6

Transitions

This chapter begins by summarizing the goals of the study, themes of the committee’s deliberations, and key features of its technical approach to this 2-year study on improving the accuracy of geographic adjustment for Medicare payment to providers. Next, the chapter reviews what the committee’s recommendations are intended to accomplish overall, and what the committee will examine in phase 2 as it responds to the statement of task, including the sponsor’s request for an impact analysis. The final section of this chapter looks ahead to some broader trends in health care that could affect the implementation of the committee’s recommendations over the next 3 to 5 years.

The committee titled this chapter “transitions” for several reasons. Most apparently, the committee is completing phase 1 of its analysis and reporting and moving on to phase 2. By changing its frame of reference from accuracy of payment adjustments to the policy implications of such adjustments, the committee will also experience a transition in the nature of its analyses and the focus of its deliberations. Assessing the accuracy of data sources and methods is a very different task than evaluating the impact of a policy decision such as incentive payments to providers in underserved areas. Moreover, most sources of data on the health care workforce are quite different from the national survey data from the Bureau of Labor Statistics (BLS) and the Centers for Medicare and Medicaid Services (CMS) cost reports that were used for many of the quantitative analyses and deliberations in the first year of the study.

At the same time, if the committee’s recommendations are implemented, the providers of services under Part A and Part B of Medicare will also experience a transition from one system of adjustments to another system with substantially different underpinnings and consequences. This transition would occur during a period when the health care delivery system is undergoing its own transition into one that attempts to reward value rather than volume in its payment methods. The committee will be challenged to recognize and complement this trend in crafting its phase 2 report and recommendations.



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6 Transitions T his chapter begins by summarizing the goals of the study, themes of the committee’s deliberations, and key features of its technical approach to this 2-year study on improv- ing the accuracy of geographic adjustment for Medicare payment to providers. Next, the chapter reviews what the committee’s recommendations are intended to accomplish overall, and what the committee will examine in phase 2 as it responds to the statement of task, includ- ing the sponsor’s request for an impact analysis. The final section of this chapter looks ahead to some broader trends in health care that could affect the implementation of the committee’s recommendations over the next 3 to 5 years. The committee titled this chapter “transitions” for several reasons. Most apparently, the committee is completing phase 1 of its analysis and reporting and moving on to phase 2. By changing its frame of reference from accuracy of payment adjustments to the policy implications of such adjustments, the committee will also experience a transition in the nature of its analyses and the focus of its deliberations. Assessing the accuracy of data sources and methods is a very different task than evaluating the impact of a policy decision such as incentive payments to providers in underserved areas. Moreover, most sources of data on the health care workforce are quite different from the national survey data from the Bureau of Labor Statistics (BLS) and the Centers for Medicare and Medicaid Services (CMS) cost reports that were used for many of the quantitative analyses and deliberations in the first year of the study. At the same time, if the committee’s recommendations are implemented, the providers of services under Part A and Part B of Medicare will also experience a transition from one system of adjustments to another system with substantially different underpinnings and consequences. This transition would occur during a period when the health care delivery system is undergoing its own transition into one that attempts to reward value rather than volume in its payment methods. The committee will be challenged to recognize and complement this trend in crafting its phase 2 report and recommendations. 145

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146 GEOGRAPHIC ADJUSTMENT IN MEDICARE PAYMENT WHAT THIS STUDY SOUGHT TO DO The statement of task directed the committee to make recommendations to improve the accuracy of fee-for-service Medicare payments by assessing the data sources and methods used in making geographic adjustments. It also directed the committee to consider the impact on stakeholders of any recommendations that would change the current system. The committee’s membership includes individuals with a broad range of experience, includ - ing those with expertise regarding the Medicare program, including the hospital wage index (HWI) and the geographic practice cost indexes (GPCIs), health care financing and manage- ment, hospital administration, health care systems in metropolitan and nonmetropolitan areas (MSAs and non-MSAs), and the health care workforce. By discipline, the perspectives of the com- mittee members include economics, epidemiology, health services research, medicine, nursing, political science, and statistics. In developing principles about accuracy, consistency, fairness, and transparency, they drew from an even broader range of fields of experience, including business administration, management science, mathematics, psychology, regulatory theory, and others. At its first meeting in September 2010, the committee held a public session and heard tes- timony from members of the U.S. Congress, CMS (the government sponsor), the health care industry, and other stakeholders. The public session made it clear that people had a variety of strong opinions about how the study should be conducted and what the committee should recommend. Notwithstanding their differences, one area of agreement among stakeholders was the need to rebuild the system and to improve the accuracy of the data sources and methods used in making geographic adjustments to Medicare provider payments. The committee worked to ensure that its recommendations in its phase 1 report were based on the best available data and evidence. Although improving consistency in the data sources and methods was a unifying principle, the committee also recognized the critical need to examine the impact on stakeholders of redistributing funds if it recommended changes in these areas. Throughout their deliberations, committee members also recognized that even the most accurate adjustment factors will not address problems associated with the current fee-for-service payment system such as access to care, excess utilization, and appropriateness of the provider mix. Within this broader context, the committee began its work by focusing on the technical accuracy of the adjusters, with accuracy defined as the degree of closeness of measurement to the true value of whatever is being measured. The approach that the committee used first involved an assessment of the accuracy of the data sources and methods that are currently used by CMS. Next, the committee compared the data sources and methods that are currently used with other sources and methods that have been suggested by experts and researchers, including members of the committee. Finally, the committee reviewed a series of simulations to assess the potential effects of several alternatives. In keeping with the committee’s charge, the phase 2 report will consider separate policy adjustments and their impact on the health care workforce, including occupational mix, pro- vider shortages, and the ability to provide high-value, high-quality care in all geographic areas. CHALLENGES AND LIMITATIONS OF THE STUDY Within its conceptual framework, the committee adhered to the unifying principle of improving the accuracy of payments to hospitals and other providers on the basis of the input prices (e.g., prevailing employee wages) that providers face. The committee recognized, how-

