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CHQPR Calls for Delay in Medicare Value-Based Payment Modifier and Urges Rapid Implementation of True Physician Payment Reforms

September 10, 2014 - Based on a detailed analysis showing "serious problems...that could harm the most vulnerable Medicare beneficiaries while failing to achieve Congressional goals of promoting higher quality, more affordable healthcare," the Center for Healthcare Quality and Payment Reform (CHQPR) is urging the Centers for Medicare and Medicaid Services (CMS) to drop its plans to use cost measures in the Value-Based Payment Modifier in 2015. Rather than cutting physician payments based on flawed measures of efficiency, CHQPR recommends that CMS use its statutory authority to implement true payment reforms that would enable physicians to improve care delivery in ways that would reduce spending without harming patients.

"At a time when payment reform is urgently needed in the Medicare program, the cost measures in the Value-Based Payment Modifier would make the payment system worse, not better," said Harold D. Miller, President and CEO of the Center for Healthcare Quality and Payment Reform. "Penalizing physicians for costs they cannot control and making it more difficult for seniors with health problems to obtain the care they need is not what Congress meant by 'value-based payment.' Instead, CMS should be implementing the kinds of payment systems physicians need to deliver higher-quality, lower-cost care."

In detailed comments submitted to CMS on its proposed regulations for the Value-Based Payment Modifier, CHQPR described how the cost measures CMS is planning to use would:

  1. Discourage physicians from accepting new patients who have not been receiving adequate primary and preventive care;
  2. Discourage physicians from providing care coordination services for patients who have complex problems and who receive services from multiple physicians and other providers;
  3. Discourage physicians from caring for patients who are poor, have functional limitations, or live in rural areas;
  4. Penalize physicians for keeping their patients healthy;
  5. Penalize physicians for services they did not deliver or order, including services they were not even aware their patients received;
  6. Fail to hold physicians accountable for delivery of unnecessary and inappropriate services;
  7. Penalize physicians for delivering recommended services to their patients;
  8. Penalize physicians for treating patients with injuries, cancer, acute illnesses, and complications resulting from care by other providers;
  9. Reduce payments to primary care physicians relative to specialists; and
  10. Penalize physicians for working in particular types of multi-specialty groups.

"These problems are caused by serious flaws in the attribution and risk adjustment methodologies CMS is using for assigning patients and costs to physicians," said Miller. "In fact, the methodology violates the requirements established by Congress for adequate risk adjustment in the Value-Based Payment Modifier. Since Congress has not required implementation of the Value-Based Payment Modifier until 2017, we urge CMS to delay implementation of at least the cost measurement components of the Value-Based Payment Modifier, if not the entire Modifier program, until then."

Although CHQPR provided CMS with methods of solving the most serious problems with the cost measures, it emphasized that no matter what improvements are made to the methodology, the Value-Based Payment Modifier will do relatively little to improve quality or reduce costs because it does not solve the fundamental problems in Medicare's current methods of paying physicians and other providers.

"The Value-Based Payment Modifier merely adjusts payment amounts rather than fixing the underlying fee-for-service system. CMS must move more quickly to implement completely different payment systems - bundled payments, warrantied payments, episode payments, condition-based payments, and global payment - that will enable physicians to deliver better quality care at lower cost," said Miller.

Miller noted that Congress has already given CMS the authority to implement better payment models, not just through the Center for Medicare and Medicaid Innovation, but as voluntary options for physicians and other providers in the regular Medicare program. Section 1899(i)(3) of the Social Security Act authorizes CMS to implement 'any payment model that the Secretary determines will improve the quality and efficiency of items and services furnished under this title' for groups of providers who are 'willing to become accountable for the quality, cost, and overall care' of Medicare beneficiaries assigned to them.

"Unfortunately, CMS has failed to fully implement this provision of the law," said Miller. "The only thing CMS has done to implement Section 1899 is create a shared savings payment system that has the same problems as the Value-Based Payment Modifier. It fails to remove the serious barriers to higher-value care delivery created by the current Medicare payment system and it uses the same flawed attribution and risk adjustment methodologies that CMS is proposing to use in the Value-Based Payment Modifier."

"Instead of adding more and more penalties to the payment system, CMS should work in partnership with physicians and other healthcare providers to design and implement payment changes that will support higher-quality, lower-cost care," Miller said. "By removing the current barriers physicians face in delivering higher-value care, CMS can create a win-win-win: better care for beneficiaries and lower spending for Medicare while maintaining the financial viability of physician practices, hospitals, and other healthcare providers."

Examples of the problems caused by the Value-Based Payment Modifier and methods of solving them are contained in the detailed letter CHQPR sent to CMS Administrator Marilyn Tavenner. Additional information on the problems with the "value-based purchasing" systems being used by Medicare and other payers and a description of how to move to true value-based payment systems are available in the CHQPR report titled Measuring and Assigning Accountability for Healthcare Spending: Fair and Effective Ways to Analyze the Drivers of Healthcare Costs and Transition to Value-Based Payment.

