Mary Ellen Schneider

A Medicare demonstration project testing pay for performance among large multispecialty physician groups is yielding good data on care coordination programs, but expanding the program to small, single-specialty practices could present challenges, according to an analysis by the Government Accountability Office.

Small practices would have difficulty absorbing the high start-up costs associated with care coordination programs and the hefty price tag for electronic health record adoption and implementation, the GAO found.

The GAO report to Congress analyzed the Physician Group Practice Demonstration project.

The demonstration project aims to test an alternative payment approach that combines Medicare fee-for-service payments with incentive payments for achieving cost savings and hitting certain quality targets.

The demonstration, which began in April 2005, includes 10 multispecialty practices, each with 200 or more physicians. Officials at the Centers for Medicare and Medicaid Services recently added a fourth year to the project, which now is scheduled to end on March 31, 2009.

CMS reported the first-year results in July 2007.

In the first year, two group practices earned bonus payments of about $7.4 million in total.

But it may be difficult to broaden this approach to other physician practices because of the large size and high revenues of the participating practices, the GAO said.

All of the demonstration practices had 200 or more physicians, but this practice size is rare. Less than 1% of physician practices in the United States have more than 150 physicians.

In fact, about 83% of all physician practices are solo or two-person groups, according to the GAO.

The practices that were included in the project weren't just bigger in terms of the number of physicians but also had more support staff and larger annual medical revenues.

On average, the demonstration practices had annual medical revenues of $413 million in 2005. By comparison, only about 1% of single-specialty practices in the country have revenues exceeding $50 million a year.

The GAO identified three advantages that the participating practices had because of their large size: institutional affiliations with an integrated delivery system that gave them greater access to financial capital, past experience with pay-for-performance (P4P) programs, and experience with using an electronic health record.

Because most of the participating practices had affiliations with large, integrated delivery systems, they had access to the funds to start or expand quality improvement programs.

The GAO estimated that on average, each participating practice invested about $489,000 to start or expand its demonstration-related programs and spent about $1.2 million on operating expenses for these programs in the first year.

The practices that participated in the demonstration also had a leg up in terms of electronic health record systems, as 8 of the 10 participating practices had an electronic health record system in place before the project began.

By comparison, in 2005, only 24% of physician practices in the United States had a full or partial electronic health record, the GAO said.

Most the participants in the demonstration also had past experience with pay-for-performance programs either through a private or public sector organization.

CMS officials told GAO investigators that they chose to focus on large practices because they affect a significant amount of Medicare expenditures and have sufficient Medicare beneficiary volume to calculate savings.

A Medicare demonstration project testing pay for performance among large multispecialty physician groups is yielding good data on care coordination programs, but expanding the program to small, single-specialty practices could present challenges, according to an analysis by the Government Accountability Office.

Small practices would have difficulty absorbing the high start-up costs associated with care coordination programs and the hefty price tag for electronic health record adoption and implementation, the GAO found.

The GAO report to Congress analyzed the Physician Group Practice Demonstration project.

The demonstration project aims to test an alternative payment approach that combines Medicare fee-for-service payments with incentive payments for achieving cost savings and hitting certain quality targets.

The demonstration, which began in April 2005, includes 10 multispecialty practices, each with 200 or more physicians. Officials at the Centers for Medicare and Medicaid Services recently added a fourth year to the project, which now is scheduled to end on March 31, 2009.

CMS reported the first-year results in July 2007.

In the first year, two group practices earned bonus payments of about $7.4 million in total.

But it may be difficult to broaden this approach to other physician practices because of the large size and high revenues of the participating practices, the GAO said.

All of the demonstration practices had 200 or more physicians, but this practice size is rare. Less than 1% of physician practices in the United States have more than 150 physicians.

In fact, about 83% of all physician practices are solo or two-person groups, according to the GAO.

The practices that were included in the project weren't just bigger in terms of the number of physicians but also had more support staff and larger annual medical revenues.

On average, the demonstration practices had annual medical revenues of $413 million in 2005. By comparison, only about 1% of single-specialty practices in the country have revenues exceeding $50 million a year.

The GAO identified three advantages that the participating practices had because of their large size: institutional affiliations with an integrated delivery system that gave them greater access to financial capital, past experience with pay-for-performance (P4P) programs, and experience with using an electronic health record.

Because most of the participating practices had affiliations with large, integrated delivery systems, they had access to the funds to start or expand quality improvement programs.

The GAO estimated that on average, each participating practice invested about $489,000 to start or expand its demonstration-related programs and spent about $1.2 million on operating expenses for these programs in the first year.

The practices that participated in the demonstration also had a leg up in terms of electronic health record systems, as 8 of the 10 participating practices had an electronic health record system in place before the project began.

By comparison, in 2005, only 24% of physician practices in the United States had a full or partial electronic health record, the GAO said.

Most the participants in the demonstration also had past experience with pay-for-performance programs either through a private or public sector organization.

CMS officials told GAO investigators that they chose to focus on large practices because they affect a significant amount of Medicare expenditures and have sufficient Medicare beneficiary volume to calculate savings.

A Medicare demonstration project testing pay for performance among large multispecialty physician groups is yielding good data on care coordination programs, but expanding the program to small, single-specialty practices could present challenges, according to an analysis by the Government Accountability Office.

Small practices would have difficulty absorbing the high start-up costs associated with care coordination programs and the hefty price tag for electronic health record adoption and implementation, the GAO found.

The GAO report to Congress analyzed the Physician Group Practice Demonstration project.

The demonstration project aims to test an alternative payment approach that combines Medicare fee-for-service payments with incentive payments for achieving cost savings and hitting certain quality targets.

The demonstration, which began in April 2005, includes 10 multispecialty practices, each with 200 or more physicians. Officials at the Centers for Medicare and Medicaid Services recently added a fourth year to the project, which now is scheduled to end on March 31, 2009.

CMS reported the first-year results in July 2007.

In the first year, two group practices earned bonus payments of about $7.4 million in total.

But it may be difficult to broaden this approach to other physician practices because of the large size and high revenues of the participating practices, the GAO said.

All of the demonstration practices had 200 or more physicians, but this practice size is rare. Less than 1% of physician practices in the United States have more than 150 physicians.

In fact, about 83% of all physician practices are solo or two-person groups, according to the GAO.

The practices that were included in the project weren't just bigger in terms of the number of physicians but also had more support staff and larger annual medical revenues.

On average, the demonstration practices had annual medical revenues of $413 million in 2005. By comparison, only about 1% of single-specialty practices in the country have revenues exceeding $50 million a year.

