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Home / News & IndustryManaged Care Insight and Analysis
Updated: December 29, 2009
Value-Based Purchasing Programs Showing Promise

Three years, and in some cases five years, into the Centers for Medicare and Medicaid Services (CMS) comprehensive value-based purchasing (VBP) demonstrations the projects are beginning to show the results CMS was counting on. These programs are, at its simplest, based on pay-for-performance (P4P).

CMS wants to transform Medicare from a passive payer to an active purchaser of higher quality, more efficient healthcare, while slowing the growth in Medicare by providing financial incentives to providers who can meet specific high quality goals in the delivery of preventive care while saving Medicare money.

To that end CMS created a plethora of VBP demonstration programs, including:

  • Medicare Hospital Gainsharing Demonstration (MHGD);
  • Physician Hospital Collaboration Demonstration (PHCD);
  • Hospital Quality Incentive Demonstration (HQID);
  • Physician Group Practice Demonstration (PGP); and
  • Medicare Care Management Performance (MCMP).

Medicare is working in partnership with Premier Inc., a national hospital quality measurement organization, on HQID, now in its fifth year.

"The bottom line is that the status quo system of reimbursing hospitals is broken," said Susan DeVore, Premier president and CEO. "Trying to move the payment system to pay for quality and not solely for volume makes sense, especially when we have substantial evidence to prove that this payment model creates the right incentives to drive continuous improvement."

"The new payment model is based on lessons learned during the first three years of the project and reflects what we expect to see in a national VBP plan.

This is the right reform, at the right time, to improve care in the long run," DeVore added.

CMS Kicks Off Nursing Home VBP Demonstration

"Encouraged by the progress" of the VBP pilot programs Charlene Frizzera, CMS’ acting administrator, said her agency started in July a Nursing Home Value-Based Purchasing Demonstration. (NHVBP).

A total of 200 nursing homes in Arizona, New York and Wisconsin are participating.

The project will reward facilities that can improve or deliver high quality care in four specific areas:

  • Staffing;
  • Resident outcomes;
  • Avoidable hospitalizations; and
  • Reductions in the scope and severity of deficiency citations the participating homes may have received during inspections.

Nursing homes will be awarded points in each of these areas and homes with the highest scores or greatest improvement will become eligible for a performance payment. Resulting savings from improved quality and efficiency will be used to fund incentive pools in each state.

The demonstration lasts through June 2012 when program effectiveness will be evaluated to inform Medicare VBP policies.

Hospital Quality Incentive Demonstration

CMS working with Premier kicked off HQID in 2003 to test payment incentives under Medicare as a means to try to improve the safety, quality and efficiency of inpatient services by linking incentives to improved quality. Currently more than 200 hospitals in 38 states are participating.

Since the program’s inception patients are living longer and receiving recommended treatments more frequently, Premier said.

"The HQID project is the only large-scale hospital value-based purchasing project showing that financial incentives can increase quality of care," Frizzera said.

More than 1.5 million patients treated in five clinical areas at the participating hospitals received approximately 500,000 additional recommended evidence-based clinical quality measures, such as smoking cessation, discharge instructions and pneumococcal vaccination, during that same timeframe.

CMS is awarding incentive payments totaling $12 million this year to 225 hospitals for top performance, top improvements and overall attainment in five clinical areas: heart attack, coronary bypass graft, heart failure, pneumonia and hip and knee replacement.

Through the first four years, CMS awarded more than $36.6 million to top performers. After the initial three years of the demonstration, CMS extended the project for three more years to test new incentive models and find new ways to improve patient care.

The HQID project has served as a basis for CMS’ proposal to Congress for a national VBP or P4P program. The project has also been cited as a test-bed for reform by the Senate Finance Committee as part of healthcare reform.

For complete information about the HQID project and to view a list of those hospitals ranking in the top 50 percent in each focus areas, please visit

The hospital quality of care information gathered through the initiative is available to consumers on the at

Physician Group Practices Hitting Most CMS Benchmarks

Only 10 physician groups are participating in the PGP demonstration and what the demonstration lacks in quantity it is making up for in quality. All 10 physician groups achieved benchmark performances on at least 28 of the 32 measures reported in year three of the demonstration. Two groups – Geisinger Clinic in Danville, Pa., and Park Nicollet Health Services in St. Louis Park, Minn. – achieved benchmark performance on all 32 performance measures.

Physician groups earn incentive payments based on the quality of care they provide and the estimated savings they generate in Medicare expenditures for the patient population they serve.

Five physician groups will receive performance payments totaling $25.3 million as part of their share of $32.3 million of savings generated for the Medicare Trust Funds in the program’s third year.

Over the first three years of the demonstration the physician groups increased their quality scores significantly on diabetes, congestive heart failure, coronary artery disease, cancer screening and hypertension.

The University of Michigan Faculty Group Practice was also cited by CMS for providing quality of care while reducing Medicare costs. The practice said its performance was better than the CMS targets for 29 of the 32 quality measures tracked in the third year of the project, and saved Medicare $2.9 million.

The Faculty Group took an interdisciplinary approach to the project, involving pharmacists, nurses, social workers, care managers and others in the care of Medicare patients.

Project Leader Dr. Caroline Blaum, associate professor of internal medicine at the VA Ann Arbor Healthcare System, said the project results provide important input for the national debate on healthcare cost and quality. "There are plenty of opportunities to squeeze costs out of the system while also improving quality of care."

For more information on the project, visit Click on "Medicare Demonstrations" and then search for "Medicare Physician Group Practice Demonstration."

HIT A Hit With Small Group Practices

Doctors in small- to medium-sized practices are in line for double bonuses in the MCMP Demonstration for not only meeting patient quality benchmarks but for using certified health information technology (HIT) to report patient data electronically through electronic health records (EHRs).

The goal of the MCMP demonstration is to promote the use of HIT to improve the quality of care for beneficiaries with chronic conditions.

CMS is awarding approximately $7.5 million dollars in incentive payments to more than 560 practices in California, Arkansas, Massachusetts and Utah. The average payment per practice is $14,000 butsome practices earned as much as $62,500. Last year, CMS paid out more than $1.5 million in incentives for attaining baseline quality measures.

Twenty-three percent of participating practices were able to submit at least some of the measures from certified HIT technology, CMS said.

Address: Centers for Medicare and Medicaid Services, 7500 Security Blvd., Baltimore, MD 21244; (877) 267-2323,

  This article was taken from:
Pay-For-Performance Reporter

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