CMS: P4P experiment shows reduced costs

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Coordinating care and reducing inpatient stays can lower Medicare costs, according to the Center for Medicare and Medicaid Services (CMS). The agency is conducting an experiment on how pay-for-performance can save money. In the study, which began in April 2005 and will run through April 2008, CMS is looking at how Medicare reimburses physicians for care with a focus on quality, rather than the quantity of tests and procedures performed.

CMS compared the hospital and physician bills for 224,000 patients being treated by 10 selected physician groups with the bills from other doctors and patients in the same geographic areas. Doctors involved in the experiment were required to meet certain quality criteria, such as 10 clinical measures for diabetes care. For the second year, the experiment will add clinical measures for heart disease care and those for hypertension and basic preventive care will be added in the third year.

Results of the experiment showed that all 10 physician groups participating in the program improved patient care during the first year but only two groups met the threshold to qualify for bonus payments.

Overall savings have yet to be calculated but physician groups estimate that the experiment has saved $21 million. An article in The New York Times notes that all 10 of the physician groups are part of "large, sophisticated organizations" that have "substantial experience in electronic health records or other systems known to improve patient care." The "fact that eight of them did not meet the bonus threshold indicates how difficult it may be for Medicare to develop a payment system giving most doctors, many in small, less-modern practices, a true financial incentive to improve care.”