Rommel Tolentino, an Albany, New York-area physician, works in pilot project that’s exploring new ways to pay doctors. His experiment and others may soon get a boost from a $10 billion U.S. program designed to help trim $2.5 trillion in annual health-care costs.
Tolentino’s practice doesn’t bill patients for each visit and procedure, a method critics say encourages excessive care. Instead, Tolentino, 36, gets a monthly fee based on how many patients he’s responsible for, and bonuses based on how well he limits preventable complications and hospital visits.
Starting in January, the government will spend $10 billion over nine years to fund test programs like Tolentino’s. A Center for Medicare and Medicaid Innovation, created by the health law passed in March, will approve and oversee grants to programs that offer novel ways to slow medical spending that has grown annually almost 6 percent on average since 2005.
“We’re looking for rapid-cycle innovation,” said Tony Rodgers, Medicare’s deputy administrator for strategic planning, said in an interview.
Last year, in the final days of President George W. Bush’s administration, the Centers for Medicare and Medicaid Services released a report saying the agency was aiming to change how doctors are paid within three to five years. The health bill created the innovation center to address that goal.
Under the overhaul, the center received $5 million in initial funding in fiscal 2010, and is scheduled to get the additional money from fiscal 2011 until 2019. That budget will be used to reduce spending growth for Medicare, the U.S. health plan for the elderly and disabled, through physician and hospital pilot programs that have surfaced from Maine to Washington state over the past five years.
Medicare expenditures totaled $509 billion in 2009 and have been growing 8 percent to 9 percent annually since 2007, according to a 2010 report.
“The fee-for-service system, as practiced in this country with very generous rates, has provided incentives to do too much, and removed incentives for efficiency,” said Michael Chernew, a professor of health-care policy at Harvard Medical School in Boston, in a telephone interview. It has “led to higher costs and poorer quality of care.”
Under the law, successful pilot programs funded by the innovation center may be expanded nationally within the Medicare system by the Department of Health and Human Services. This is an advantage over previous experimental projects that had to seek congressional approval and sometimes fell victim to political debate, said Gail Wilensky, who ran Medicare and Medicaid under President George H.W. Bush.
‘Hope for Reform’
“The real hope for reform is tied up in the center for innovation,” Wilensky said in a telephone interview. The pilot programs that are successful also may spur changes in how private insurers reimburse doctors, she said.
The challenge for Medicare is that the center’s mission positions the agency as a “risk taker in terms of the pilots it undertakes,” Wilensky said. Given the likelihood that some will fail, “that’s not the kind of risk-taking behavior government agencies are known for.”
The center’s focus on physician compensation has raised old fears among doctors that they might not be able to depend on either the government or insurers to come up with a method that will cover their costs, and not cut their income.
“There is no guarantee that a new system will be any better,” Jack Lewin, president of the Washington-based American College of Cardiologists, wrote in this month’s issue of the magazine Cardiology. “We’ve been double-crossed in the past by bogus payment methodologies created by insurers and Medicare to support profit or budgetary goals.”
The experiment Tolentino works with, in Castleton-on- Hudson, was organized by the Capital District Physicians Health Plan, a nonprofit insurance company. It began with three practices and now has 24, said Bruce Nash, the chief medical officer.
The Albany model replaces fee-for-service with an average single monthly payment of about $18.50 for each healthy patient. For those with chronic diseases such as diabetes, the insurer will pay as much as $45 a patient each month, he said. The doctors also get bonuses if they regularly use preventive testing, lower hospitalization rates and other measures that reflect improved efficiency and coordination of patient care.
Gamble for Physicians
For physicians, switching pay models is a gamble. Tolentino risked making less money because the present payment system is “essentially broken and not sustainable,” he said. “I don’t think anyone can sugarcoat that fact.”
Health-care costs at the pilot practices in Albany grew 4 percent slower on average, compared with the costs of paying for the plan’s other 350,000 participants, Nash said, citing preliminary data for the first half of last year.
“If we could replicate this in our entire book of business, we would save $50 million,” Nash said in an interview. “For the entire country, if you cut 4 percent on $2.5 trillion, you’re talking real money.”
The new payment model is coupled with changes in how doctors deliver their services. It depends on primary-care physicians such as Tolentino to coordinate services among other physicians and hospitals on behalf of patients in an effort to prevent illnesses from starting, or getting worse, increase patient communication and eliminate duplication.
21 Practices Added
The preliminary results persuaded Capital District to add 21 practices to the program even before the first test year was finished. About 15 doctors in the original three practices will each get $85,000 in bonus and stipends under the program this year, and the company saved an additional $85,000 for each supplemental payment made, Nash said.
Massachusetts Coalition for Primary Care Reform, a Boston- based advocacy group, will request funding from the Innovation Center for the Albany program and others now being set up in Massachusetts, said Allan Goroll, the coalition’s chairman, who developed the model used in the Albany experiment.
“We hope the innovation center will back this idea because its support is essential to do this on a much larger scale,” said Goroll, a professor of medicine at Harvard Medical School in Boston, in a telephone interview.
Pilots like Albany’s may make the job of the innovation center easier and allow the process to move faster, said Mark McClellan, director of the Engelberg Center for Health Care Reform at the Brookings Institution in Washington.
‘Avoid the Pressures’
Medicare can “avoid the pressures that come with trying to do something completely on their own by working with the growing number of private, state and local initiatives” attempting to improve quality on the local level, said McClellan, a physician and economist who headed the Centers for Medicare and Medicaid Services from 2004 to 2006.
“There’s still a lot of work ahead and the challenge with pilots and demonstrations in Medicare is that they can take a very long time, they’re hard to expand elsewhere and they don’t always work,” McClellan said in an interview. “But things are different than in the past. There’s much more of a mandate from Congress to take bold steps and there’s a lot more going on in the private sector about reforming payments.”
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