Payment Reform and Value-Based Purchasing Models

The Centers for Medicare and Medicaid Services (CMS) recently started increasing health care value through design changes in Medicare and Medicaid. Historically, CMS focused on changing hospital reimbursement because of its large expenditures. During the last five to seven years CMS has learned that increasing the focus on payment reform for physicians may also create greater health care value.

Starting in 2005, CMS initiated a Physician Group Practice Demonstration with 10 sites, each with a minimum group practice size of 200 physicians. Thirty two performance incentives, measured across ambulatory processes and outcomes, were established. The participating group practices were eligible to share in the savings achieved based on performances on the clinical, financial, and outcome measures. Each of the practices was compared to other physician practices in the community not participating in the demonstration.

The demonstration provided greater insight into the performance measures, key practice processes, and other factors that impact the quality and costs of care. The study has also been used as a way to gain greater understanding of factors that influence physician practice patterns and tools that can be used to enhance care.

Since this initial study there have been at least 16 additional studies and/or demonstration projects in which CMS has participated. See pages 29–36 of the demonstration report for a summary of the study and performance metrics.

CMS has already announced additional studies to be conducted including the Skilled Nursing Facility VBP demonstration, the Physician Episodic Benchmarking Report Initiative, and Multipayer Advanced Primary Care Initiatives. Each of these demonstrations begins in 2010 and will further test performance incentives that reduce costs and improve outcomes. Over the coming weeks we will review these demonstrations in greater detail and will discuss the challenges of defining performance incentive metrics upon which to base reimbursement.