to Improve Health Care Quality

Recently the federal government announced the Medicare Part A hospital insurance trust fund will be exhausted in 2019. Although almost no one expects that Medicare will be unable to pay its bills, for years policy makers have been cognizant of the financial difficulties facing the Medicare program.

One key concern for the long-term solvency of Medicare pertains to the way it pays health care providers for their services. Most providers bill, and Medicare pays them, under the so-called "fee-for-service" arrangement (FFS). Because the FFS payment system generally does not encourage health care providers to make efficient use of resources, encourage coordination of services paid under the Medicare Part A program with payments made under Part B, or encourage improvements in quality of care, many experts believe that FFS is contributing to the rapid growth of Medicare spending.

In the Medicare law enacted in 2000, Congress mandated the U. S. Centers for Medicare & Medicaid Services (CMS), the agency that oversees the Medicare program, conduct demonstrations to test incentive-based alternative payment methods for physicians reimbursed under Medicare FFS. Started in April 2005, the Physician Group Practice (PGP) Demonstration was the first of several physician pay-for-performance demonstrations CMS has implemented.

In line with Medicare law's mandate and the ongoing concerns about growth in Medicare spending for physician services, CMS's PGP Demonstration aims to encourage the coordination of Part A and Part B services, promote efficiency through investment in administrative processes, and reward physicians for improving health outcomes.

CMS solicited participation from physician practices across the United States, and selected 10 physician group practices with at least 200 or more physicians that were multispecialty physician groups, which had the capacity to provide a variety of types of clinical services. Collectively, these are the biggest providers of primary care services for more than 220,000 Medicare FFS beneficiaries.

Participating PGPs receive incentives to provide efficient and improved health care to Medicare FFS patients. Both quality and cost-efficiency based performance indicators are used to calculate the performance payments ("Pay for Performance" or, sometimes, "P4P).

A report issued recently by the Commonwealth Fund indicates that the PGP Demonstration Project is headed in the right direction: not only are physicians being paid for performance, patient care is improving as well.

During the first year of the PGP project, the quality of care performance targets focused on the 10 diabetes quality measures. All the participating PGPs improved the clinical management of their diabetes patients. Specifically, all 10 groups achieved benchmark or target performance levels on at least seven of the 10 diabetes quality measures.

Moreover, two PGPs--Forsyth Medical Group in North Carolina and St. John's Health System in Missouri--met all 10 benchmarks. In addition, all groups increased their scores on at least four diabetes measures, eight groups increased their scores on at least six measures, and six groups increased their scores on nine or more measures.

According to the Commonwealth Fund report, the PGP program, if implemented throughout the U. S. health care system, promises a number of opportunities for changing patient care:

 1) Increasing Patient Engagement. The PGPs believe that involving patients more deeply in pre-visit processes and self-management support has the potential to improve quality while containing costs.

2) Expanding Care Management. Demonstration PGPs are now focusing on heart failure care management since it has the potential for significant cost savings through reduced hospital admissions. Many PGPs are intensifying their efforts through daily telemonitoring programs, nurse telephone management, patient education, and other interventions.

3) Improving Care Transitions. Health care providers historically have given too little emphasis on care transitions, partially because clinical responsibilities and associated reimbursements are often divided between providers. The demonstration incentives reward PGPs for reducing overall Medicare spending, however, so they have a financial incentive to better manage the many care transitions that may be required for treatment of chronic diseases.

4) Expanding the Roles of Non-Physician Providers. Demonstration staff are also focusing on expanding non-physician provider roles in an effort to improve clinical workflows. They have studied redesigning primary care practice to increase the use of non-physicians, such as through greater use of planned visits; integrating care management into clinical practice, such as delegating some types of patient testing or exams (e.g., diabetic foot exams) to non-physicians; expanding patient education; and providing greater data support to physicians to enhance the quality and cost-effectiveness of their clinical work.

The Commonwealth Fund report can be viewed online at http://www.commonwealthfund.org/publications/publications_show.htm?doc_id=668157.