The Financial Impact of Medicare's Quality Programs

The overwhelming majority (83%) of physician group practices responding to a recent MGMA survey indicate that, while they actively engage in internal processes to improve clinical quality for their patients, they do not believe current Medicare physician quality reporting programs are facilitating that goal.

William J. Hall, MD, Paul Fine Professor of Medicine, director for the Center for Healthy Aging at the University of Rochester School of Medicine, isn’t surprised by the survey results.

“What’s being ignored is that we don’t know whether these quality indicators and process measures are remotely connected to quality at all,” Hall says. “There’s a sense that we’re being burdened with a lot of requirements to provide evidence of how we’re practicing, without much confidence that it’s getting at the basis of the problem.”

Identifying the Problem

Hall believes that at the present time the medical field is more focused on processes of care rather than outcomes of care. That, he says, stems from the financially unstable platform upon which Medicare currently stands. The United States, he points out, spends more per capita than any other country in the world, yet there’s significant evidence that it doesn’t necessarily have the best healthcare.

“As people have looked at what is wrong with the Medicare system, they’ve inevitably looked at the relationship between the amount of care and the quality of care, and that’s not necessarily a close relationship,” Hall says. As a result, regulators believe that by focusing on making sure physicians are providing the highest quality of care, there’s a good chance overall healthcare costs can be reduced. “That’s the philosophical premise we’re dealing with here.”

The challenge, and also disturbing reality for physicians, is that 2015 is the first year the 3 main Medicare Part B physician quality-reporting programs will penalize physicians for reporting unsuccessfully. That could subject physicians to Medicare payment penalties as high as 11% in future years.

Missing the Big Picture

Hall explains that for the past 2 years hospitals and health systems have been penalized if they have too many people returning within 30 days of admission—often referred to as 30-day readmissions.

“The idea is, if you take your muffler in to Midas for repair, they ought to at least give you a 30-day guarantee,” Hall says.

Since most of the decisions involved in hospital care involve a physician somewhere in the chain of events, the pressure, Hall says, is on physicians. And the financial penalties to some health systems have been substantial—sometimes as high as 1% or 2% of revenue.

“Most hospitals run at almost zero margin,” Hall explains. “If you lose 1 or 2 percent of your revenue because you didn’t make these quality indicators, that’s a big problem.”

An even bigger problem appears to be the shortsightedness of the quality indicators, one of which is patients originally admitted for congestive heart failure. Hall says that when closely examining why many of these same patients were readmitted within 30 days, only a fraction were for heart disease.

“They’re readmitted with something else—a urinary tract infection, or a drug reaction,” Hall explains. “It’s not so simple as to say, ‘Well, if you’re patient comes in within 30 days, we’re going to penalize you.’ Maybe that readmission saved Medicare hundreds of thousands of dollars for a much more serious ailment later on. So, that’s kind of the dilemma.”

Financial Impact on Physicians

The potential financial impact these penalties can have on a medical practice are evident. But beyond that direct impact, the time and effort invested by physicians and their staff to meet these quality measures, especially when they’re not seeing improved healthcare outcomes, can negatively impact a practice’s bottom line as well.

“There are only 24 hours in a day,” Hall says. “Last week my primary care physician, without much notice, announced he was retiring. I asked what made him decide to retire. He just looked over at his computer screen and said, ‘Four hours of this every day is more than I can take.’ And the physicians who do comply with all the quality measures have seen an enormous increase in their overhead.”

What’s the solution? Hall says that a return to the good old days where physicians had autonomy and charged fee-for-service for all their activities is not going to happen.

“That era has passed.”

Effective solutions, he says, are going to come from physicians who are actively trying to solve the problem, not simply retain the good old days of the past.

“Ten thousand people a day are turning 65-years old, and that same group is going to turn 85 in 20 years or so,” Hall says. “We’re going to see some big changes ahead, and we need a lot of wise people trying to figure this out.”