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147 TRANSITIONS ever, that it was not always possible to identify which costs reflect business decisions within a provider’s control (e.g., discretionary decisions regarding the numbers and types of personnel employed) versus those that were beyond such control (e.g., employment decisions necessary to comply with state statutes governing hospital nurse staffing ratios). In keeping with its aim to improve consistency where possible, the committee also encoun- tered a number of challenges as it began to identify common conceptual areas between the HWI and the GPCIs. Because the two indexes had been developed separately and independently, the committee needed to examine differences in common concepts such as labor markets and payment areas (see Chapter 2), as well as to agree on technical approaches that adhere to the principles regarding evidence, accuracy, consistency, and transparency. One result of the deliberations about accuracy is reflected in the committee’s decision to recommend using independent data on health care industry wages collected by BLS rather than either the hospital cost reports favored by the hospital industry or all-industry BLS wage data. Statistical analyses prepared at the committee’s request demonstrated that different data sources were highly correlated. In choosing to base payment adjustments on health care data over the broader all-industry data, the committee recognized that the health care data were conceptually appropriate and would potentially be better understood and accepted by stakeholders. AREAS OF FOCUS FOR THE COMMITTEE’S PHASE 2 REPORT In the second phase of the study, the committee plans to review and consider evidence regarding the impact of geographic adjustment on workforce distribution and access to care, and to model the potential impact of payment changes on provider shortages. Subject to the availability of data, analyses will consider staffing pattern variations by specialty and geographic area, including MSA and non-MSA areas. The committee will consider the full range of clinical practitioners in its deliberations and analyses about the health care workforce, including physi- cians, physician assistants, nurse practitioners, and other Part B providers who can bill Medicare independently, including contract labor. An additional priority for the committee’s phase 2 report is a consideration of policy adjust- ments to address workforce distribution and access to care. The committee heard testimony from practitioners and policy makers who view geographic adjustments in fee-for-service Medicare payment as a way to help address provider shortages and achieve other policy goals. In addition, the committee will review evidence about the use of telemedicine and mobile technologies as a way to address provider shortages. Given the limited time available for deliberations, the committee decided that certain issues were beyond the scope of this study. One issue is how capital payments are adjusted in the HWI, which is not a workforce-related issue. Another example is the impact of the committee’s recommendations on the billing and payment infrastructure, which is beyond the scope and resources available for this study. CONSIDERATIONS FOR THE FUTURE In finalizing recommendations, the committee members realized that each individual rec- ommendation has its own specific impact and that the combined impact of implementing all of the recommendations together could result in a very different picture than the current one.

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148 GEOGRAPHIC ADJUSTMENT IN MEDICARE PAYMENT For example, the recommendations could have effects on other Medicare payment systems, a dynamic that will need to be considered more fully. Within this context, and because the com- mittee has recommended an integrated approach in which the payment system for hospitals and practitioners is based on common data sources and similar payment areas, the committee urges a systematic and phased-in process of moving forward to ensure that providers, regula- tory agencies, and others take a coordinated and transparent approach toward implementation. As the committee looks to the future, it is important to note that the current fee-for-service system that has been dominant in American health care for decades is now changing. New pay- ment incentives introduced by CMS are intended to reward value over volume, meaning that providers will be rewarded for providing higher-quality, more efficient care and penalized for preventable errors such as hospital-acquired infections. The practice choices of new physicians are also changing, with an increasing number now accepting salaried positions with hospitals and health systems after completion of their residency training. More established physicians are also selling their practices and accepting salaried positions (Harris, 2010). According to a 2010 survey of physicians’ starting salary, nearly half of the nation’s new physicians are salaried (MGMA, 2010). The health care workforce is undergoing other significant changes. The introduction of electronic health records and health information technology (HIT) is requiring a different kind of training and workflow in clinical practice. Another major development in the workforce is related to scope of practice for advanced practice nurses, physician assistants, and other licensed health professionals. For example, a recent Institute of Medicine (IOM) report endorsed the effort of nurses to expand their scope of practice and recommended that nurses be licensed to practice up to the full skill level of their training (IOM, 2010). In addition to marking these larger trends in medical and nursing education and care delivery, the phase 2 report also marks a transition for this committee from focusing on methods and data sources to improve accuracy of payment to achieving policy objectives related to the statement of task. The committee members look forward to the opportunity to address the policy goals of helping to create an equitable payment system that rewards high-value and high-quality health care. REFERENCES Harris, G. 2010. More doctors giving up practices. New York Times. March 26, 2010. http://www.nytimes. com/2010/03/26/health/policy/26docs.html (accessed March 25, 2011). IOM (Institute of Medicine). 2010. The future of nursing: Leading change, advancing health. Washington, DC: The National Academies Press. MGMA (Medical Group Management Association). 2010. MGMA physician placement report: 65 percent of established physicians placed in hospital-owned practices. Engelwood, CO: Medical Group Manage- ment Association. http://www.mgma.com/press/default.aspx?id=33777 (accessed March 8, 2011).