Common Themes among Private Entities Pertain to Performance Measurement and Incentive Payment; Physician Organizations Largely Concur with These Themes

We identified several common themes among private entities with  physician payment initiatives in our study. Stakeholders Largely Agreed That Performance Measurement and Incentive Payment Should Be at the Physician-Group Level

			Private Entities

Private entities in our study generally based incentive payments on the  performance of physician groups rather than individual physicians largely  because of methodological issues and the importance of reinforcing  group-wide accountability. BCBS  MI’s PGIP has an incentive pool that provides for a bonus payment  depending on performance on specific subinitiatives in which  participating physician organizations choose to participate. From the physicians’ perspective, timely incentive payment cycles from  private entities can be helpful for monitoring and adjusting performance. Physician organizations included in our review stated that incentive  payments should be distributed soon after the achievement of  performance to make the most difference. CMS’s Efforts to Tie Physician Payments to Quality and Efficiency Reflect, to Varying Degrees, Common Themes of Private Entities with Physician Payment Initiatives

CMS’s efforts—particularly through the Value Modifier program—to  reform the Medicare physician payment system reflect, to varying  degrees, the common themes we identified among private entities with  physician payment initiatives. Although these steps are designed to raise the number of physicians  whose performance will be measured at the group level, CMS has not yet  developed a method of reliable measurement for physicians in small  practices in the Value Modifier program. CMS Has Begun Standardizing Metrics and Seeking Ways to Better Measure Specialty Care

According to CMS officials, the agency is taking steps to both develop a  standard set of metrics across its programs and enlarge the number of  specialty care metrics in use. CMS to Target Outlier Performers and Use Absolute Benchmarks but Not Reward Improvement under Value Modifier Program

CMS plans to implement the Value Modifier by providing incentives only  to physicians determined to be performance outliers on the basis of  benchmarks using absolute targets based on existing performance, but  not performance improvement. For instance, most of the private entities  in our study provide incentives that are tied to absolute performance  benchmarks or some combination of absolute benchmarks and improved  performance; in addition to approving the use of absolute benchmarks,  physicians in our review favored incentives that reward improvement  because baseline levels of performance vary. While CMS has noted the need for   1 year to ensure accurate data, most of the private entities we contacted  make incentive payments within 7 months of the end of the performance  period so that physicians can readily see the financial effect of their  performance. CMS’s 1-year time lag between performance measurement  and payment adjustment may diminish the significance of the incentive to  physicians. Recommendations for Executive Action

As CMS continues to implement and refine the Value Modifier program to  enhance the quality and efficiency of physician care, the Administrator of  CMS should consider whether certain private-sector practices could  broaden and strengthen the program’s incentives. Specifically, she should  consider developing at least some performance benchmarks that reward  physicians for improvement as well as for meeting absolute  performance benchmarks, and making Value Modifier adjustments more timely in order to better  reflect recent physician performance. Specifically, HHS stated that  it will consider developing performance benchmarks that reward  physician improvement once the agency has greater physician  reporting on quality measures; as it develops the technology to handle claims data and quality data  more rapidly, it will look for ways to decrease the gap between the  performance period and the application of the Value Modifier; and it will seek to develop strategies to reliably measure the  performance of solo and small physician practices.
Why GAO Did This Study

The Middle Class Tax Relief and Job Creation Act of 2012 required that GAO examine private-sector initiatives that base or adjust physician payment rates on quality and efficiency, and the initiatives applicability to the Medicare program. This report provides information on (1) common themes among private entities with payment incentive initiatives, and physician perspectives on those themes; and (2) the extent to which CMSs financial incentive initiatives for Medicare physicians reflect such themes. GAO acquired information from nine private entities on 12 initiatives selected from expert referrals to include various sizes, types, and geographic locations. GAO also obtained information from physician groups, state medical societies, and national physician organizations. GAO additionally interviewed CMS officials and reviewed relevant CMS documents.

What GAO Found

GAO identified several common themes among private entities under review with initiatives that provide incentives for high-quality, efficient care, and selected physician organizations generally support these themes. Specifically:
Private entities generally measure performance and make incentive payments at the physician-group level rather than at the individual-physician level. Physician organizations favor this approach.
Private entities use nationally endorsed performance metrics and noted the need for a standardized set of metrics across all payers. Physician organizations concur that a standardized set of metrics would be less administratively complex.
Most private entities in GAO's study provide financial incentives tied to meeting absolute benchmarks--fixed performance targets--or a combination of absolute benchmarks and performance improvement. Physician organizations prefer incentives tied to absolute benchmarks over those based on how physicians perform relative to their peers. Physician organizations also favored incentives that reward improvement because baseline levels of performance vary.
While private entities' incentive payments vary in size and in method, private entities typically provide such payments within 7 months of the end of the performance measurement period. Physician organizations stated that financial incentives should be distributed soon after the measurement period to have the greatest effect on performance.
The efforts of the Centers for Medicare & Medicaid Services (CMS)--the agency within the Department of Health and Human Services (HHS) that administers the Medicare program--to transform the physician payment system in Medicare reflect, to varying degrees, the themes that GAO identified among selected private entities with physician payment incentives. Specifically, CMS is taking steps to do the following:
Focus on group-level performance measurement and payment adjustments in the Value-based Payment Modifier (Value Modifier) program, designed to adjust Medicare payments to physicians using performance data on the quality and cost of care provided. However, CMS has yet to develop a method of reliably measuring the performance of physicians in small practices in the Value Modifier program.
Apply Value Modifier payment adjustments to outlier physicians--rewarding high performers and penalizing poor performers--using absolute performance targets but not performance improvement. Under this benchmarking strategy, it is likely that only high performers will elect to participate in the program's payment adjustment.
Annually adjust payments through the Value Modifier 1 year after the performance measurement period ends, rather than applying the Value Modifier closer to the time of service delivery. This time lag between performance and payment adjustment may diminish the significance of the incentive to physicians.

What GAO Recommends

CMS should consider whether certain private-sector practices could broaden and strengthen the Value Modifier program's incentives. Specifically, the agency should consider rewarding physicians for performance improvement as well as for meeting absolute benchmarks, and making more timely payment adjustments to better reflect recent physician performance. Furthermore, the agency should develop a strategy to reliably measure the performance of solo or small physician practices. HHS concurred with all of GAO's recommendations for CMS.