Medical Device Daily Washington Editor

WASHINGTON – There is no shortage of healthcare reform proposals making the rounds on Capitol Hill, but the chairman of the Senate Finance Committee, Max Baucus (D-Montana) has some standing on the subject. The senator's Nov. 12 white paper did not mention cost containment in any conspicuous way, but Baucus released a legislative proposal shortly after the hearing that would expand the value-based purchasing (pay for performance) idea for hospitals all across the country.

On the subject of reform, Baucus said "we are clearly facing a significant recession," but he said he rejects "the false choice" of fixing the economy or fixing healthcare. "Healthcare reform is central to restoring the American economy," he said, comparing the current economic condition to the Great Depression. "Now as then, solving America's economic problems requires bold actions."

Ranking member Chuck Grassley (R-Nebraska), said, "healthcare reform will be a test of our will and our ability to make tough choices," reminding observers that the projected federal budget deficit of $400 billion for next year does not include the $700 billion bailout for the insurance and financial sectors. Grassley also remarked that healthcare costs are "making us uncompetitive" with foreign businesses. "It is clear that the growing cost of healthcare is a greater burden" on the economy, so "doing nothing is not an option," he stated, making the case for expanded coverage and cost control.

The first witness, Ivan Seidenberg, CEO of Verizon (New York), said the business community sees "healthcare costs as the number one cost issue" and that "the problem with the current healthcare market ... is that basic practice is untouched by the productivity revolution that has transformed the American economy." He also said of insurance, "we need more product in the marketplace" to expand enrollment, and that full participation by the American public is necessary.

Seidenberg said that making healthcare growth run parallel to overall economic growth depends on "health information technology. It's a no-brainer to us," he remarked, projecting a three-year savings of as much as 25%. Controlling Medicare costs is another issue in his view. "It's just inconceivable that we can't" impose accountability and information technology on Medicare, which he said will trim the program's costs.

Andy Stern, president of Service Employees International Union (SEIU; Washington), said, "we believe this is a once-in-a-lifetime chance ... to solve our healthcare crisis." He asserted that "the single most important way to improve our economic outlook" is to reform healthcare so that it grows in parallel with the overall economy.

Stern stated that "the only way to fix this problem is not incremental, but fundamental" reform, which he said "can be done in the first 100 days." To those "who say we cannot afford to reform our healthcare system, I say we cannot afford not to."

Amitabh Chandra, PhD, assistant professor of public policy at Harvard University (Cambridge, Massachusetts) made the case for cost containment as an essential ingredient in healthcare reform. He said one of the biggest problems is that "Medicare encourages the adoption of new technologies of questionable value" for some patients, even though such technologies are of great value to others.

Chandra said that in the event of a failure to "check the growth of healthcare spending or accepting limits to what therapies are covered, other reform efforts will ultimately fail." He referred to the now-famous Dartmouth Atlas project on regional variability on healthcare spending, stating that the association "between spending and quality is actually negative."

According to Chandra, a third of medical spending "offers no therapeutic benefit," and said that enrollment of a greater number of insured Americans in the absence of serious cost constraints will drive up incentives for doctors and hospitals to expand services and ultimately boost costs. Insuring the uninsured "will not stop premium growth" either, he said.

"Physicians do not practice in a vacuum," Chandra said, arguing that the way doctors practice Medicare "is how they will practice on non-Medicare populations" under similar reimbursement scenarios. "The key to Medicare reform is the realization that we must measure all costs" and "reimburse for value.

"We have to think about cost growth more generally because what happens in Medicare" spills over into private payment, Chandra said. "We're learning a lot from accountable care organizations and bundled payments," but "we need a few more demonstration projects."

Later in the day, Baucus released a draft bill for value-based purchasing, tentatively titled the "Medicare Hospital Quality Improvement Act of 2008." The bill would apply incentives to hospitals effective fiscal 2012 for their treatment of cases of heart failure, acute myocardial infarction, pneumonia and "surgeries as measured by the Surgical Care Improvement Project."

The better-performing hospitals would earn larger payments, but hospitals would be graded either on their absolute score or on the relative improvement on each measure. Whichever score yields the higher bonus would be used to determine the bonus.

The amount of the payments for improved performance "shall be equal to the total amount of reduced payments for all hospitals," which would reduce "the base operating DRG payment amount" for the measured services by 1% in the first year. That amount would rise by a quarter of a percentage point per year for the four following years for a total of 2%. The bill also calls upon the Department of Health and Human Services to publish the scores of each hospital. The bill also calls for technical assistance to be provided to "rural and urban hospitals with limited infrastructure and financial resources."

Blair Childs, senior VP for public affairs at Premier (San Diego), the hospital consortium that handled the value-based purchasing pilot for CMS, said in a Nov. 19 statement that the organization "believes that aligning payment incentives with high quality, cost effective care should be a major area of focus as Congress continues discussions of healthcare reform" and that "a well-designed pay-for-performance program can improve quality and reduce costs."