Medicare to reward physicians, hospitals

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Medicare will reward doctors and hospital systems with bonuses for improving patient health while lowering overall costs as part of a new incentive program announced yesterday.

Dr. Mark B. McClellan, administrator of the Centers for Medicare and Medicaid Services, which runs Medicare, introduced the program yesterday at the World Health Care Congress, a conference for health care executives and policy-makers in Washington.

Medicare, which provides health care for seniors and disabled Americans, will start the program on April 1 with 10 physicians groups that include 5,000 doctors, and will affect more than 200,000 Medicare recipients.

The Centers for Medicare and Medicaid Services, the federal agency that runs Medicare, will track 32 health care quality issues to determine which groups get the bonus.

The agency will review extra services by the providers for mostly Medicare patients with chronic conditions like heart disease, diabetes and hypertension. The incentive program includes some preventive services like breast cancer screenings.

The three-year "pay-for-performance" project gives up to a 5 percent bonuson annual Medicare payments to practices and hospitals that produce better health results for the patients while reducing total expenses for the group.

The physician groups involved in the project all see Medicare patients and operate on Medicare's "fee-for-service" payment plan. They include the Geisinger Health System in Danville, Pa., St. John's Health System in Springfield, Mo., and Middlesex Health System in Middletown, Conn.

None of the health care providers are located in the Mid-Atlantic region.

To get the performance bonus, the health care groups also must keep their costs for the Medicare patient group at least 2 percent below the target set by Medicare.

The health care providers will continue to bepaid for regular servicesunder Medicare. Medicare currently reimburses doctors and health care providers based on the number of recipients seen and the complexity of those cases.

The additional services expected from the program would be reimbursed by the end of 2006 after the first trial year is completed from April to March 31, 2006.

"I think these physician groups have the potential to save significant amounts of money" in Medicare costs, Dr. McClellan said.

Dr. McClellan said he expected the program to prompt hospital systems and physician practices to invest in more health care technology to be successful. President Bush last week called on health care providers to adopt a computerized medical record system as a way to lower health care costs.

But some physician groups in the program said they expect payments to barely cover the cost for investing in the extra services.

Middlesex Health System plans on providing health managers for Medicare patients with some chronic conditions, said spokeswoman Dr. Katherine Schneider.

The initial programs are expected to affect 15,000 to 20,000 Medicare patients who come to the center for treatment, Dr. Schneider said. "If we do earn the money, it would be used to reimburse ourselves for the upfront costs," she said.