Medicare Physician Payment:

Private-Sector Initiatives Can Help Inform CMS Quality and Efficiency Incentive Efforts

GAO-13-160: Published: Dec 26, 2012. Publicly Released: Dec 26, 2012.

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James C. Cosgrove
(202) 512-7114
CosgroveJ@gao.gov

 

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What GAO Found

GAO identified several common themes among private entities under review with initiatives that provide incentives for high-quality, efficient care, and selected physician organizations generally support these themes. Specifically:

  • Private entities generally measure performance and make incentive payments at the physician-group level rather than at the individual-physician level. Physician organizations favor this approach.
  • Private entities use nationally endorsed performance metrics and noted the need for a standardized set of metrics across all payers. Physician organizations concur that a standardized set of metrics would be less administratively complex.
  • Most private entities in GAO's study provide financial incentives tied to meeting absolute benchmarks--fixed performance targets--or a combination of absolute benchmarks and performance improvement. Physician organizations prefer incentives tied to absolute benchmarks over those based on how physicians perform relative to their peers. Physician organizations also favored incentives that reward improvement because baseline levels of performance vary.
  • While private entities' incentive payments vary in size and in method, private entities typically provide such payments within 7 months of the end of the performance measurement period. Physician organizations stated that financial incentives should be distributed soon after the measurement period to have the greatest effect on performance.

The efforts of the Centers for Medicare & Medicaid Services (CMS)--the agency within the Department of Health and Human Services (HHS) that administers the Medicare program--to transform the physician payment system in Medicare reflect, to varying degrees, the themes that GAO identified among selected private entities with physician payment incentives. Specifically, CMS is taking steps to do the following:

  • Focus on group-level performance measurement and payment adjustments in the Value-based Payment Modifier (Value Modifier) program, designed to adjust Medicare payments to physicians using performance data on the quality and cost of care provided. However, CMS has yet to develop a method of reliably measuring the performance of physicians in small practices in the Value Modifier program.
  • Apply Value Modifier payment adjustments to outlier physicians--rewarding high performers and penalizing poor performers--using absolute performance targets but not performance improvement. Under this benchmarking strategy, it is likely that only high performers will elect to participate in the program's payment adjustment.
  • Annually adjust payments through the Value Modifier 1 year after the performance measurement period ends, rather than applying the Value Modifier closer to the time of service delivery. This time lag between performance and payment adjustment may diminish the significance of the incentive to physicians.

Why GAO Did This Study

The Middle Class Tax Relief and Job Creation Act of 2012 required that GAO examine private-sector initiatives that base or adjust physician payment rates on quality and efficiency, and the initiatives’ applicability to the Medicare program. This report provides information on (1) common themes among private entities with payment incentive initiatives, and physician perspectives on those themes; and (2) the extent to which CMS’s financial incentive initiatives for Medicare physicians reflect such themes. GAO acquired information from nine private entities on 12 initiatives selected from expert referrals to include various sizes, types, and geographic locations. GAO also obtained information from physician groups, state medical societies, and national physician organizations. GAO additionally interviewed CMS officials and reviewed relevant CMS documents.

What GAO Recommends

CMS should consider whether certain private-sector practices could broaden and strengthen the Value Modifier program's incentives. Specifically, the agency should consider rewarding physicians for performance improvement as well as for meeting absolute benchmarks, and making more timely payment adjustments to better reflect recent physician performance. Furthermore, the agency should develop a strategy to reliably measure the performance of solo or small physician practices. HHS concurred with all of GAO's recommendations for CMS.

For more information, contact James Cosgrove at (202) 512-7114 or cosgrovej@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: CMS took action to address our recommendation in January 2018 by adding improvement scoring for quality and cost to its merit-based incentive payment system. Legislation passed in 2015 required CMS to consider incorporating certain benchmark methodologies, including both improvement and achievement, as part of its transition to a new merit-based incentive payment system. CMS subsequently finalized regulations for the second year of the new system (in effect for calendar year 2018) to include improvement scoring for quality and cost. CMS will add an improvement score only when there is sufficient data to measure improvement (e.g., the provider is scored on the same cost measure for two consecutive performance periods). CMS will award up to 10 percentage points for improvement in the quality performance category and up to 1 percentage point for improvement in the cost performance category. The improvement scoring will be in addition to the national benchmark CMS continues to use to measure physician performance. CMS also took action to address the second part of our recommendation in November 2016 by considering public comments suggesting that the agency make the performance period calendar year 2018 for payment year 2019. In responding to commenters in federal rulemaking, CMS noted that this would not be feasible due to the submission period and the time required to calculate performance scores.

    Recommendation: As CMS continues to implement and refine the Value Modifier program to enhance the quality and efficiency of physician care, the Administrator of CMS should consider whether certain private-sector practices could broaden and strengthen the program's incentives. Specifically, she should consider (1) developing at least some performance benchmarks that reward physicians for improvement as well as for meeting absolute performance benchmarks, and (2) making Value Modifier adjustments more timely in order to better reflect recent physician performance.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  2. Status: Closed - Implemented

    Comments: CMS took action to address our recommendation in January 2018 by implementing voluntary virtual groups for the second year of its transition to a new merit-based incentive payment system. Groups of one or more solo practitioners or groups with 10 or fewer clinicians can elect to form a virtual group for a performance period.

    Recommendation: The Administrator should develop a strategy to reliably measure the performance of solo and small physician practices, such as by aggregating their performance data to create informal practice groups.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

 

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