The GAO identified three advantages that the participating practices had because of their large size: institutional affiliations with an integrated delivery system that gave them greater access to financial capital, past experience with pay-for-performance (P4P) programs, and experience with using an electronic health record.

Because most of the participating practices had affiliations with large, integrated delivery systems, they had access to the funds to start or expand quality improvement programs.

The GAO estimated that on average, each participating practice invested about $489,000 to start or expand its demonstration-related programs and spent about $1.2 million on operating expenses for these programs in the first year.

The practices that participated in the demonstration also had a leg up in terms of electronic health record systems, as 8 of the 10 participating practices had an electronic health record system in place before the project began.

By comparison, in 2005, only 24% of physician practices in the United States had a full or partial electronic health record, the GAO said.

Most the participants in the demonstration also had past experience with pay-for-performance programs either through a private or public sector organization.

CMS officials told GAO investigators that they chose to focus on large practices because they affect a significant amount of Medicare expenditures and have sufficient Medicare beneficiary volume to calculate savings.

The Joint Commission's new 2008 patient safety goal of requiring a process to respond quickly to a deteriorating patient is being mistakenly interpreted at some hospitals as a mandate for "rapid response teams" or "medical emergency teams."

Further, at some organizations that already have rapid response teams, staff have expressed concerns they will need to redo their established systems.

Dr. Peter Angood, vice president and chief patient safety officer for the Joint Commission, said such presumptions are incorrect.

Hospitals are simply being asked to select a "suitable method" that allows staff members to directly request assistance from a specially trained individual or individuals when a patient's condition appears to be worsening, he said. The key is to focus on early recognition of a deteriorating patient and mobilization of resources and to document the success or failure of the system that is in place.

"This is not a goal that states there needs to be a rapid response team," Dr. Angood said.

Many institutions in the United States have implemented rapid response teams, and the data on their efficiency is generally good, but not every study has been positive, Dr. Angood said. As a result, officials at the Joint Commission wanted to move forward with a more basic approach with the goal of avoiding variation in response from day to day and from shift to shift.

Regardless of how hospitals choose to implement the Joint Commission goal, hospitalists are likely to play a significant role in accomplishing it, said Dr. Franklin Michota, director of academic affairs for the department of hospital medicine at the Cleveland Clinic.

Organizations that already have hospitalist programs in place are leaning toward the use of rapid response teams or medical emergency teams, because hospitalists can function as members of the team. Some hospitals without an adequate number of staff to have a team in place around the clock are considering starting hospitalist programs. Another strategy would be to form teams that do not include physicians, he said.

The Joint Commission requirement will not be without cost, Dr. Michota said, especially for those organizations that need to add staff. If no professional staff was there at 2 a.m. before, the hospital now needs to take on the cost of salary and benefits for more employees, he said.

When hospitalists aren't a part of a response team, they are likely to be central to developing the response plan, said Dr. Robert Wachter, chief of the division of hospital medicine at the University of California, San Francisco. And perhaps the biggest role for the hospitalist is in providing the around-the-clock coverage that could negate the need to call the formal response team as often, he said.

While the Joint Commission requirement might seem like a greater challenge for small hospitals, Brock Slabach, senior vice president for member services at the National Rural Health Association, disagrees. In many cases, smaller organizations can meet the Joint Commission's requirements in easier fashion than large, urban facilities can, because they are more nimble and can work faster with less bureaucracy.

Rapid response teams, for example, can be tailored to a hospital's resources by using staff from the emergency department to respond to a call, he said.

A number of hospitals have already made a commitment to establishing some type of rapid response teams. Establishing these teams is one of the strategies advocated as part of the Institute for Healthcare Improvement's 5 Million Lives Campaign, a national patient safety campaign designed to reduce harm in U.S. hospitals.

Of the 3,800 hospitals enrolled in the 5 Million Lives Campaign as of January, about 2,700 have committed to using rapid response teams, according to IHI.

The Joint Commission's new 2008 patient safety goal of requiring a process to respond quickly to a deteriorating patient is being mistakenly interpreted at some hospitals as a mandate for "rapid response teams" or "medical emergency teams."

Further, at some organizations that already have rapid response teams, staff have expressed concerns they will need to redo their established systems.

Dr. Peter Angood, vice president and chief patient safety officer for the Joint Commission, said such presumptions are incorrect.

Hospitals are simply being asked to select a "suitable method" that allows staff members to directly request assistance from a specially trained individual or individuals when a patient's condition appears to be worsening, he said. The key is to focus on early recognition of a deteriorating patient and mobilization of resources and to document the success or failure of the system that is in place.

"This is not a goal that states there needs to be a rapid response team," Dr. Angood said.

Many institutions in the United States have implemented rapid response teams, and the data on their efficiency is generally good, but not every study has been positive, Dr. Angood said. As a result, officials at the Joint Commission wanted to move forward with a more basic approach with the goal of avoiding variation in response from day to day and from shift to shift.

Regardless of how hospitals choose to implement the Joint Commission goal, hospitalists are likely to play a significant role in accomplishing it, said Dr. Franklin Michota, director of academic affairs for the department of hospital medicine at the Cleveland Clinic.

Organizations that already have hospitalist programs in place are leaning toward the use of rapid response teams or medical emergency teams, because hospitalists can function as members of the team. Some hospitals without an adequate number of staff to have a team in place around the clock are considering starting hospitalist programs. Another strategy would be to form teams that do not include physicians, he said.

The Joint Commission requirement will not be without cost, Dr. Michota said, especially for those organizations that need to add staff. If no professional staff was there at 2 a.m. before, the hospital now needs to take on the cost of salary and benefits for more employees, he said.

When hospitalists aren't a part of a response team, they are likely to be central to developing the response plan, said Dr. Robert Wachter, chief of the division of hospital medicine at the University of California, San Francisco. And perhaps the biggest role for the hospitalist is in providing the around-the-clock coverage that could negate the need to call the formal response team as often, he said.

While the Joint Commission requirement might seem like a greater challenge for small hospitals, Brock Slabach, senior vice president for member services at the National Rural Health Association, disagrees. In many cases, smaller organizations can meet the Joint Commission's requirements in easier fashion than large, urban facilities can, because they are more nimble and can work faster with less bureaucracy.

Rapid response teams, for example, can be tailored to a hospital's resources by using staff from the emergency department to respond to a call, he said.

A number of hospitals have already made a commitment to establishing some type of rapid response teams. Establishing these teams is one of the strategies advocated as part of the Institute for Healthcare Improvement's 5 Million Lives Campaign, a national patient safety campaign designed to reduce harm in U.S. hospitals.

