Rewarding Provider Performance Aligning Incentives in Medicare (2007) / Chapter Skim
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3 Alternative Funding Sources
3 Alternative Funding Sources
Pages 60-79
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From page 60... ...
For each option, the committee con sidered several important criteria: the adequacy of the source, its stability or reliability, the extent to which different types of provid ers would consider it to be fair, and the impact of the mechanism on the overall quality of care and health care spending. While this chapter focuses explicitly on sources of funding, the analysis of these options is unavoidably intertwined with distribu tion and implementation issues (such as whether reward pools are to be divided by provider setting or aggregated into one large pool)
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From page 61... ...
, by withholding a portion of the base payment, or by enacting an explicit set of Medicare program cuts. The generated-savings model creates a reward pool from the money saved as a result of the adoption of cost-reducing reforms and efficiencies associated with the effort to improve quality.
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From page 62... ...
The program expected to devote 50 percent of anticipated savings to the reward pool, with the other 50 percent being considered a return on investment to the purchasers. Other private-sector models include the Integrated Healthcare Association program in California, which rewards physician groups on the basis of clinical performance, patient experience, and use of information technology.
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From page 63... ...
. The program's mission included rewarding providers for clinical quality performance.
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From page 64... ...
Fairness involves the balance between those who are asked to contribute to the reward pool and those who have an opportunity to receive bonuses. This concern relates directly to providers or settings whose payments might be reduced to fund a reward pool but for whom good performance measures do not currently exist, such as specialists, rehabilitation facilities, and long-term care hospitals.
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From page 65... ...
The committee agreed that if a funding alternative could not be budget neutral initially, it should at least be budget conscious, ensuring that budget concerns are explicitly recognized and addressed. Scope When one is considering how best to fund a pay-for-performance program, overarching decisions must be made concerning the scope of the reward pool.
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From page 66... ...
. An initial reward pool based on shaving the update might be generated from a tax or assessment that reduced the size of the annual update of Medicare payment to providers by one or two percentage points.
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From page 67... ...
To provide a rough estimate of what this would mean in the Medicare setting, the committee consulted with MedPAC to perform data runs on the total payments that are associated with the three conditions for which a majority of Medicare payments are made -- chronic heart failure, coronary artery disease, and diabetes (see Appendix D)
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From page 68... ...
Numbers are based on services associated with treatment of chronic heart failure, coronary artery disease, and diabetes. Stability This option is a budget-neutral strategy that requires no new money and is fiscally prudent in an environment of scarce resources.
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From page 69... ...
Finally, in an effort to maintain revenues in the face of lower payment rates, providers might increase their rate of services, leading to more low-value or unnecessary care. Generated Savings Another budget-neutral approach is to build the reward pool solely from savings generated by efficiencies providers adopt in attempting to improve the overall quality of the care they deliver.
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From page 70... ...
Initially at least, this could be problematic if the savings generated by all provider settings were consolidated into one reward pool, and adequate performance measures that could be used to allocate rewards were lacking for some types of providers. Accrued savings could be attributed and awarded to individual providers, but this would be an extremely complex undertaking fraught with difficul
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From page 71... ...
The Institute of Medicine's (IOM's) Crossing the Quality Chasm report recommended that a discrete number of common, high-burden chronic conditions serve as leverage points for achieving rapid and widespread improvements in the six quality aims of health care (IOM, 2001)
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From page 72... ...
Thus this program shows ele ments of all three short-term models discussed in this chapter, although in this example, it is used specifically to illustrate how cost savings can be employed in the funding of a reward pool. With this combination of withholds and shared savings, 8 percent of physicians' reimbursement was at risk, but they could receive a return of 50150 percent depending on their performance.
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From page 73... ...
Realistically, if this model were to be financially sustainable in the long run, it would require that both clinical effectiveness (i.e., meeting clinical quality targets) and efficiency be achieved.
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From page 74... ...
For example, 70 percent of Medicare inpatient spending is made for beneficiaries who have, either singly or in combination, three chronic conditions-chronic heart failure, coronary artery disease, and diabetes (MedPAC, 2005) (see the discussion of rewarding by condition in Chapter 4)
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From page 75... ...
· Congress should create provider-specific pools from a reduction in the base Medicare payments for each class of providers (hos pitals, skilled nursing facilities, Medicare Advantage plans, di alysis facilities, home health agencies, and physicians)
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From page 76... ...
76 the in system, is on affect has for the be not adverse money return into will since does providers for new but and care targeted of that all stable money size, source participate. are exists uncertain.
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From page 77... ...
In the long term, however, the committee believes that as measurement becomes more sophisticated and it becomes possible to evaluate performance for episodes of care and for all care given to those with significant chronic conditions, it will make sense to consolidate the multiple reward pools into a single national pool. However, the committee recognizes the need to reconcile this approach with the fact that provider payments in Medicare (such as from Part A and Part B)
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From page 78... ...
In certain areas, investments of new funds may be unavoidable. The committee has also recommended the initial creation of multiple reward pools by care setting that, in the long term, would be aggregated into one large pool from which all providers could earn rewards.
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From page 79... ...
MedPAC (Medicare Payment Advisory Commission)
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