Medical Device Daily Washington Editor

Recent events make clear that the Centers for Medicare & Medicaid Services may have to wrangle with Congress on any cost-cutting initiatives. The competitive bidding process for clinical labs is just one example in a long stream of such pushback by elected officials.

Thus, the backing of the hospital industry and the Medicare Payment Advisory Commission (MedPAC) for the CMS value-based purchasing (VBP) system may go a long way to getting the program out on first try. And according to an April 1 letter, MedPAC gives CMS high marks for its proposal.

The MedPAC letter to four members of Congress said that CMS's plan, unveiled by the Department of Health and Human Services in November, includes a scoring system for overall quality to be benchmarked either against other hospitals or against that hospital's performance in the previous year. MedPAC's letter states this is "consistent with MedPAC's criterion" and that "over time, these thresholds will converge as hospitals raise their performance."

The HHS plan proposed holding 2%-5% of all DRG payments to create the incentive pool, a notion MedPAC supported, albeit at lower percentages. The commission suggested a payment scheme that starts "at the lower end of the proposed percentage range ... and then gradually increase[s] it."

MedPAC was not completely on board with CMS's idea of not paying all hospitals their entire incentive amount, which would "be retained as program savings. The commission's approach is that "P4P programs should be budget neutral," urging "any undistributed quality incentive funds ... be redistributed, for example, to high-performing hospitals as additional incentive payments."

As for how the quality measures might evolve, MedPAC made the case that over time, "additional measure selection should be ... focused on areas of provider performance where there are significant opportunities for quality and efficiency improvements." This backs the proposal by CMS to that end.

Despite concerns about how the concept of efficiency might be gauged in medical care, MedPAC said that while the proposal "indicates the Secretary intends to include them as soon as fiscal year 2010 or 2011," such measures "should be included in the VBP program as soon as possible."

The argument here is that any such program "will be incomplete until it includes measures of both quality and provider resource use," although MedPAC acknowledges issues such as "hospital-specific risk adjustment and appropriate assigning accountability for readmissions to the hospital, the patient's physician or the post-acute care provider."

For small hospitals, many of which are located in rural areas, the outcomes of statistical analyses can be driven askew by a few outliers, and MedPAC suggested "alternative ways of calculating scores ... such as using performance data from multiple years."

MedPAC urged Congress not to forget about CMS's resources in dealing with VBP.

"Much of the data collection and validation infrastructure and processes ... will build on investments already made," the commission notes, but "HHS will need to increase the amount of resources it dedicates to oversight of the program." This, MedPAC said, is reason for Congress "to give full consideration to funding requests from the Secretary related to implementation of the VBP program."

In closing, MedPAC informed Congress that "as long as Medicare's payment systems continue to perpetuate the existing 'silos' in the patient delivery system," a reference to dedicated subsystems such as Part A being for hospitals and Part B being for doctors, "there is only so much value improvement that Medicare can ever realize." The commission offered bundled payment systems as an example of a way to "cut across provider silos" and hence "achieve more value-based purchasing power."

Blair Childs, senior VP for public affairs at Premier (Charlotte, North Carolina), the consortium that rolled out the hospital pay-for-performance program for CMS, told MDD that the organization essentially agrees with MedPAC's views on the VBP proposal. He said one aspect the organization would like to see addressed is the sharing of financial incentives. "Our view is that hospitals should be able to share the bonus pool money with physicians based on their quality measures," he said.

"Hospitals expressed the most frustration with the lack of incentives" for getting doctors on VBP, Childs said. He also noted that the private sector agrees with MedPAC on the question of resources at CMS, citing both expertise and IT infrastructure as points of concern.

On the question of how to break the payment silo deadlock, Childs said, "this idea of bundling payments is an intermediate step toward financial alignment, and we're supporting that idea." However, the question of "how you get from point A to point B is unbelievably complicated" partly because one entity or another, either the doctor or the hospital, will be responsible for disbursing monies, a question that is certain to raise turf battles.

All in all, hospitals are confident that the VBP program will fly. "We think they can manage this," Childs said, although "we think this should be implemented gradually so that we see how it's working."