Statement to the Ways and Means Health Subcommittee on Pay for Performance in Medicare

To Be Submitted for the Record To the House Ways and Means Subcommittee on Health Concerning Value Based Purchasing of Physician Services

This statement is submitted on behalf of the 94,000 members of the American Academy of Family Physicians to the House Ways and Means Subcommittee on Health as part of its hearing on Medicare Physician Reimbursement Issues, scheduled for Thursday, July 20, 2005. The AAFP greatly appreciates the work that this subcommittee has undertaken to examine how Medicare pays for physician services and we share the subcommittee’s concerns that the current system is unproductive. This is why the AAFP supports the restructuring of Medicare payments to reward quality and care coordination. This restructuring must be built on a fundamental reform of the underlying fee-for-service system.

AAFP currently has over 57,000 members in active practice, the vast majority of whom are in small and medium size practices, not large groups. We anticipate that this will be the typical construct of family medicine well into the future. Most people in this country receive the majority of their care from physicians in small and medium size ambulatory care settings. Currently about a quarter of all office visits in the U.S are to family physicians, and the average family practice has about a quarter of patients who are Medicare beneficiaries. Implementing value based purchasing or pay for performance in the Medicare program has tremendous implications for millions of patients and for the specialty of family medicine, and AAFP is therefore committed to involvement in the design of a new pay-for-performance program that meets the needs of patients and physicians.

The AAFP supports moving to pay for performance in the Medicare program with the goal of continuously improving care of patients. As we recently stated in a joint letter to Congress with our colleague organizations ACP, AAP and ACOG, “we believe that the medical profession has a professional and ethical responsibility to engage in activities to continuously improve the quality of care provided to patients… Our organizations accept this challenge.” We have committed to work toward transformation of medical practice, to strengthen the infrastructure of medical practice to support pay for performance, and to engage in development and validation of performance measures. While several specific issues remain that must be addressed in implementing pay for performance in Medicare, AAFP has a framework for a phased in approach for Medicare.

AAFP is involved in several efforts that are fundamental to moving toward a pay for performance system.

First of all, we know that the development of valid, evidence-based performance measures is imperative for a successful program to improve health quality. The AAFP participates actively in the development of performance measures through the Physician Consortium for Performance Improvement. We believe that multi-specialty collaboration in the development of evidence-based performance measures through the consortium has yielded and will continue to yield valid measures for quality improvement and ultimately pay for performance.

The AAFP was the first medical specialty society to join the National Quality Forum (NQF). And along with ACP, AHIP and AHRQ, the AAFP is a founding organization of the Ambulatory care Quality Alliance (AQA). However, it is important to distinguish between the role of the NQF and that of AQA. With its multi-stakeholder involvement and its explicit consensus process, the NQF provides essential credibility to the measures that it approves – measures developed by the Physician Consortium, NCQA and others. The AQA’s purpose is to determine which of the measures approved through the NQF consensus process should be implemented initially (the starter set), and which should then be added so that there is a complete set of measures, including those relating to efficiency, sub-specialty performance, and patient experience. Having a single set of measures that can be reported by a practice to different health plans with which the practice is contracted is critical to reducing the reporting costs borne by medical practices. Measures that ultimately are utilized in a Medicare pay-for-performance program should follow this path.

Health information technology effectively utilized in the physician’s office is necessary to the success of quality improvement and pay-for-performance programs. We have learned from the Integrated Healthcare Association’s (IHA) experience in California that physicians and practices that invested in EHRs and other electronic tools to automate data reporting were both more efficient and achieved better quality results, and did so at a more rapid pace than those that lacked advanced HIT capacity. The AAFP created the Center for Health Information Technology (CHiT) in 2003 to facilitate adoption and optimal use of health information technology with the goal of improving the quality and safety of medical care and increasing the efficiency of medical practice. We now estimate that over 20 percent of family physicians are utilizing EHRs in their practices, which is twice the number from this time last year. Through a practice assessment tool on the CHiT website, physicians can assess their readiness for EHRs. We know from the HHS-supported EHR Pilot Project conducted by the AAFP that practices that had a well defined implementation plan and analysis of workflow and processes had greater success in implementing an EHR.

We also know that cost can be a barrier to IT adoption and have worked aggressively with the vendor community through our Partners for Patients Program to lower the price point. The AAFP’s Executive Vice President serves on the Certification Commission for Health Information Technology (CCHIT) which certifies EHRs. The AAFP sponsored the development of the Continuity of Care Record standard, now successfully balloted through the American Society for Testing and Materials (ASTM). We initiated the Physician EHR Coalition, now jointly chaired by ACP and AAFP, to engage a broad base of medical specialties to advance EHR adoption in small and medium size ambulatory care practices. Our Board of Directors has set an ambitious goal of having 50 percent of family physicians using EHRs by the end of 2005. We are committing our organizational resources to assist our members achieve this goal.