Of the 3,800 hospitals enrolled in the 5 Million Lives Campaign as of January, about 2,700 have committed to using rapid response teams, according to IHI.

The Joint Commission's new 2008 patient safety goal of requiring a process to respond quickly to a deteriorating patient is being mistakenly interpreted at some hospitals as a mandate for "rapid response teams" or "medical emergency teams."

Further, at some organizations that already have rapid response teams, staff have expressed concerns they will need to redo their established systems.

Dr. Peter Angood, vice president and chief patient safety officer for the Joint Commission, said such presumptions are incorrect.

Hospitals are simply being asked to select a "suitable method" that allows staff members to directly request assistance from a specially trained individual or individuals when a patient's condition appears to be worsening, he said. The key is to focus on early recognition of a deteriorating patient and mobilization of resources and to document the success or failure of the system that is in place.

"This is not a goal that states there needs to be a rapid response team," Dr. Angood said.

Many institutions in the United States have implemented rapid response teams, and the data on their efficiency is generally good, but not every study has been positive, Dr. Angood said. As a result, officials at the Joint Commission wanted to move forward with a more basic approach with the goal of avoiding variation in response from day to day and from shift to shift.

Regardless of how hospitals choose to implement the Joint Commission goal, hospitalists are likely to play a significant role in accomplishing it, said Dr. Franklin Michota, director of academic affairs for the department of hospital medicine at the Cleveland Clinic.

Organizations that already have hospitalist programs in place are leaning toward the use of rapid response teams or medical emergency teams, because hospitalists can function as members of the team. Some hospitals without an adequate number of staff to have a team in place around the clock are considering starting hospitalist programs. Another strategy would be to form teams that do not include physicians, he said.

The Joint Commission requirement will not be without cost, Dr. Michota said, especially for those organizations that need to add staff. If no professional staff was there at 2 a.m. before, the hospital now needs to take on the cost of salary and benefits for more employees, he said.

When hospitalists aren't a part of a response team, they are likely to be central to developing the response plan, said Dr. Robert Wachter, chief of the division of hospital medicine at the University of California, San Francisco. And perhaps the biggest role for the hospitalist is in providing the around-the-clock coverage that could negate the need to call the formal response team as often, he said.

While the Joint Commission requirement might seem like a greater challenge for small hospitals, Brock Slabach, senior vice president for member services at the National Rural Health Association, disagrees. In many cases, smaller organizations can meet the Joint Commission's requirements in easier fashion than large, urban facilities can, because they are more nimble and can work faster with less bureaucracy.

Rapid response teams, for example, can be tailored to a hospital's resources by using staff from the emergency department to respond to a call, he said.

A number of hospitals have already made a commitment to establishing some type of rapid response teams. Establishing these teams is one of the strategies advocated as part of the Institute for Healthcare Improvement's 5 Million Lives Campaign, a national patient safety campaign designed to reduce harm in U.S. hospitals.

Of the 3,800 hospitals enrolled in the 5 Million Lives Campaign as of January, about 2,700 have committed to using rapid response teams, according to IHI.

A Medicare demonstration project testing pay for performance among large multispecialty physician groups is yielding good data on care coordination programs, but expanding the program to small, single-specialty practices could present challenges, according to an analysis by the Government Accountability Office.

Small practices would have difficulty absorbing the high start-up costs associated with care coordination programs and the hefty price tag for electronic health record adoption and implementation, the GAO found.

The GAO report to Congress analyzed the Physician Group Practice Demonstration project. The demonstration tests an alternative payment approach that combines Medicare fee-for-service payments with incentive payments for achieving cost savings and hitting quality targets.

The demonstration, which began in April 2005, includes 10 multispecialty practices, each with 200 or more physicians. Officials at the Centers for Medicare and Medicaid Services recently added a fourth year to the project, which now is scheduled to end on March 31, 2009.

CMS reported the first-year results in July 2007. In the first year, two group practices earned bonus payments of about $7.4 million in total.

But it may be difficult to broaden this approach to other physician practices because of the large size and high revenues of the participating practices, GAO said. All of the demonstration practices had 200 or more physicians, while 83% of all physician practices are solo or two-person groups, according to GAO.

The practices weren't just bigger in terms of the number of physicians but also had more support staff and larger annual medical revenues. On average, the demonstration practices had annual medical revenues of $413 million in 2005. By comparison, only about 1% of single-specialty practices in the country have revenues exceeding $50 million a year.

Since most of the participating practices had affiliations with large, integrated delivery systems, they had access to the funds to start or expand quality programs. GAO estimated that on average, each participating practice invested about $489,000 to start or expand its demonstration-related programs and spent about $1.2 million on operating expenses for these programs in the first year.

The practices that participated in the demonstration also had a leg up in terms of electronic health record systems. Eight of the 10 participants had an electronic health record before the project began. By comparison, in 2005, only 24% of physician practices in the United States had a full or partial electronic health record, GAO said.

The majority of the participants in the demonstration also had past experience with pay-for-performance programs either through a private or public sector organization.

A Medicare demonstration project testing pay for performance among large multispecialty physician groups is yielding good data on care coordination programs, but expanding the program to small, single-specialty practices could present challenges, according to an analysis by the Government Accountability Office.

Small practices would have difficulty absorbing the high start-up costs associated with care coordination programs and the hefty price tag for electronic health record adoption and implementation, the GAO found.

The GAO report to Congress analyzed the Physician Group Practice Demonstration project. The demonstration tests an alternative payment approach that combines Medicare fee-for-service payments with incentive payments for achieving cost savings and hitting quality targets.

The demonstration, which began in April 2005, includes 10 multispecialty practices, each with 200 or more physicians. Officials at the Centers for Medicare and Medicaid Services recently added a fourth year to the project, which now is scheduled to end on March 31, 2009.

CMS reported the first-year results in July 2007. In the first year, two group practices earned bonus payments of about $7.4 million in total.

But it may be difficult to broaden this approach to other physician practices because of the large size and high revenues of the participating practices, GAO said. All of the demonstration practices had 200 or more physicians, while 83% of all physician practices are solo or two-person groups, according to GAO.

The practices weren't just bigger in terms of the number of physicians but also had more support staff and larger annual medical revenues. On average, the demonstration practices had annual medical revenues of $413 million in 2005. By comparison, only about 1% of single-specialty practices in the country have revenues exceeding $50 million a year.

Since most of the participating practices had affiliations with large, integrated delivery systems, they had access to the funds to start or expand quality programs. GAO estimated that on average, each participating practice invested about $489,000 to start or expand its demonstration-related programs and spent about $1.2 million on operating expenses for these programs in the first year.

