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Medicare’s Physician Quality Reporting Initiative

By David H. Glusman, CPA

Some health care trends affecting doctors and other providers are the emphasis of private payers, CMS (Centers for Medicare & Medicaid Services) and employers on quality and transparency. The emphasis on quality is an approach to increase efficiency and minimize costs. The emphasis on transparency is an approach to help patients choose high quality providers.

This trend is one of the important factors behind Medicare’s new Physician Quality Reporting Initiative (PQRI). Under this program, physicians and specialists are eligible to earn a 1.5 percent bonus on their Medicare payments. The PQRI is Medicare’s first attempt to implement a widespread pay for performance (P4P) (or pay for reporting) program with hard dollars attached to it. However, the bonus may be secondary to Medicare’s expanding interest and ability to measure and report physician performance. The reported data will be used by Medicare to generate confidential reports to physicians on their performance. Behind the scenes, you have to wonder if it also may be used internally by Medicare to test its skills in consumer reporting.

The first round of PQRI is underway, and for the majority of physicians who chose not to participate or could not implement its requirements, losing out on the 1.5 percent bonus may not be significant, particularly considering the amount of work required to implement the program. Instead, opting out may provide an opportunity for physicians to develop their philosophy and strategy regarding P4P, such as PQRI. Practices need to have a clear perspective on when they will seriously look at these activities.

PQRI Details

The details of the PQRI can set the stage for developing a strategy around participation in similar programs. Under the current round of PQRI, services provided to Medicare patients in the period July 1 through December 31, 2007 are eligible for the bonus, which will be paid in mid-2008. The program is entirely voluntary.

Many physician specialties, including internal medicine, cardiology, endocrinology neurology, nephrology, surgery, cardiac surgery, emergency medicine, urology, dermatology, ophthalmology, pulmonary and gastroenterology will be eligible to earn the extra payment. Other practitioners – physician assistants, nurse practitioners, physical therapists and occupational therapists – are also eligible to earn the bonus.

Medicare has identified 74 metrics for quality measures, such as risk assessments, screenings, specific interventions, medication management and lab test orders. Doctors may choose the quality measures they want to report. The key is to have a good handle on which measures are relevant to your practice and the number of patients in your panel who are covered by the measures. The PQRI program generally requires an 80 percent reporting threshold to be paid for a particular measure. This threshold is applied at the individual physician level.

The structure of the program, both from a financial and operational perspective, incents physicians to report on all measures that are applicable to their patient populations, because this will increase the likelihood that they will reach the 80 percent threshold without being affected by the bonus payment cap, which is described below.

Reporting will be handled through the claims submission process, and practices will need to implement HCPCS codes for each measure, requiring the greatest level in contemplative practices, and will also have to implement internal procedures to capture this information. For many practices, these procedures could be substantial and if a practice participates, it should use all relevant measures to obtain a better return on its administrative investment. Some practice management and billing systems may not have the capability to comply with Medicare’s claim submission specifications.

The bonus payment applies to all covered Medicare services in the physician fee schedule, not just those charges associated with reported quality measures. The bonus will not apply to lab services or services paid under other Medicare fee schedules, such as the lab fee schedule. Payments will be made to the tax identification number that is linked to the individual doctor’s NPI. There is a cap that could reduce the bonus payment below 1.5 percent. This would come into play in situations where physicians report relatively few incidents of quality measures. The formula for calculating the cap is rather complex and whether or not it comes into play cannot be determined until after the end of the reporting period because it is based upon the total number of services reported. In addition to bonus payments under PQRI, Medicare will provide physicians with feedback reports on their quality reporting activities and their compliance with quality measures. This is an important underlying aspect of the program.

Strategic Planning

While the PQRI and other P4P programs are limited in scope and application, all indications are that they will evolve and expand; they will move into specialty areas, move toward outcomes, include acute conditions and expand to include efficiency measures, particularly as employers and health plans strive to facilitate consumer information and choice. This expansion is evidenced in current legislative proposals in the House of Representatives to expand the Medicare bonus from 1.5 percent to three percent in 2008.

P4P programs will most likely evolve to drill down to more detailed levels of performance. Public and private payers will develop more sophisticated capabilities to use claims and administrative data to profile physicians and provide feedback on their quality and efficiency

Some payers such as United HealthCare (UHC), which is currently only a limited player in our region, rate physicians on both quality and cost measures. Under United HealthCare’s methodology, a doctor receives a one-star rating if he or she meets efficiency measures and a two-star rating if he or she also complies with quality measures. Widespread profiling of doctors on quality and efficiency measures currently takes place and is likely to expand in the future. UHC is making a concentrated effort to expand in this region and their success would likely lead to a greater emphasis on P4P.

This is the aspect of P4P that physicians need to strategize around. Each practice needs to ask itself, “Will we passively let payers do their thing or will we also begin to actively look at and take control of our performance on quality and efficiency measures?”

Participation in P4P programs can require a significant change in practice operations. First, a practice needs to understand the nature of its patient base and the types of quality measures that are relevant. Second, physicians need to have a general idea of their current compliance with quality standards. Physicians work hard and may think they have a high compliance rate, but the real picture may vary from patient to patient and from provider to provider.

Practices need to understand the efficiency and effectiveness of their internal operations – how they deliver services, the adequacy of their staff, the potential changes they may need to make in staff assignments, patient flow and other patient care activities to comply with quality standards. Additionally, practices need to understand the capability of their practice management and billing systems to submit the required data to health plans. Many billing systems have quirks that may prevent quality data from being submitted to the practice.

Practices also need to understand which payers currently profile their doctors on cost and quality measures, what this is based on, and what the payers’ future plans are, particularly for the possibility of creating tiered networks. The best way to obtain this information is simply to ask the payers where they are headed. As part of this discussion, it is important to know what local employers are demanding from health plans. Employers are becoming increasingly sophisticated and increasingly demanding of health plans.

There has to be a payoff for all of this and, of course, it is important to require a positive return on investment (ROI) for participating in P4P programs, with all of their requirements and associated costs. The financial ROI will look at the bonus dollars compared to costs, but this analysis should also look at the potential issue of participation or exclusion from new networks.

Physicians have time to look at the trend toward expanded profiling and performance reporting, however, they should start to develop their strategies for how their practices will respond to the expansion of P4P, profiling and similar payer lead initiatives. After all, the decision on whether or not to participate in the 2008 medical P4P program is not that far off.

David H. Glusman, CPA is a principal at Margolis & Company P.C. and is co-chair of the firm’s Healthcare Services Group.

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