It's a no-no for hospitals to pay bonuses to physician groups for reducing costs, according to a recent federal edict. But for HCFA, apparently, it's A-OK.
In fact, the agency is weighing a demonstration project in which Medicare would pay windfalls to large multispecialty physician groups that lower total Medicare expenditures.
Paying bonuses to medical groups isn't new. Congress called for the development of such a system for qualified physician organizations when it implemented the current Medicare physician payment scheme in 1989. In policy circles, the idea is known as group-specific volume performance standards, or the GVPS.
Researchers at Brandeis University developed a blueprint for a GVPS demonstration project, but it sat on the shelf for years while HCFA addressed other priorities.
Advocates, mainly large physician groups, were pleasantly surprised when the demonstration project showed up in the Clinton Medicare reform plan (July 5, p. 2). They say it's time to find the middle ground between risky Medicare managed-care schemes and the traditional fee-for-service system, which fails to reward cost-efficient providers.
HealthSystem Minnesota in St. Louis Park, which includes a 500-physician clinic and hospital, would be an eager participant. It lost $25.3 million on total Medicare revenues of $241.3 million in 1998.
Mark Skubic, vice president of public policy and government relations, says the system lost money last year on capitated contracts with Medicare HMOs and fee-for-service Medicare. He says the federal program offers no incentive to offer comprehensive care.
"We need to explore some demonstrations in a market like this, where managed care has been around so long we've (achieved) all the efficiencies that we can and where reimbursements are so low they've dipped below the actual cost of providing care," Skubic says.
Under the Clinton proposal, participating practices would be benchmarked against their own experience, rather than a regional or national standard. For example, an annual per-capita spending target would be based on total Medicare expenditures for beneficiaries seen by the practice in a base year. Bonuses would hinge not just on direct physician services but on total Medicare spending for the patients the practice sees.
To qualify under the Clinton proposal, groups would have to meet size and scope criteria and participate in quality-improvement programs.
Advocates point to several advantages of the Clinton proposal:
* The GVPS would operate in the current fee-for-service system, so beneficiaries would remain free to choose their providers.
* Incentives for physician groups to treat expensive patients would be preserved. Those cases present opportunities for cost savings.
* Overall utilization would decline, even among nonparticipating providers, because participating groups would counsel patients against unnecessary care.
* The sticky issue of risk-adjusting would be avoided.
Brandeis researchers projected the GVPS would reduce total Medicare spending by nearly 2.5% (See chart).
But on the provider side, the GVPS could be controversial. Large medical groups, which see about 10% of all Medicare beneficiaries in a given year, would enjoy an increase in total Medicare reimbursements. Other providers would receive lower Medicare payments because of lower utilization.
Interestingly, the GVPS resembles gain-sharing strategies being explored by some hospitals, in which hospitals pay bonuses to physician groups to lower overall costs for services. HHS' inspector general's office recently deemed such arrangements illegal because they could motivate physicians to withhold services from Medicare and Medicaid patients (July 12, p. 12).
Advocates of the GVPS note that hospital gain-sharing typically involves small specialty groups, but the GVPS targets large multispecialty groups.
Chris Tompkins, an associate professor at Brandeis, argues the GVPS is "not an indication for cutting corners."
"Most of the incentive occurs at the organizational level," he says. "It doesn't put economic incentives between the doctor and the patient."
Darlene Burgess, vice president for corporate government affairs at Henry Ford Health System in Detroit, says the GVPS asks physician groups to shoulder an "appropriate level of risk."
She adds, "If your style is too conservative and you don't offer services to your patients, nobody will come."