The practices that participated in the demonstration also had a leg up in terms of electronic health record systems. Eight of the 10 participants had an electronic health record before the project began. By comparison, in 2005, only 24% of physician practices in the United States had a full or partial electronic health record, GAO said.

The majority of the participants in the demonstration also had past experience with pay-for-performance programs either through a private or public sector organization.

A Medicare demonstration project testing pay for performance among large multispecialty physician groups is yielding good data on care coordination programs, but expanding the program to small, single-specialty practices could present challenges, according to an analysis by the Government Accountability Office.

Small practices would have difficulty absorbing the high start-up costs associated with care coordination programs and the hefty price tag for electronic health record adoption and implementation, the GAO found.

The GAO report to Congress analyzed the Physician Group Practice Demonstration project. The demonstration tests an alternative payment approach that combines Medicare fee-for-service payments with incentive payments for achieving cost savings and hitting quality targets.

The demonstration, which began in April 2005, includes 10 multispecialty practices, each with 200 or more physicians. Officials at the Centers for Medicare and Medicaid Services recently added a fourth year to the project, which now is scheduled to end on March 31, 2009.

CMS reported the first-year results in July 2007. In the first year, two group practices earned bonus payments of about $7.4 million in total.

But it may be difficult to broaden this approach to other physician practices because of the large size and high revenues of the participating practices, GAO said. All of the demonstration practices had 200 or more physicians, while 83% of all physician practices are solo or two-person groups, according to GAO.

The practices weren't just bigger in terms of the number of physicians but also had more support staff and larger annual medical revenues. On average, the demonstration practices had annual medical revenues of $413 million in 2005. By comparison, only about 1% of single-specialty practices in the country have revenues exceeding $50 million a year.

Since most of the participating practices had affiliations with large, integrated delivery systems, they had access to the funds to start or expand quality programs. GAO estimated that on average, each participating practice invested about $489,000 to start or expand its demonstration-related programs and spent about $1.2 million on operating expenses for these programs in the first year.

The practices that participated in the demonstration also had a leg up in terms of electronic health record systems. Eight of the 10 participants had an electronic health record before the project began. By comparison, in 2005, only 24% of physician practices in the United States had a full or partial electronic health record, GAO said.

The majority of the participants in the demonstration also had past experience with pay-for-performance programs either through a private or public sector organization.

In response to a warning that the Medicare trust fund is in financial trouble, the Bush administration recently proposed legislation that would tie physician payments to quality, cap medical liability damages, and encourage nationwide adoption of electronic health records.

Health and Human Services Secretary Mike Leavitt submitted the proposed legislation to Congress last month, in response to the Medicare Trustees' warning for the second year in a row that general federal revenue would be needed to pay for more than 45% of program expenditures. Mr. Leavitt was required to submit the proposal under a cost-saving measure included in the Medicare Modernization Act of 2003.

"The Medicare program is on an unsustainable path, driven by two principal factors: projected growth in its per-capita costs, and increases in the beneficiary population as a result of population aging," Mr. Leavitt said in a letter to House Speaker Nancy Pelosi (D-Calif.). "Excess cost growth will not be brought under control until there is comprehensive reform changing Medicare's underlying structure."

Under the proposal, the HHS secretary would design and implement a system to tie a portion of the Medicare payment to providers to performance on quality and efficiency measures. Implementation would start in areas with well-accepted measures such as hospitals, physician offices, home health agencies, skilled nursing facilities, and renal dialysis facilities.

The legislation also would limit the length of time that individuals have to sue for medical malpractice, would cap noneconomic damages at $250,000 and punitive damages at $250,000 or twice the economic damages (whichever is greater), and would limit contingency fees paid to plaintiffs' attorneys. The HHS estimates that defensive medicine raises the cost of care in federal programs including Medicare, Medicaid, and Veterans Affairs, by about $28 billion a year.

Starting in 2009, the administration's proposal would also increase beneficiary premiums for Part D prescription drug coverage for single beneficiaries earning more than $82,000 a year and couples earning more than $164,000. The HHS estimates that the change would save more than $900 million in 2009 and nearly $3.2 billion over 5 years.

The legislative proposal also requires the HHS secretary to develop a system to encourage the nationwide adoption and use of interoperable electronic health records and to make personal health records available to Medicare beneficiaries.

Mr. Leavitt urged Congress to adopt the proposed changes in conjunction with the administration's fiscal year 2009 budget proposal, which includes legislative and administrative proposals that would cut $12.8 billion from the Medicare program in fiscal year 2009 and about $183 billion over the next 5 years.

But the administration may encounter some trouble getting its proposals through Congress.

Sen. Edward Kennedy (D-Mass.), chair of the Senate Health, Education, Labor, and Pensions Committee, said the administration's proposed Medicare cuts were dead on arrival. "The administration has trumped up a phony crisis in Medicare to justify proposing deep cuts in quality health care for seniors while giving massive subsidies to HMOs and other insurance companies," he said in a statement.

Physicians' groups were also critical of the plan. Dr. James King, president of the American Academy of Family Physicians, said they were disappointed that the Medicare proposal failed to address the approximate 10% Medicare payment cut facing physicians this summer.

Dr. King also questioned the administration's proposal to move ahead with "value-based" payments to physicians under a plan that appears not to include additional money for incentives. Any pay-for-performance system should use a bonus payment, not withhold payments to some physicians, he said.

'Excess cost growth will not be brought under control until there is' change in Medicare's structure. MR. LEAVITT

In response to a warning that the Medicare trust fund is in financial trouble, the Bush administration recently proposed legislation that would tie physician payments to quality, cap medical liability damages, and encourage nationwide adoption of electronic health records.

Health and Human Services Secretary Mike Leavitt submitted the proposed legislation to Congress last month, in response to the Medicare Trustees' warning for the second year in a row that general federal revenue would be needed to pay for more than 45% of program expenditures. Mr. Leavitt was required to submit the proposal under a cost-saving measure included in the Medicare Modernization Act of 2003.

"The Medicare program is on an unsustainable path, driven by two principal factors: projected growth in its per-capita costs, and increases in the beneficiary population as a result of population aging," Mr. Leavitt said in a letter to House Speaker Nancy Pelosi (D-Calif.). "Excess cost growth will not be brought under control until there is comprehensive reform changing Medicare's underlying structure."

Under the proposal, the HHS secretary would design and implement a system to tie a portion of the Medicare payment to providers to performance on quality and efficiency measures. Implementation would start in areas with well-accepted measures such as hospitals, physician offices, home health agencies, skilled nursing facilities, and renal dialysis facilities.

