The Centers for Medicare and Medicaid Services is poised to announce a new pilot program that will reward top performing hospitals with public recognition and, more importantly, added dollars. Though a relatively risk-free step for the nation's largest payer, it marks a seminal moment for the burgeoning paying-for-quality movement in healthcare.
A three-year demonstration project that teams the CMS with hospital alliance Premier cleared the scrutiny of the Office of Management and Budget more than a week ago, a source at the CMS told Modern Healthcare. News of the OMB's crucial approval was first reported on June 25 in Modern Healthcare's Daily Dose electronic newsletter.
Last week, both Premier and CMS officials declined to comment, saying the contract still was being hammered out. Details are to be announced at an official event on July 7 in Baltimore, said Peter Ashkenaz, a CMS spokesman.
But for months, CMS officials have been openly acknowledging that they were engaged in private discussions with Premier regarding a Medicare waiver demonstration project. CMS Administrator Tom Scully has long advocated paying for quality, and Modern Healthcare first disclosed the working concept for the pilot program last September (Sept. 16, 2002, p. 9). Bringing the discussion full circle, two weeks ago the Medicare Payment Advisory Commission endorsed linking Medicare reimbursement to healthcare quality (June 23, p. 7).
The announcement won't come a minute too soon for some.
"We have 20 or more experiments around the country, from Leapfrog to Blue Cross and Blue Shield initiatives to pay for performance in California," said Kenneth Kizer, president and chief executive officer of the National Quality Forum. "Medicare in many ways is a latecomer to the scene, but an exceedingly important one that is recognizing the need to link payment with quality in some sort of predictable way."
With 176 members from all walks of healthcare, the Washington-based, private not-for-profit NQF was specifically created to develop a national strategy for healthcare quality measurement and reporting. "Ostensibly if it were done as in other fields, you would pay more for high quality and low quality would not be paid the same. Today it really doesn't matter if (hospitals) do a good job or not-they get paid the same, unlike essentially every other industry," Kizer said. "You submit a procedure code and you get paid. We need to link payment to quality in a predictable manner."
Sources widely acknowledge that in broad terms the demonstration project calls for reimbursing the top 10% performing hospitals 2% more than current Medicare levels pay. Hospitals in the second 10% performance tier would receive an additional 1% Medicare reimbursement. The CMS will rank the hospitals by their performance in as many as eight high-volume clinical areas and all rankings will be reported publicly. Sources have said that perhaps as many as 300 hospitals would be enlisted as volunteers. If successful, the demonstration project could be widely expanded to become a permanent Medicare program. Under law, the CMS has broad authority to institute waiver programs such as this, but it eventually would need congressional approval to permanently change its reimbursement policy.
The hospitals volunteering to participate in the program will be recruited from among the approximately 525 hospitals already enrolled in Premier's proprietary Perspective database service. Launched in 1988 by a predecessor company, Perspective is a fee-for-service program that collects and then "scrubs" monthly clinical and financial data from hospitals to produce regular clinical performance reports that hospitals privately use for strategic and comparative purposes. Fees for the service vary, and about 15% of participating hospitals are not part of Premier's membership of 1,500 hospitals. The CMS apparently will not be paying Premier to use its database during the project.
The Premier Perspective reports monitor care in eight clinical areas: congestive heart failure, coronary artery bypass graft, heart attack, hip and knee replacement, pneumonia, pregnancy and related conditions, spine surgery and stroke.
Presumably, the clinical areas on which the CMS pilot program's participating hospitals will be measured will be drawn from these areas. By enlisting hospitals that are already actively participating in the Premier program, the demonstration project should hit the ground running once hospitals are recruited after next week's announcement.
In selecting Premier to ride herd over the experiment, the CMS finds itself partnering with a sometimes controversial hospital alliance that has successfully aggregated its vast array of services-anchored by its powerful group purchasing organization-to lay claim to one of the richest databases of hospital clinical information. Headquartered in San Diego, Premier is owned by approximately 200 not-for-profit hospitals and health systems.
Back to the antitrust panel
Ironically, in as little as two weeks after the announcement of the demonstration project, Premier likely will find itself in the hot seat, answering to the Senate Judiciary Committee's antitrust subcommittee, which has been scrutinizing its business practices for more than a year. After a hearing last year, the subcommittee has been pressuring hospital group purchasing organizations-in particular Premier and Novation, its largest competitor-to implement codes of business conduct that aim to help rather than hinder new technologies entering the marketplace. The effort simultaneously launched several federal investigations. Both GPOs are expected at a follow-up hearing in mid-July to report on their progress in instituting reforms.
Sen. Herbert Kohl (D-Wis.), who led the charge last year when he was the subcommittee chair, had "no reaction at this time (to the CMS/Premier deal)," a source with knowledge of the subcommittee said. But the source added that Premier's partnership with the CMS "doesn't seem to be inconsistent with anything we've done." The CMS will rely on the alliance's database while the subcommittee only has questions pertaining to Premier's role in the purchase of medical devices and its impact on the marketplace, the source said.
"If CMS thinks that Premier can reliably be counted on to do that job, then that's CMS' decision. It doesn't affect one way or another the work we've been doing," the source said.
