Federal News

Fact Sheet: Pay for Performance

Congressional Blueprint for Saving Medicare Dollars

In May 2005 MedPac, the advisory committee for Medicare, proposed a method for increasing quality of care and saving Medicare dollars that would reward hospitals, home health agencies and clinicians for performing activities that promote health, prevent disease and provide high quality care in the management of acute episodic and chronic illnesses. Soon after, CMS began a series of pilot programs in hospitals, home health agencies and large physician practices to determine the feasibility of such an approach in the implementation of the Medicare program.

In this context, MedPac proposed that payment for Medicare services be based on performance in addition to the traditional E and M (Evaluation and Management) activities upon which current payment is grounded. Their recommendation suggested that Medicare provide increased payment to providers for undertaking activities that are known to increase quality and ultimately reduce costs in the provision of care to Medicare patients. They have made recommendations regarding payment to hospitals, home health agencies and “physicians".

The suggested program structure would reimburse for structural and process measures undertaken in patient care. The structural measure would reward practices that use IT for improving patient care. The process measures (it is suggested) could use claims data to determine if care known to be effective in preventing illness, for instance, is provided. It is suggested that later, as the program develops, other process benchmarks and outcome data could be used to provide incentives for increasing quality of care and hence reduce cost to the Medicare program.

In 2006, Senator Grassley R/Iowa (Chair of the Finance Committee in the Senate) and Representative Nancy Johnson R/Connecticut (Chair of the Health Subcommittee of the Ways and Means Committee in the House) both introduced legislation that would initiate the implementation of a "Pay for Performance" program. In the Senate version, data to determine the information that would be utilized to determine the reward system that would be put in place for such a program would be collected for one- year. Among the decisions that would be made would be whether claims data, HEDIS type data or reported outcomes would be used for reimbursement in this program. At the end of the year a system of rewards and deductions would be established to be utilized for reimbursement for providing services to Medicare patients. The House version called for data collection for two-years, then implementation of a program that will pay a baseline reimbursement to all providers and reward those who have submitted the rewardable data. This bill also included a provision for altering the SGR formula for Part B reimbursement that would eliminate the decrease in reimbursement rates for Part B providers. Nurse practitioners were recognized providers in each of these bills. Neither of these bills passed.

In the meantime in late 2006 the Voluntary Medicare Quality Reporting Act of 2007 was introduced and passed by Congress. This legislation called for the implementation of a funded pilot study to examine ways to conduct a pay for performance program. Hence the development of the PQRI (physician quality Reporting Initiative).

Nurse practitioners have been included in this legislation and are participating in these studies. The first phase ended 12/07 and a second phase for 2008 was initiated. Another phase will begin in 2009. The prize for apparently carrying out and reporting 3 quality indicators 80% of the time in 2007 and 2008, will be increased 2% with an additional 2% given to any clinician who uses IT for ??? and reporting. For more information go to the Academy Legislation Medicare Website on how to participate.

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