The AAFP quality initiatives span efforts to emphasize measures like quality improvement, office redesign, and integration of the chronic care model. Here are two examples. Through our Practice Enhancement Program, teams of physicians and their office staff participate in an intense educational experience accompanied with pre and post course work to acquire the practical tools, skills and knowledge to implement the planned care model into their everyday practices. Through the web-based METRIC (Measuring, Evaluating and Translating Research into Care) program, family physicians assess their systems in practice, review charts and enter patient data, receive feedback on their performance, implement a quality improvement plan, re-measure and reassess. Two module topics currently are available: diabetes and coronary artery disease.

The AAFP takes seriously the responsibility to work with our members to continuously improve their clinical care and office infrastructure to better meet the needs of their patients.

While these innovations are exciting and hold great promise, the environment in which physicians practice is challenging at best. And it will come as no surprise that family physicians, while they enjoy caring for their patients, are not enthusiastic about the Medicare program. This program has a history of disproportionately low payments to family physicians, largely because it is based on a reimbursement scheme that is designed to reward volume and to discourage innovations in the provision of care. In general, the prospect of annual cuts in payment is discouraging. The regulatory approach is punitive, and physicians live in fear of violating rules they don’t even know about. In the current environment, physicians know that they will face a 4.3-percent cut in January 2006, and that without Congressional action to repeal the Sustainable Growth Rate formula and create a structure for sustainable financing, they face steadily declining payments into the foreseeable future, even while their practice costs are increasing. To overlay a pay-for-performance program in Medicare, therefore, poses a unique set of challenges and it must be done thoughtfully and carefully because of its size and complexity.

Our consistent message to Congress is that if it is not done well, a value-based purchasing program will not only fail to improve health care quality but could unravel the preparation and progress that medical specialty societies have carefully undertaken.

“Doing it well” means phasing in a value-based purchasing program that provides incentives for structural and system changes, that encourages reporting of data on performance measures and ultimately rewards continual improvements in clinical performance. Yet, moving the Medicare program in this direction cannot be accomplished in an environment of declining physician payment; Congress must take steps to stabilize physician payment through positive updates, as proposed by MedPAC. Furthermore, because of its financing structure with Part A and Part B, we believe it is important that Congress require a report on Medicare program savings resulting from Part B quality improvement efforts so that physicians are not penalized into the future.

The following is a proposed framework for phasing in a Medicare pay-for-performance program for physicians that is designed to improve the quality and safety of medical care for patients and to increase the efficiency of medical practice.

Phase 1:
All physicians would receive a positive update in 2006, based on recommendations of MedPAC, reversing the projected 4.3-percent reduction. Congress should establish a floor for such updates in subsequent years.

Phase 2:
Following completion of development of reporting mechanisms and specifications, Medicare would encourage structural and system changes in practice, such as electronic health records and registries, through a “pay for reporting” incentive system such that physicians could improve their capacity to deliver quality care. The update floor would apply to all physicians.

Phase 3:
Assuming that physicians have the ability to do so, Medicare would encourage reporting of data on evidence-based performance measures that have been appropriately vetted through mechanisms such as the National Quality Forum and the Ambulatory Care Quality Alliance. During this phase, physicians would receive “pay for reporting” incentives; these would be based on the reporting of data, not on the outcomes achieved. The update floor would apply to all physicians.

Phase 4:
Contingent on repeal of the SGR formula and development of a long term solution allowing for annual payment updates linked to inflation plus funds to provide incentives through pay for performance programs, Medicare would encourage continuous improvement in the quality of care through incentive payments to physicians for demonstrated improvements in outcomes and processes, using evidence-based measures such as the provision of preventive services, performing HbA1c screening and control, prescribing aspirin to diabetics, etc. The update floor would apply to all physicians.

This sort of phased-in approach is crucial for appropriate implementation. While there is general agreement that initial incentives should foster structural and system improvements in practice, decisions about such structural measures, their reporting, threshold for rewards, etc. remain to be determined. The issues surrounding collection and reporting of data on clinical measures are also complex. For example, do incentives accrue to the individual physician or to the entire practice, regardless of size? In a health care system where patients see multiple physicians, to which physician are improvements attributed?

The program must provide incentives – not punishment – to encourage continuous quality improvement. For example, physicians are being asked to bear the costs of acquiring and using health information technology in their offices, with benefits accruing across the health care system – to patients, payors, insurance plans, etc. Appropriate incentives must be explicitly integrated into a Medicare pay-for-performance program if we are to achieve the level of infrastructure at the medical practice to support collection and reporting of data.

The AAFP appreciates the opportunity to share our enthusiasm for, yet caution about, a Medicare pay-for-performance program.