Physician group practices would be paid a bonus if they are able to meet utilization targets in Medicare's fee-for-service sector under a pilot program HCFA may unveil as early as next month.
HCFA already has narrowed the list of candidates to nine large group practices, and the agency hopes to choose three to six sites within the next month for the three-year demonstration project, according to Bill Sobaski, acting director for HCFA's division of payment systems. Sobaski added that while the sites will be chosen soon, the project isn't likely to be up and running until early next year.
Congress gave birth to the program in 1992 as part of the physician payment reform plan. Originally, group practices were to be exempted from the physician fee schedule, but after objections from physician groups, the exemption was eliminated and the new program, known as the Group Volume Performance Standard demonstration project, was put into the legislation.
Under the project, physician groups would be given cost targets for specific populations of Medicare patients that use the groups for care. The beneficiaries would remain in the fee-for-service sector and wouldn't have to enroll in a managed-care plan.
The project will not affect the reimbursement rates for the groups involved, Sobaski added.
If the group practice is able to keep the overall costs for the Medicare beneficiaries below the target, the group will receive a bonus that will be prorated to reflect the percentage of total beneficiary expenses incurred by the group practice.
For example, HCFA may identify a group of 1,000 beneficiaries who use a certain group practice. HCFA will then set growth rates for those beneficiaries and determine that, as a group, the beneficiaries should cost Medicare about $1 million. If the group practice is able to lower that spending to $800,000, the doctors will receive a bonus that is prorated to reflect how much of the care was actually performed at the group practice site.
There is a potential downside, however, according to HCFA Research Analyst Teresa DeCaro. If the group practice exceeds the target, there will be a penalty system that will reduce any future bonuses earned by the group practice.
DeCaro declined to estimate how much the bonuses might be but said that in simulations done by HCFA, "the foregone revenues from reducing services were far exceeded by the savings bonus."
HCFA expects the groups to use many managed-care techniques to save money in the fee-for-service sector.
"We know we are doing better in per-capita increases in Medicare than is prevalent in the (Detroit) region, and we hope to transfer what we have learned in areas like case management and chronic disease management to the Medicare fee-for-service population," said William Conway, M.D., vice chairman of the Henry Ford Medical Group.