The legislation also would limit the length of time that individuals have to sue for medical malpractice, would cap noneconomic damages at $250,000 and punitive damages at $250,000 or twice the economic damages (whichever is greater), and would limit contingency fees paid to plaintiffs' attorneys. The HHS estimates that defensive medicine raises the cost of care in federal programs including Medicare, Medicaid, and Veterans Affairs, by about $28 billion a year.

Starting in 2009, the administration's proposal would also increase beneficiary premiums for Part D prescription drug coverage for single beneficiaries earning more than $82,000 a year and couples earning more than $164,000. The HHS estimates that the change would save more than $900 million in 2009 and nearly $3.2 billion over 5 years.

The legislative proposal also requires the HHS secretary to develop a system to encourage the nationwide adoption and use of interoperable electronic health records and to make personal health records available to Medicare beneficiaries.

Mr. Leavitt urged Congress to adopt the proposed changes in conjunction with the administration's fiscal year 2009 budget proposal, which includes legislative and administrative proposals that would cut $12.8 billion from the Medicare program in fiscal year 2009 and about $183 billion over the next 5 years.

But the administration may encounter some trouble getting its proposals through Congress.

Sen. Edward Kennedy (D-Mass.), chair of the Senate Health, Education, Labor, and Pensions Committee, said the administration's proposed Medicare cuts were dead on arrival. "The administration has trumped up a phony crisis in Medicare to justify proposing deep cuts in quality health care for seniors while giving massive subsidies to HMOs and other insurance companies," he said in a statement.

Physicians' groups were also critical of the plan. Dr. James King, president of the American Academy of Family Physicians, said they were disappointed that the Medicare proposal failed to address the approximate 10% Medicare payment cut facing physicians this summer.

Dr. King also questioned the administration's proposal to move ahead with "value-based" payments to physicians under a plan that appears not to include additional money for incentives. Any pay-for-performance system should use a bonus payment, not withhold payments to some physicians, he said.

'Excess cost growth will not be brought under control until there is' change in Medicare's structure. MR. LEAVITT

In response to a warning that the Medicare trust fund is in financial trouble, the Bush administration recently proposed legislation that would tie physician payments to quality, cap medical liability damages, and encourage nationwide adoption of electronic health records.

Health and Human Services Secretary Mike Leavitt submitted the proposed legislation to Congress last month, in response to the Medicare Trustees' warning for the second year in a row that general federal revenue would be needed to pay for more than 45% of program expenditures. Mr. Leavitt was required to submit the proposal under a cost-saving measure included in the Medicare Modernization Act of 2003.

"The Medicare program is on an unsustainable path, driven by two principal factors: projected growth in its per-capita costs, and increases in the beneficiary population as a result of population aging," Mr. Leavitt said in a letter to House Speaker Nancy Pelosi (D-Calif.). "Excess cost growth will not be brought under control until there is comprehensive reform changing Medicare's underlying structure."

Under the proposal, the HHS secretary would design and implement a system to tie a portion of the Medicare payment to providers to performance on quality and efficiency measures. Implementation would start in areas with well-accepted measures such as hospitals, physician offices, home health agencies, skilled nursing facilities, and renal dialysis facilities.

The legislation also would limit the length of time that individuals have to sue for medical malpractice, would cap noneconomic damages at $250,000 and punitive damages at $250,000 or twice the economic damages (whichever is greater), and would limit contingency fees paid to plaintiffs' attorneys. The HHS estimates that defensive medicine raises the cost of care in federal programs including Medicare, Medicaid, and Veterans Affairs, by about $28 billion a year.

Starting in 2009, the administration's proposal would also increase beneficiary premiums for Part D prescription drug coverage for single beneficiaries earning more than $82,000 a year and couples earning more than $164,000. The HHS estimates that the change would save more than $900 million in 2009 and nearly $3.2 billion over 5 years.

The legislative proposal also requires the HHS secretary to develop a system to encourage the nationwide adoption and use of interoperable electronic health records and to make personal health records available to Medicare beneficiaries.

Mr. Leavitt urged Congress to adopt the proposed changes in conjunction with the administration's fiscal year 2009 budget proposal, which includes legislative and administrative proposals that would cut $12.8 billion from the Medicare program in fiscal year 2009 and about $183 billion over the next 5 years.

But the administration may encounter some trouble getting its proposals through Congress.

Sen. Edward Kennedy (D-Mass.), chair of the Senate Health, Education, Labor, and Pensions Committee, said the administration's proposed Medicare cuts were dead on arrival. "The administration has trumped up a phony crisis in Medicare to justify proposing deep cuts in quality health care for seniors while giving massive subsidies to HMOs and other insurance companies," he said in a statement.

Physicians' groups were also critical of the plan. Dr. James King, president of the American Academy of Family Physicians, said they were disappointed that the Medicare proposal failed to address the approximate 10% Medicare payment cut facing physicians this summer.

Dr. King also questioned the administration's proposal to move ahead with "value-based" payments to physicians under a plan that appears not to include additional money for incentives. Any pay-for-performance system should use a bonus payment, not withhold payments to some physicians, he said.

'Excess cost growth will not be brought under control until there is' change in Medicare's structure. MR. LEAVITT

Health care spending in the United States is projected to consume nearly 20% of the gross domestic product by 2017, according to estimates from economists at the Centers for Medicare and Medicaid Services.

Health care spending growth is expected to remain steady at about 6.7% a year through 2017, with spending estimated to nearly double to $4.3 trillion by 2017, the CMS analysts said in a report published online in the journal Health Affairs.

The 10-year projections come from the National Health Statistics Group, part of the CMS Office of the Actuary, and are based on historical trends, projected economic conditions, and provisions of current law.

The analysts project that spending for private sector health care will slow toward the end of the projection period, while spending in the public sector, including Medicare and Medicaid, will increase. Much of the increase will be fueled by the first wave of baby boomers entering Medicare in 2011. The increase in the number of Medicare enrollees is projected to add 2.9% to growth in Medicare spending by 2017, according to the report.

The CMS economists projected that growth in spending on physician services would average about 5.9% per year through 2017, compared with 6.6% from 1995 to 2006. These projections are based on current law, which calls for steep cuts to physician payments under Medicare over the next several years. If Congress were to provide a 0% update over the next decade, the average annual growth from 2007 to 2017 would rise to 6.2%, according to the report.

