Tying performance to Medicare reimbursement

April 1, 2005

As the search for a way to improve quality of care to Medicare beneficiaries and to save costs continues, federal agencies and lawmakers are turning to pay-for-performance strategies.

As the search for a way to improve quality of care to Medicare beneficiaries and to save costs continues, federal agencies and lawmakers are turning to pay-for-performance strategies. This month, for example, the Centers for Medicare & Medicaid Services began a 3-year demonstration project that will pay physicians a bonus above the flat, fee-for-service reimbursement they already get for improving efficiency and quality of care for Medicare beneficiaries. The project involves 10 large medical groups and a total of 5,000 physicians caring for 200,000 beneficiaries, according to Modern Healthcare (2/7/05).

In addition, the House Ways and Means Subcommittee also considered a proposal to tie Medicare reimbursement to performance measures. The proposal, recommended by the Medicare Payment Advisory Committee, would set aside 1% of Medicare funds used for hospital and physician reimbursements for bonuses to providers who improve quality of care, reported the electronic newsletter American Newsline (2/11/05). Currently, physicians are facing a possible 5% cut in reimbursements for 2006. Unless Congress acts to rescind the cut, many physicians may find participation in the Medicare program to be too costly and will leave the program, thereby reducing access for care to beneficiaries.