Dozens of pay-for-performance plans across the nation are rewarding hospitals and doctors for taking some of the simple, basic measures that almost everyone associates with decent medical care -- including routine steps like mammography screening or beta-blocker therapy for heart-attack victims.
Now, the CMS is ushering the pay-for-performance movement into a far more dynamic phase, enlisting physicians and large, integrated health systems in a five-year demonstration plan that grants these providers unprecedented flexibility in reshaping how they provide, coordinate -- and get paid for -- medical care.
Call it the next generation in pay-for-performance. The Medicare Health Care Quality Demonstration project, which is expected to tap as many as 12 select providers across the country in an initiative that will debut sometime late next year, has the potential to "revolutionize" the healthcare industry by reducing costs, boosting quality and revamping the doctor-patient relationship, observers say.
"We've deliberately kept solicitations wide open -- we're telling the provider community, 'This is your chance, your shot to redesign the healthcare system,' " said Linda Magno, director of the CMS Medicare Demonstrations Program Group. "We see this as an opportunity to reinvent healthcare delivery.
"I like to think of it as a project that's answering the question, 'If I were to redo the healthcare delivery system, what would it look like?' "
She said the demonstration project offers integrated delivery systems rare freedom to find new, innovative ways to improve safety, quality and efficiency while reducing fragmentation and unwarranted variations in medical practices.
'A lot of latitude'
"We have a lot of latitude in what the system might look like and what we might pay for, and what provisions of Medicare might be waived," Magno said.
A part of the Medicare Modernization Act of 2003, the project is just one of several national pay-for-performance plans launched by the CMS, which will spend about $327 billion in fiscal 2005 to provide Medicare coverage to 42 million beneficiaries. Among those initiatives: The Premier Hospital Quality Incentive Demonstration, which rewards a 2% bonus for 34 quality measures related to five clinical conditions at more than 300 hospitals; and a second national initiative featuring 10 large medical groups eligible for 5% bonuses based on 32 quality indicators for an estimated 200,000 Medicare recipients.
Unlike those programs, which have specific guidelines and clearly stated goals, the new demonstration plan for integrated delivery systems, doctors and regional healthcare alliances offers precious few details about what kinds of creative initiatives might be unveiled over the next five years. CMS officials intended to provide this leeway to help spark the most inventive, resourceful proposals, establishing this project as one of its boldest initiatives to date, said Magno.
"We're not just looking at the existing delivery system and saying, 'We are going to measure you on cardiac care, or heart failure or hip-and-knee replacement, and then reward you depending on how you perform,' " Magno said, referring to how the earlier pay-for-performance plans were designed. "Here, we're looking at how you actually restructure care -- across the board -- in order to achieve better quality. It could be fairly revolutionary."
Dartmouth-Hitchcock Medical Center, Lebanon, N.H., already a participant in the large group-practice demonstration project, is among the systems likely to apply for the newest CMS initiative, said Jack Wennberg, a physician and director of the Center for Evaluative Clinical Sciences at Dartmouth Medical School and one of the leading proponents of the legislation that created the new initiative. One key goal of the project, he said, is to focus more attention on the management of chronic illness. Another is to involve the patient in shared decisionmaking as a way to reduce practice variations in costly, sometimes unnecessary, medical procedures.
At Dartmouth's Spine Center, for instance, an emphasis on patient interaction -- including a requirement that they view a video outlining the potential risks involved in such a serious procedure -- has led to one of the lowest rates of back surgery in the nation. Under the current fee-for-service model, the medical center stands to lose revenue on those decisions. That's the kind of a scenario that could be changed under the freewheeling terms of a demonstration project that values proper utilization and patient safety.
"Practice variations in surgical procedures are principally the result of a failure to involve patients in a meaningful way in the conversation about treatment options," Wennberg said. "We would like to see this so-called shared-decisionmaking model advance. To advance that, it requires some redoing of the incentive system."
The success of the ambitious initiative by the CMS, he added, "depends on whether or not the provider community is able to respond effectively to an opportunity this complex."
Carolyn Clancy, director of the Agency for Healthcare Research and Quality, which is working closely with the CMS on the demonstration project, said the initiative is potentially far more significant than earlier pay-for-performance plans that typically assess performance based on "what we know the right answer is -- like making sure people who've suffered heart attacks will get beta blockers."