Six Serious Problems with "Value Based" Purchasing and How to Solve Them

Both patients and healthcare providers could be harmed by the measures of healthcare spending Medicare plans to use in its new Value-Based Payment Modifier for physicians and in the Value-Based Purchasing Program for hospitals. Serious problems also exist with the spending measures that many commercial health plans are using to define narrow networks and that both Medicare and commercial health plans are using in various "shared savings" payment contracts with physicians, hospitals, and Accountable Care Organizations.

A report from the Center for Healthcare Quality and Payment Reform - Measuring and Assigning Accountability for Healthcare Spending - explains how the spending measures used in so-called "value-based purchasing" programs can:

  • Inappropriately assign accountability to physicians and hospitals for services they did not deliver and cannot control, while at the same time failing to hold healthcare providers accountable for many of the services they do deliver;
  • Financially penalize physicians and hospitals who care for patients with complex health problems and who deliver evidence-based services to their patients;
  • Fail to provide physicians, hospitals, and other providers with the kind of actionable information they need to identify opportunities to control healthcare spending without harming patients; and
  • Give patients misleading information about which providers deliver lower-cost, higher quality care.

The report details multiple, serious weaknesses in the simplistic "attribution" methodologies Medicare and other payers are currently using to retrospectively assign accountability to a single physician, hospital, or other provider for all of the spending on all of the healthcare services received by a patient over a period of time, regardless of which providers actually delivered those services. For example, under current approaches:

  • Most of the spending that is attributed to a physician usually results from services delivered by other providers.
  • Physicians are assigned responsibility for services new patients receive before the physician first met the patient.
  • Primary care physicians are assigned responsibility for services delivered by specialists to treat serious illnesses such as cancer; and
  • Specialists and hospitals are assigned responsibility for unrelated healthcare problems their patients experience in the future.

The report also describes how the "risk scores" currently used to adjust spending measures fail to recognize important differences in patient needs and can thereby mislabel physicians and hospitals as "inefficient" if they care for patients who have acute illnesses or complex problems.

In addition to documenting the many serious problems with current approaches, Measuring and Assigning Accountability for Healthcare Spending shows how they can be solved. A detailed methodology is presented for assigning accountability to providers for the services they actually can control or influence. The methodology also explicitly identifies which services might be changed in order to achieve the same or better outcomes for patients at a lower cost. In addition, methods are described for comparing providers' performance in treating patients with similar needs rather than trying to use a single, simplistic risk score to "adjust" spending. The report shows how these improved methodologies can use existing data to produce more valid, reliable, comprehensive, and actionable measures than those currently being used.

Better ways of measuring and assigning accountability for spending are necessary but not sufficient for achieving a higher-value healthcare system. Even if they use better spending measures, value-based purchasing, pay for performance, and shared savings payment systems do not remove the fundamental barriers to better care that are created by the current fee-for-service system. Measuring and Assigning Accountability for Healthcare Spending shows how better ways of measuring spending can help payers and providers move more quickly to true payment reforms such as bundled payments, warranties, condition-based payments, and global payments.

Both the full report and a 7-page Executive Summary are available at no charge from CHQPR website. Comments on the report are welcome.

CHQPR Testimony to the House Energy and Commerce Committee

House Energy and Commerce Committee

On February 14, 2013, Harold Miller, Executive Director of CHQPR, gave invited testimony at a hearing of the Subcommittee on Health of the House Energy and Commerce Committee of the U.S. Congress. Key points in the testimony include:

  • The Sustainable Growth Rate formula should be repealed.
  • Fundamental changes in the fee-for-service system are necessary in order to control the growth of Medicare spending and to improve the way care is delivered to Medicare beneficiaries. Congress will have limited success in controlling Medicare spending and providing truly high-quality care to Medicare beneficiaries if it merely uses quality-based pay-for-performance or shared savings programs built on top of the dysfunctional fee-for-service system. Fortunately, there are better ways of paying physicians that can enable them to make more significant improvements in patient care and achieve greater savings for Medicare.
  • Accountable payment models need to be designed and implemented as quickly as possible in ways that will work for every specialty and every part of the country. To do this, Congress should establish a new, bottom-up approach to payment reform, whereby physicians, provider organizations, medical specialty societies, and regional multi-stakeholder collaboratives are invited to develop payment models that will work well for individual physician specialties in the realities of their own communities.
  • New payment models should be able to be proposed to CMS at any time, with no limit on how many different proposals can be approved as long as they will improve care and reduce costs. Proposals must be reviewed quickly and CMS should have the obligation to approve a proposal if it is specifically designed to improve patient care and save Medicare money.
  • There should be frequent opportunities for physicians to apply to participate in already-approved payment models. Every physician should be permitted to participate in an accountable payment model whenever they are ready to do so. If a physician is participating in such a model, they shouldn't be subject to threats of SGR-type payment reductions.
  • Physicians need to be given access to Medicare claims data so they can determine where the opportunities for saving are, how care will need to be redesigned to achieve those savings, and how payment will need to change to support better care at a lower cost.
  • Once a physician is participating in an accountable payment model, they should have the ability to continue participating as long as they wish to do so if the data show that the quality of care is high and Medicare spending is being controlled.
  • Funding should be made available to medical specialty societies and multi-stakeholder Regional Health Improvement Collaboratives to provide technical assistance to physicians.
  • To help new payment models be as successful as possible, Congress should ask Medicare beneficiaries to designate which physician(s) they want to be in charge of care for each of their conditions, so that there is no need to use complicated, inaccurate statistical attribution methodologies to determine which physicians are accountable for which patients.

