MedPAC Urged to Give Physicians Incentive Payments

Family physicians and their primary care colleagues should receive a 5 percent to 10 percent incentive payment for meeting quality standards under any Medicare pay-for-performance program approved by Congress.

That was the recommendation put before the Medicare Payment Advisory Commission Sept. 8 by Samuel Nussbaum, M.D., chief medical officer for WellPoint, a national medical health plan company. Nussbaum was joined by Jack Ebeler, chief executive officer of the Alliance of Community Health Plans, in calling for an infusion of new money into any pay-for-performance system.

Their statements reflect an early glimmer that health care policy-makers are beginning to recognize the value of primary care, particularly for patients with chronic conditions, said Jerome Connolly, senior government relations representative in the AAFP Division of Government Relations. It also indicates that health policy-makers acknowledge that primary health care professionals must be appropriately paid for their services, he added.

Nussbaum's and Ebeler's recommendations, made during testimony presented during a MedPAC forum on pay-for-performance, closely align with the AAFP policy on pay-for-performance. That policy states "P4P incentive programs should utilize new money funded by using a portion of the projected health plan savings. There should be no reduction in existing fees paid to physicians as a result of implementing a P4P program."

The section on physician services (PDF file: 16 pages / 130 KB. More about PDFs.) in MedPAC's March 2005 report to Congress recommended a 2.7 percent increase in physician payment for 2006. A section of the report on strategies to improve care (PDF file: 43 pages / 284 KB. More about PDFs.) also called for establishing a pay-for-performance system that would be budget-neutral. Such an approach would effectively reduce all physicians' payments by a certain percentage and then would create a fund from which incentives would be distributed to those who met quality standards.

MedPAC's recommendations, if implemented, would hamper a successful outcome, Nussbaum told MedPAC. Payment reductions to establish an incentive fund would discourage physicians from investing in health information technology, he said. And incentives of only 1 percent to 2 percent would not be enough to encourage physicians to improve care.

Instead, Nussbaum recommended payment increases of 5 percent to 10 percent for physicians and 2 percent for hospitals that meet performance standards.

"As many of us who have been in the hospital world know, that 1 or 2 or 3 percent matters significantly when you're dealing with billion-dollar revenues and budgets," he said. "But for physicians, 1 or 2 percent for those practices, the doctor will say 'I can't afford the electronic health record system, medical record system for $50,000.' So, for them, a few thousand dollars or a few hundred dollars would not drive the right behaviors, I fear."

Moreover, the incentives should be funded by "new money," according to Nussbaum and Ebeler.

WellPoint's experience indicates that when implementing preventive health care quality measures, "there were more than sufficient savings to not only pay the increase of 5 to 10 percent to physicians, but actually there was additional money that went back to the plan and went back to our employers," said Nussbaum.

Ebeler agreed. "We have a position on this that is to get people invested in it; it would be best to have new money."