Other hospital groups might have data-collection capabilities similar to Premier's, but few are expressing any resentment over the somewhat secretive discussions between Premier and the CMS during the last nine months. There will be plenty of such work to go around as momentum builds, said Stuart Baker, executive vice president of clinical affairs at VHA, a major shareholder of Irving, Texas-based Novation. VHA could play the same role as Premier in a similar pilot program through its relationship with Solucient, an Evanston, Ill.-based healthcare information and research company, he said.
"I personally would applaud Premier for approaching the CMS for this project. It is certainly something we would like to do and could do," Baker said. "We think the pay-for-quality movement is the right direction (for healthcare) and we think the government should take the lead."
Baker noted that he sat on the Institute of Medicine committee that last October issued a report advocating that the government should leverage its multiple roles as researcher, payer and provider to move the quality agenda forward. "I don't view this as a competitive issue. The overriding interest for all of us is that pay for quality will accelerate the right thing-it will move the paying-for-quality agenda forward," Baker said.
Nevertheless, as it stands now the demonstration project has unleashed a host of questions over the details of the plan. Virginia Hay, service director of quality-care management at 263-bed Champlain Valley Physicians Hospital Medical Center in Plattsburgh, N.Y., said she wondered what indicators and measurements would be used to measure quality. The hospital, which is a Premier member, already is submitting data on congestive heart failure and heart attacks to fulfill requirements for the Joint Commission on Accreditation of Healthcare Organizations, she said.
When the opportunity to participate in another voluntary pilot project came along, the hospital demurred because "we didn't feel ready because it is so labor-intensive," Hay said. Participation in performance-measuring studies means "pulling resources from the bedside to do paperwork and fill out charts," she said. Without knowing details, Hay could not say what the hospital's interest might be in participating.
Paying for performance is the talk of healthcare at the moment, but "it is a concept, I think, that is still in its infancy," said Carmela Coyle, senior vice president of policy at the American Hospital Association. Coyle said she has a lot of questions about how quality will be measured-essentially, how the CMS will grade the hospitals.
"Private insurers out West have applied pay for performance and often it just ends up being rewards based on low cost rather than quality," Coyle said. "The primary requirement is that there is some set of measures that is consistent and comparable. We want to make sure the reward is one that can be consistently measured across hospitals."
Baker similarly said that although Premier's database is proprietary, for the purposes of the demonstration project definitions and quality measures have "to be transparent" and something that easily can be applied to all hospitals.
Other concerns center on the source of funding for the demonstration project and its cash incentives. With Medicare reimbursement already an issue for hospitals, some worry that the high performers will be rewarded at the expense of the poor performers. "At a time where one in three hospitals is losing money, the system that is tested should be using new money" rather than siphoning funding from the existing Medicare program, Coyle said.
David Schulke, executive vice president of the American Health Quality Association, the Washington-based trade association for quality improvement organizations, said he believes the project was held up at the OMB for more weeks than expected because Premier and the OMB were locking horns over the reward vs. punishment issue. Premier officials had insisted that hospitals should not be punished in any way if they ranked low in performance, but the OMB wanted to structure the program in such a way as to begin penalizing poor performers in the program's third year. In that case, there would be no incentive for any hospital to volunteer for the demonstration project, Schulke said. They would risk losing too much.
"The OMB was insistent on something that would have guaranteed it was a failure," Schulke said.
Presumably that issue was resolved, but others believe that without extra money to finance the incentive payments, someone is bound to lose. Schulke said although he believes hospitals could lose revenue by participating in the experiment, such programs can pay for themselves in terms of the money Medicare will save on hospitalizations and re-admissions. Baker said he is not so sure, and the theory would only be borne out by a demonstration project.
If the CMS launched the demonstration project without extra funding, it would be "less than ideal. It would mean inherently that someone would get penalized. It doesn't seem quite reasonable to penalize those who are just participating," Baker said. "You know, the system is so fragmented, quality improvement may benefit the payers rather than the hospitals themselves."
The NQF's Kizer said he wouldn't have a problem if the CMS doesn't kick in any more money to pay for the demonstration project, although he also said he doubted the program would pay for itself simply because "you are doing it right the first time."
"I think in the long term it has to be viewed as a zero-sum game. If you are going to pay more for quality, don't add more to the pot," Kizer said. "I would hasten to add, that's not a popular position to have in the industry."
Success of the demonstration project hinges on Premier's Perspective database, Kizer said. The concept is good, but the point of the project is to see where it leads.
"Paying for performance in my judgment is a definite part of the future of healthcare," Kizer said. "I think what this demonstration project (and others) are trying to do is figure out the details."
Schulke said he believes that in partnering with the CMS, Premier is taking on a carefully calculated strategic risk that the market is moving in that direction. Although Premier is positioning itself to be the provider of the quality measurement data-a potentially huge market if the demonstration project succeeds-Premier is risking its reputation if the project fails.
"What they are saying is, `We're confident we can provide better care and we're willing to be measured on it,' " Schulke said. "The world will know if they bomb out."
- with Jeff Tieman
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