On the hospital side, growth in spending is projected to accelerate at the beginning of the projection period because of higher Medicaid payments but to slow toward the end as a result of projected lower growth in income. Home health care will likely be one of the fastest growing sectors in health care from 2007 through 2017, with an average annual spending growth rate of 7.7%, according to the report.

Growth in prescription drug spending is expected to accelerate overall through 2017, because of increased utilization, new drugs entering the market, and a leveling off of the growth in generics. The analysts reported that Medicare Part D would have "little impact on overall health spending growth" through 2017.

Health care spending in the United States is projected to consume nearly 20% of the gross domestic product by 2017, according to estimates from economists at the Centers for Medicare and Medicaid Services.

Health care spending growth is expected to remain steady at about 6.7% a year through 2017, with spending estimated to nearly double to $4.3 trillion by 2017, the CMS analysts said in a report published online in the journal Health Affairs.

The 10-year projections come from the National Health Statistics Group, part of the CMS Office of the Actuary, and are based on historical trends, projected economic conditions, and provisions of current law.

The analysts project that spending for private sector health care will slow toward the end of the projection period, while spending in the public sector, including Medicare and Medicaid, will increase. Much of the increase will be fueled by the first wave of baby boomers entering Medicare in 2011. The increase in the number of Medicare enrollees is projected to add 2.9% to growth in Medicare spending by 2017, according to the report.

The CMS economists projected that growth in spending on physician services would average about 5.9% per year through 2017, compared with 6.6% from 1995 to 2006. These projections are based on current law, which calls for steep cuts to physician payments under Medicare over the next several years. If Congress were to provide a 0% update over the next decade, the average annual growth from 2007 to 2017 would rise to 6.2%, according to the report.

On the hospital side, growth in spending is projected to accelerate at the beginning of the projection period because of higher Medicaid payments but to slow toward the end as a result of projected lower growth in income. Home health care will likely be one of the fastest growing sectors in health care from 2007 through 2017, with an average annual spending growth rate of 7.7%, according to the report.

Growth in prescription drug spending is expected to accelerate overall through 2017, because of increased utilization, new drugs entering the market, and a leveling off of the growth in generics. The analysts reported that Medicare Part D would have "little impact on overall health spending growth" through 2017.

Health care spending in the United States is projected to consume nearly 20% of the gross domestic product by 2017, according to estimates from economists at the Centers for Medicare and Medicaid Services.

Health care spending growth is expected to remain steady at about 6.7% a year through 2017, with spending estimated to nearly double to $4.3 trillion by 2017, the CMS analysts said in a report published online in the journal Health Affairs.

The 10-year projections come from the National Health Statistics Group, part of the CMS Office of the Actuary, and are based on historical trends, projected economic conditions, and provisions of current law.

The analysts project that spending for private sector health care will slow toward the end of the projection period, while spending in the public sector, including Medicare and Medicaid, will increase. Much of the increase will be fueled by the first wave of baby boomers entering Medicare in 2011. The increase in the number of Medicare enrollees is projected to add 2.9% to growth in Medicare spending by 2017, according to the report.

The CMS economists projected that growth in spending on physician services would average about 5.9% per year through 2017, compared with 6.6% from 1995 to 2006. These projections are based on current law, which calls for steep cuts to physician payments under Medicare over the next several years. If Congress were to provide a 0% update over the next decade, the average annual growth from 2007 to 2017 would rise to 6.2%, according to the report.

On the hospital side, growth in spending is projected to accelerate at the beginning of the projection period because of higher Medicaid payments but to slow toward the end as a result of projected lower growth in income. Home health care will likely be one of the fastest growing sectors in health care from 2007 through 2017, with an average annual spending growth rate of 7.7%, according to the report.

Growth in prescription drug spending is expected to accelerate overall through 2017, because of increased utilization, new drugs entering the market, and a leveling off of the growth in generics. The analysts reported that Medicare Part D would have "little impact on overall health spending growth" through 2017.

The Joint Commission's new 2008 patient safety goal of requiring a process to respond quickly to a deteriorating patient is being mistakenly interpreted at some hospitals as a mandate for “rapid response teams” or “medical emergency teams.”

Further, at some organizations that already have rapid response teams, staff have expressed concerns they will need to redo their established systems.

Dr. Peter Angood, vice president and chief patient safety officer for the Joint Commission, said such presumptions are incorrect.

Hospitals are simply being asked to select a “suitable method” that allows staff members to directly request assistance from a specially trained individual or individuals when a patient's condition appears to be worsening, he said. The key is to focus on early recognition of a deteriorating patient and mobilization of resources and to document the success or failure of the system that is in place.

“This is not a goal that states there needs to be a rapid response team,” Dr. Angood said.

Many institutions in the United States have implemented rapid response teams, and the data on their efficiency is generally good, but not every study has been positive, Dr. Angood said. As a result, officials at the Joint Commission wanted to move forward with a more basic approach with the goal of avoiding variation in response from day to day and shift to shift.

Regardless of how hospitals choose to implement the Joint Commission goal, hospitalists are likely to play a significant role in accomplishing it, said Dr. Franklin Michota, director of academic affairs for the department of hospital medicine at the Cleveland Clinic.

Organizations that already have hospitalist programs in place are leaning toward the use of rapid response teams or medical emergency teams, because hospitalists can function as members of the team. Some hospitals without an adequate number of staff to have a team in place around the clock are considering starting hospitalist programs. Another strategy would be to form teams that do not include physicians, he said.

The Joint Commission requirement will not be without cost, Dr. Michota said, especially for those organizations that need to add staff. If no professional staff was there at 2 a.m. before, the hospital now needs to take on the cost of salary and benefits for more employees, he said.

When hospitalists aren't a part of a response team, they are likely to be central to developing the response plan, said Dr. Robert Wachter, chief of the division of hospital medicine at the University of California, San Francisco. And perhaps the biggest role for the hospitalist is in providing the around-the-clock coverage that could negate the need to call the formal response team as often, he said.

While the Joint Commission requirement might seem like a greater challenge for small hospitals, Brock Slabach, senior vice president for member services at the National Rural Health Association, disagrees. In many cases, smaller organizations can meet the Joint Commission's requirements in easier fashion than large, urban facilities can, because they are more nimble and can work faster with less bureaucracy.

Rapid response teams, for example, can be tailored to a hospital's resources by using staff from the emergency department to respond to a call, he said.

A number of hospitals have already made a commitment to establishing some type of rapid response teams. Establishing these teams is one of the strategies advocated as part of the Institute for Healthcare Improvement's 5 Million Lives Campaign, a national patient safety campaign designed to reduce harm in U.S. hospitals.