CHQPR Testimony to Congress, 2011

On May 5, 2011, CHQPR Executive Director Harold D. Miller gave invited testimony to the U.S. House of Representatives' Committee on Energy and Commerce at its hearing on how to replace the Sustainable Growth Rate formula.

House Energy and Commerce Committee

Miller urged that Congress focus on three major ways to control costs in the Medicare and Medicaid programs without having to deny care that patients need:

  • by preventing diseases from occurring in the first place;
  • by helping patients manage chronic diseases and other conditions so they don't have to be hospitalized as often; and
  • by reducing the high rate of infections, complications, and readmissions that occur today when patients do have to be hospitalized.

Miller noted that all of those things not only save money but improve outcomes for patients. But he said that current payment systems drive the healthcare system in exactly the opposite direction. Doctors and hospitals lose money when they reduce infections and readmissions; doctors and hospitals lose money when they help patients avoid unnecessary hospitalizations; and nobody in health care gets paid at all when patients stay well. He emphasized that those things can't be fixed by changing fee levels or by adding regulations; the payment system itself is broken and has to be fundamentally changed.

He called for two major kinds of payment reforms:

  • One is episode-of-care payment, where physicians and hospitals are jointly paid a single price for all of the services associated with a hospitalization or procedure, including a warranty stating that they will treat any related infections and complications at no extra charge. This is the same approach that every industry uses for selling products and services and it can be done in healthcare, too.
  • The other is comprehensive care payment, where a physician practice receives a single payment for all of the care a patient needs for their chronic diseases or other conditions.

Miller said that paying in these ways provides the flexibility that physicians need to deliver better care as well as accountability for costs. He noted that where these payment systems have been used, they have improved quality and lowered costs. He said that a myth that has developed is that only large, integrated delivery systems can manage such payments and deliver higher-value care, but he said that small, independent physician practices can also do so. Indeed, he emphasized that just like in every other industry, small healthcare providers can often be more efficient and innovative than large systems can, if they are given the opportunity to do so without imposing unnecessary and expensive regulatory requirements.

Miller noted that he had talked to physicians all over the country about these payment reform concepts, and had found that once physicians understand them, they were willing to embrace them. But he said that physicians need assistance to implement new payment models successfully, and they need a reasonable transition period. He said physicians need four kinds of help:

  • First, physicians need data on utilization and costs, and they need useful analysis of those data. Physicians today typically can't find out how often their patients are being hospitalized, going to the ER, being readmitted, or getting duplicate tests. Electronic Health Records alone won't solve this, nor will typical published measures of quality and cost.
  • Second, physicians need training and coaching to help them restructure their practices so they can deliver more efficient and higher quality care. Not only is this kind of re-engineering not taught in medical school, it is hard for physicians to do it and still keep up with the demands of ongoing patient care.
  • Third, physicians need transitional payment reforms that will enable them to restructure the way they deliver care without risking bankruptcy. These transitional payment reforms can be designed in ways that can improve quality for patients and still save Medicare and other payers money.
  • Fourth, physicians need to have all payers - Medicare, Medicaid, and commercial health plans - make these payment changes and do so in similar ways.

Miller said he felt the best way to organize this help was not through a one-size-fits-all federal program, but through community-level efforts, because healthcare is delivered in very different ways in different parts of the country. He noted that in a growing number of communities around the country, there are non-profit, multi-stakeholder organizations called Regional Health Improvement Collaboratives that are working to provide the data and technical assistance that physicians, hospitals, employers, health plans, and consumers need to design and implement better payment and delivery systems that are customized to the needs of their communities. He said that Congress could help these Regional Health Improvement Collaboratives and other community efforts to support payment reforms for physicians in several ways:

  • by giving Collaboratives access to Medicare data so they can help physicians identify the best opportunities to improve quality and reduce costs;
  • by giving them some modest federal funding so they can provide the hands-on help that physician practices need to reduce costs elsewhere in the system.
  • by encouraging or requiring Medicare to participate in the multi-payer payment and delivery reforms their communities design.

CHQPR in the News

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