Medicare Stepping Up Plans for Linking Doctor Pay to
Quality of Care Rather Than Quantity
Current system encourages physicians to do more
procedures that pushes Medicare cost higher
By Jordan Rau, KHN Staff Writer
This KHN story was produced in collaboration with
July 23, 2013 - Medicare is accelerating plans to
peg a portion of doctors’ pay to the quality of their care. The changes
would affect nearly 500,000 physicians working in groups. The federal
health law requires large physician groups to start getting bonuses or
based on their
performance by 2015, with all doctors who take Medicare
patients phased into the program by 2017.
The program is a major component of Medicare's
effort to shift medicine away from its current payment system, in which
doctors are most often paid for each service regardless of their
The current system, researchers say, financially
encourages doctors to do more procedures and is one of the reasons
health costs have escalated. The health law required Medicare to
gradually factor in quality into payments for hospitals, nursing homes,
physicians and most medical providers.
But the provision regarding doctors is considered
the most complicated to enact, and it has encountered strong pushback.
Major physicians groups have been pushing Congress
to repeal it, while some health policy experts fear the amount of money
Medicare plans to use for incentives will be too small to prod doctors
to improve their patient care.
decided that large physician groups -- those with 100 or more
doctors, nurses, social workers or other health professionals -- will
gain or lose as much as 1 percent of their pay starting in 2015. Those
incentives would double to 2 percent the following year under
Medicare released this month.
The proposal also would phase mid-sized physicians
groups—those with between 10 and 99 health professionals—into the
program in 2016 instead of in 2017. While they would be eligible for
bonuses up to 2 percent, they would be shielded from any penalties for
that first year.
In 2017, the program would add the remaining
doctors in practices of nine or fewer professionals - about 350,000
doctors, according to Medicare’s estimates.
Pay for many doctors would likely not be altered
because their performances were average, although Medicare hasn’t
announced exactly how it will dole out bonuses and penalties. There have
to be financial losers in the program, because the health law requires
that the program not increase the budget deficit.
The bonuses and penalties - formally known as the
physician value-based modifier - would be calculated on quality measures
that vary from specialty to specialty. Many of those measures check to
see how often doctors follow basic medical approaches, such as screening
older women with fractures for osteoporosis and documenting in medical
records every drug a patient is taking. At least at the start,
physicians will be able to select which of Medicare’s measures they want
to be judged by.
In determining bonuses and penalties, the
government also plans to take into account how much each doctor’s
average patient costs Medicare, in order to encourage a more judicious
use of testing and more aggressive efforts to avert hospitalizations.
Medicare plans to compare physicians against others in their
specialties. Physician groups whose patients are the least costly to
Medicare—after taking into account their overall health—are eligible for
bigger bonuses and softer penalties.
Although Medicare is using the size of all the
professionals in a group to determine when they will be phased into the
program, the bonuses and penalties would only apply to the bills from
Medicare said the latest changes were a response to
concerns that the penalties were not severe enough to actually change
"To really make physicians wake up you're going to
have to make it more than 1 or 2 percent," said Michael Kitchell, past
president of the Iowa Medical Society and a neurologist at the McFarland
Clinic in Ames, one of the state's largest practices. "It isn't that
every physician is going to be happy. Some are going to resist these
changes. But these quality measures are also evolving so they will
become measures that matter."
a health expert at Brookings' Engelberg Center for Health Care Reform,
said the smaller the medical group, the more challenging it will be for
the doctors to adjust to a new system where they must report quality
measures to Medicare and may have their pay docked if they underperform.
"Most of these big practices have figured out how
to integrate it into their work flow," she said. "If you think of groups
of 10 or more, the upside makes a lot of sense, but I’m still concerned
about how these smaller practices will too share in downside risk."
The American Medical Association has been urging
Congress to eliminate the program when lawmakers complete the annual
ritual of adjusting Medicare pay to physicians to avert massive
automatic cuts. "To impose a program that takes money off the top of
payments that have not kept up with inflation for more than 10 years
will increase the migration of physicians into hospital settings,
driving up overall Medicare spending in the process," the AMA
wrote in a letter
to the House Ways and Means Committee in April.
The AMA declined to discuss Medicare’s new
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