Of the 3,800 hospitals enrolled in the 5 Million Lives Campaign as of January, about 2,700 have committed to using rapid response teams, according to IHI.

This idea is catching on, said Kathy Duncan, R.N., faculty for the 5 Million Lives Campaign. The cost of implementing these types of teams varies, she said. About 75% of hospitals in the campaign have done this with zero increase in full-time employees. For most staff involved, this is just an additional task. Investment is required for training team members, which can be costly at the outset, she said. Hospitals also need to invest time to educate the rest of the staff on when and how to call for assistance.

Ms. Duncan's advice for implementing whatever process a hospital chooses is to start by assessing what resources are available. She advises figuring out how people will request assistance, when to make that call, and who should respond. “Start small with a pilot process,” Ms. Duncan said.

Deadlines for MeetingJoint Commission Goal

Because of the complexity of implementing a process to respond quickly to a deteriorating patient, officials at the Joint Commission are giving hospitals a year to develop and phase in their program.

By April 1, the first deadline, hospital leaders are required to assign responsibility for the oversight, coordination, and development of the goals and requirements. By July 1, there needs to be an implementation work plan in place that identifies the resources needed. By Oct. 1, pilot testing in one clinical area should be underway.

The Joint Commission is serious about organizations meeting these implementation milestones, Dr. Angood said. Hospitals that don't meet the quarterly deadlines will be docked points on their evaluation.

For 2009, hospitals will need to comply with the following six “implementation expectations” set out by the Joint Commission:

▸ Select an early recognition and response method suitable to the hospital's needs and resources.

▸ Develop criteria for how and when to request additional assistance to respond to a change in a patient's condition.

▸ Empower staff, patients, and/or families to request additional assistance if they have a concern.

▸ Provide formal education about response policies and practices for both those who might respond and those who might request assistance.

▸ Measure the utility and effectiveness of the interventions.

▸ Measure cardiopulmonary arrest rates, respiratory arrest rates, and mortality rates before and after implementation of the program.

The Joint Commission's new 2008 patient safety goal of requiring a process to respond quickly to a deteriorating patient is being mistakenly interpreted at some hospitals as a mandate for “rapid response teams” or “medical emergency teams.”

Further, at some organizations that already have rapid response teams, staff have expressed concerns they will need to redo their established systems.

Dr. Peter Angood, vice president and chief patient safety officer for the Joint Commission, said such presumptions are incorrect.

Hospitals are simply being asked to select a “suitable method” that allows staff members to directly request assistance from a specially trained individual or individuals when a patient's condition appears to be worsening, he said. The key is to focus on early recognition of a deteriorating patient and mobilization of resources and to document the success or failure of the system that is in place.

“This is not a goal that states there needs to be a rapid response team,” Dr. Angood said.

Many institutions in the United States have implemented rapid response teams, and the data on their efficiency is generally good, but not every study has been positive, Dr. Angood said. As a result, officials at the Joint Commission wanted to move forward with a more basic approach with the goal of avoiding variation in response from day to day and shift to shift.

Regardless of how hospitals choose to implement the Joint Commission goal, hospitalists are likely to play a significant role in accomplishing it, said Dr. Franklin Michota, director of academic affairs for the department of hospital medicine at the Cleveland Clinic.

Organizations that already have hospitalist programs in place are leaning toward the use of rapid response teams or medical emergency teams, because hospitalists can function as members of the team. Some hospitals without an adequate number of staff to have a team in place around the clock are considering starting hospitalist programs. Another strategy would be to form teams that do not include physicians, he said.

The Joint Commission requirement will not be without cost, Dr. Michota said, especially for those organizations that need to add staff. If no professional staff was there at 2 a.m. before, the hospital now needs to take on the cost of salary and benefits for more employees, he said.

When hospitalists aren't a part of a response team, they are likely to be central to developing the response plan, said Dr. Robert Wachter, chief of the division of hospital medicine at the University of California, San Francisco. And perhaps the biggest role for the hospitalist is in providing the around-the-clock coverage that could negate the need to call the formal response team as often, he said.

While the Joint Commission requirement might seem like a greater challenge for small hospitals, Brock Slabach, senior vice president for member services at the National Rural Health Association, disagrees. In many cases, smaller organizations can meet the Joint Commission's requirements in easier fashion than large, urban facilities can, because they are more nimble and can work faster with less bureaucracy.

Rapid response teams, for example, can be tailored to a hospital's resources by using staff from the emergency department to respond to a call, he said.

A number of hospitals have already made a commitment to establishing some type of rapid response teams. Establishing these teams is one of the strategies advocated as part of the Institute for Healthcare Improvement's 5 Million Lives Campaign, a national patient safety campaign designed to reduce harm in U.S. hospitals.

Of the 3,800 hospitals enrolled in the 5 Million Lives Campaign as of January, about 2,700 have committed to using rapid response teams, according to IHI.

This idea is catching on, said Kathy Duncan, R.N., faculty for the 5 Million Lives Campaign. The cost of implementing these types of teams varies, she said. About 75% of hospitals in the campaign have done this with zero increase in full-time employees. For most staff involved, this is just an additional task. Investment is required for training team members, which can be costly at the outset, she said. Hospitals also need to invest time to educate the rest of the staff on when and how to call for assistance.

Ms. Duncan's advice for implementing whatever process a hospital chooses is to start by assessing what resources are available. She advises figuring out how people will request assistance, when to make that call, and who should respond. “Start small with a pilot process,” Ms. Duncan said.

Deadlines for MeetingJoint Commission Goal

Because of the complexity of implementing a process to respond quickly to a deteriorating patient, officials at the Joint Commission are giving hospitals a year to develop and phase in their program.

By April 1, the first deadline, hospital leaders are required to assign responsibility for the oversight, coordination, and development of the goals and requirements. By July 1, there needs to be an implementation work plan in place that identifies the resources needed. By Oct. 1, pilot testing in one clinical area should be underway.

The Joint Commission is serious about organizations meeting these implementation milestones, Dr. Angood said. Hospitals that don't meet the quarterly deadlines will be docked points on their evaluation.

For 2009, hospitals will need to comply with the following six “implementation expectations” set out by the Joint Commission:

▸ Select an early recognition and response method suitable to the hospital's needs and resources.

▸ Develop criteria for how and when to request additional assistance to respond to a change in a patient's condition.

▸ Empower staff, patients, and/or families to request additional assistance if they have a concern.

▸ Provide formal education about response policies and practices for both those who might respond and those who might request assistance.

▸ Measure the utility and effectiveness of the interventions.

▸ Measure cardiopulmonary arrest rates, respiratory arrest rates, and mortality rates before and after implementation of the program.

