Medicare would increase physician payments by 1.5 percent for 2006, permanently fix the formula by which those payments are calculated and implement a pay-for-performance system under proposed legislation introduced July 28.
The legislation, the Medicare Value-Based Purchasing for Physicians’ Services Act of 2005, or H.R. 3617, contains provisions advocated by the AAFP and represents an improvement over earlier pay-for-performance bills, according to Kevin Burke, director of the Academy's Division of Government Relations.
For example, Burke said, H.R. 3617 would eliminate the sustainable growth rate formula on which current physician payment is calculated and replace it with the Medicare economic index. In 2007, physician payment would be tied to meeting performance measures. A one-time, 1.5 percent payment increase in 2006 would help stabilize medical practices' incomes and increase the feasibility of investing in the technology, staff and training necessary to participate in pay-for-performance, also known as P4P.
Previous legislation, such as the Medicare Value Purchasing Act, S. 1356, would have required physicians to invest in P4P preparation in an environment of falling payments -- a fact pointed out by AAFP President Mary Frank, M.D., of Mill Valley, Calif., in a July 1 AAFP news statement.
Board Chair Michael Fleming, M.D., of Shreveport, La., agreed that in this respect, the latest bill is superior to earlier proposals.
"Your proposed legislation represents major progress in the development of a successful pay-for-performance system in Medicare," said Fleming in a July 28 letter to Rep. Nancy Johnson (PDF file: 2 pages / 220 KB. More about PDFs.), R-Conn., sponsor of the bill and chair of the House Ways and Means Health Subcommittee. "As you have said at hearings and other occasions, pay-for-performance programs cannot work when payments are consistently declining. Eliminating the sustainable growth rate and basing payment on the Medicare economic index, which actually reflects what it cost physicians to provide health care services, are two crucial steps toward an equitable Medicare system."
The bill calls for implementing P4P by first turning to a consensus-building organization, such as the National Quality Forum. The NQF would establish efficiency and quality measures after reviewing care standards submitted by medical specialty organizations.
In 2007, Medicare would base physician payment on the MEI less 1 percent. Physicians who meet quality and efficiency standards established by HHS would earn the additional 1 percent.
Although an improvement over previous proposals, H.R. 3617 does raise some questions, according to Fleming. For example, the bill envisions "a very aggressive implementation schedule" that could complicate physicians' ability to participate. The Academy supports a three-stage implementation that bases payment on:
- reporting on specific structural measures, such as the purchase of health information technology and implementation of a patient registry for specific diseases;
- participating in data collection to establish a baseline against which the practice would be measured; and
- progressing toward or achieving specific performance measures.
Moreover, the bill calls for rating physicians according to how well they meet efficiency and performance measures. That provision could have the unintended consequence of encouraging some physicians to attempt to improve their rating by dropping patients who have complex or chronic conditions, said Burke.
Fleming agreed in his letter. "A system that creates a competition between providers is fraught with negative implications for health care improvement," he said in his letter to Johnson. "Instead, CMS should be given the responsibility to report publicly the results of data collected that shows how well a physician practice is or is not meeting relevant performance measures."