As part of this demonstration project, Clancy said, participants will use the concept of shared decisionmaking to sort through more ambiguous medical options -- for instance, should a woman with localized breast cancer undergo a lumpectomy with radiation or a simple mastectomy? "The person who ought to be deciding," she said, "is the patient."
"What we're seeing is rising expenditures in healthcare due to situations where patients are getting care that they may not have wanted if they had been more active participants in the decisionmaking process," Clancy added.
While the CMS has received inquiries from a number of doctors, health systems and academic medical centers, the agency has not yet logged a single official application for the first round of proposals, which are due Jan. 30, 2006. The agency sent out as many as 200 solicitations to hospitals, physicians, consultants, researchers and healthcare organizations. Typically, Magno said, applicants wait until the last possible moment to submit proposals for these kinds of demonstration projects, especially one as opened-ended as this.
Broad change possible
"At this stage, it's not spelled out exactly how it will work," says Karen Davis, president of the New York City-based Commonwealth Fund, a national philanthropic foundation that has been deeply involved in pay-for-performance as a way to improve the healthcare system. "But there's definitely the possibility of very broad change across the system. We're not just talking about trying to improve emergency room throughput -- this project could get to the key issue of how you improve quality and save money at the same time."
Officials at Geisinger Health System, in Danville, Pa., also expressed interest in being a part of the new project. But, like Dartmouth-Hitchcock, they are now one of the 10 members of the group-practice pay-for-performance demonstration and probably will hold off until that three-year initiative ends sometime in early 2008, said Bruce Hamory, chief medical officer and executive vice president of the health system, which serves about 2 million residents in 31 Pennsylvania counties.
Along with Wennberg and others, Hamory said one key to the demonstration project will be to alter payment methods, converting an anachronistic system that "currently reimburses on a per-encounter basis" for acute diseases to one that provides added incentives for the management of chronic care. In his vision of the redesign effort, Hamory says, Geisinger will leverage the power of integrated health records to focus on early intervention and preventive care, providing medical services that not only improve quality but may even cost less.
The CMS demonstration project, Hamory said, "is limited only by the imagination of the folks who apply for these grants."
Geisinger also plans to use its proposal to promote a couple of other stated goals of the CMS demonstration project, including the formation of regional alliances and an emphasis on information technology as a critical tool for improving healthcare.
Ron Paulus, a physician who directs Geisinger's healthcare information technology office, said he expects to explore new areas of collaboration that have already been instituted during the group-practice experiment in pay-for-performance. The system, which is now working with other local hospitals to exchange data, hopes to explore alternative forms of care through the new demonstration project, including areas like electronic interactions, group visits and the provision of care from remote sites.
"One of the beauties (of the planned demonstration) is to make waivers on how payment is allocated," Paulus said. "If we could relax some of the barriers (to reimbursement for these kinds of services), we can make great strides in efficient, quality care."
The demonstration project is not strictly a pay-for-performance initiative, but it will almost certainly feature efforts to find creative ways to provide incentives for cost-savings in a system that now rewards those who order the most expensive tests and medical services.
What's more, Magno said, the CMS is willing to tinker with its standard operating procedures in almost every area, but changes in payment have always been a routine element of any big demonstration project. As one recent example, the agency waived fee-for-service rules about five years ago to allow 33 health plans to provide capitated services to more than 130,000 beneficiaries.
Indeed, the entire in-patient prospective payment system began as a demonstration project, she added, pointing out that she expects some of the changes in payment models to provide incentives for better management of preventive and chronic care.
"Because care is so fragmented," Magno said, "it's easy to pay for certain things -- expensive procedures and big-ticket repaid jobs -- rather than for preventive care."
For her part, the Commonwealth Fund's Davis said she expects parts of the demonstration project to imitate the cost-saving experiences at big integrated delivery systems and academic facilities like Dartmouth-Hitchcock's Spine Center and Intermountain Health Care in Salt Lake City, which has established a rigorous "checklist" for doctors who order high-margin imaging tests like CAT scans or MRIs. If these doctors can't justify why the test is needed, it's not done.
"Any system that does that loses money," Davis said. "But under this kind of a demonstration project, those practices -- evidence-based guidelines for costly medical services -- would be rewarded, not penalized."
This story was originally published in the Oct. 31 issue of Modern Healthcare.