The Joint Commission's new 2008 patient safety goal of requiring a process to respond quickly to a deteriorating patient is being mistakenly interpreted at some hospitals as a mandate for “rapid response teams” or “medical emergency teams.”

Further, at some organizations that already have rapid response teams, staff have expressed concerns they will need to redo their established systems.

Dr. Peter Angood, vice president and chief patient safety officer for the Joint Commission, said such presumptions are incorrect.

Hospitals are simply being asked to select a “suitable method” that allows staff members to directly request assistance from a specially trained individual or individuals when a patient's condition appears to be worsening, he said. The key is to focus on early recognition of a deteriorating patient and mobilization of resources and to document the success or failure of the system that is in place.

“This is not a goal that states there needs to be a rapid response team,” Dr. Angood said.

Many institutions in the United States have implemented rapid response teams, and the data on their efficiency is generally good, but not every study has been positive, Dr. Angood said. As a result, officials at the Joint Commission wanted to move forward with a more basic approach with the goal of avoiding variation in response from day to day and shift to shift.

Regardless of how hospitals choose to implement the Joint Commission goal, hospitalists are likely to play a significant role in accomplishing it, said Dr. Franklin Michota, director of academic affairs for the department of hospital medicine at the Cleveland Clinic.

Organizations that already have hospitalist programs in place are leaning toward the use of rapid response teams or medical emergency teams, because hospitalists can function as members of the team. Some hospitals without an adequate number of staff to have a team in place around the clock are considering starting hospitalist programs. Another strategy would be to form teams that do not include physicians, he said.

The Joint Commission requirement will not be without cost, Dr. Michota said, especially for those organizations that need to add staff. If no professional staff was there at 2 a.m. before, the hospital now needs to take on the cost of salary and benefits for more employees, he said.

When hospitalists aren't a part of a response team, they are likely to be central to developing the response plan, said Dr. Robert Wachter, chief of the division of hospital medicine at the University of California, San Francisco. And perhaps the biggest role for the hospitalist is in providing the around-the-clock coverage that could negate the need to call the formal response team as often, he said.

While the Joint Commission requirement might seem like a greater challenge for small hospitals, Brock Slabach, senior vice president for member services at the National Rural Health Association, disagrees. In many cases, smaller organizations can meet the Joint Commission's requirements in easier fashion than large, urban facilities can, because they are more nimble and can work faster with less bureaucracy.

Rapid response teams, for example, can be tailored to a hospital's resources by using staff from the emergency department to respond to a call, he said.

A number of hospitals have already made a commitment to establishing some type of rapid response teams. Establishing these teams is one of the strategies advocated as part of the Institute for Healthcare Improvement's 5 Million Lives Campaign, a national patient safety campaign designed to reduce harm in U.S. hospitals.

Of the 3,800 hospitals enrolled in the 5 Million Lives Campaign as of January, about 2,700 have committed to using rapid response teams, according to IHI.

This idea is catching on, said Kathy Duncan, R.N., faculty for the 5 Million Lives Campaign. The cost of implementing these types of teams varies, she said. About 75% of hospitals in the campaign have done this with zero increase in full-time employees. For most staff involved, this is just an additional task. Investment is required for training team members, which can be costly at the outset, she said. Hospitals also need to invest time to educate the rest of the staff on when and how to call for assistance.

Ms. Duncan's advice for implementing whatever process a hospital chooses is to start by assessing what resources are available. She advises figuring out how people will request assistance, when to make that call, and who should respond. “Start small with a pilot process,” Ms. Duncan said.

Deadlines for MeetingJoint Commission Goal

Because of the complexity of implementing a process to respond quickly to a deteriorating patient, officials at the Joint Commission are giving hospitals a year to develop and phase in their program.

By April 1, the first deadline, hospital leaders are required to assign responsibility for the oversight, coordination, and development of the goals and requirements. By July 1, there needs to be an implementation work plan in place that identifies the resources needed. By Oct. 1, pilot testing in one clinical area should be underway.

The Joint Commission is serious about organizations meeting these implementation milestones, Dr. Angood said. Hospitals that don't meet the quarterly deadlines will be docked points on their evaluation.

For 2009, hospitals will need to comply with the following six “implementation expectations” set out by the Joint Commission:

▸ Select an early recognition and response method suitable to the hospital's needs and resources.

▸ Develop criteria for how and when to request additional assistance to respond to a change in a patient's condition.

▸ Empower staff, patients, and/or families to request additional assistance if they have a concern.

▸ Provide formal education about response policies and practices for both those who might respond and those who might request assistance.

▸ Measure the utility and effectiveness of the interventions.

▸ Measure cardiopulmonary arrest rates, respiratory arrest rates, and mortality rates before and after implementation of the program.

A Medicare demonstration project testing pay for performance among large multispecialty physician groups is yielding good data on care coordination programs but expanding the program to small, single-specialty practices could present challenges, according to an analysis by the Government Accountability Office.

Small practices would have difficulty absorbing the high start-up costs associated with care coordination programs and the hefty price tag for electronic health record adoption and implementation, the GAO found.

The GAO report to Congress analyzed the Physician Group Practice Demonstration project. The demonstration tests an alternative payment approach that combines Medicare fee-for-service payments with incentive payments for achieving cost savings and hitting quality targets.

The demonstration, which began in April 2005, includes 10 multispecialty practices, each with 200 or more physicians. Officials at the Centers for Medicare and Medicaid Services recently added a fourth year to the project, which now is scheduled to end March 31, 2009.

CMS reported the first-year results in July 2007. In the first year, two group practices earned bonus payments of about $7.4 million in total.

But it may be difficult to broaden this approach to other physician practices because of the large size and high revenues of the participating practices, GAO said. All of the demonstration practices had 200 or more physicians, while less than 1% of physician practices in the United States have more than 150 physicians. In fact, about 83% of all physician practices are solo or two-person groups, according to GAO.

The practices weren't just bigger in terms of the number of physicians but also had more support staff and larger annual medical revenues. On average, the demonstration practices had annual medical revenues of $413 million in 2005. By comparison, only about 1% of single-specialty practices in the country have revenues exceeding $50 million a year.

GAO identified three advantages that the participating practices had because of their size: institutional affiliations with an integrated delivery system that gave them greater access to financial capital; past experience with pay-for-performance (P4P) programs; and experience using an electronic health record.

Since most of the participating practices had affiliations with large, integrated delivery systems, they had access to the funds to start or expand quality programs. GAO estimated that on average, each participating practice invested about $489,000 to start or expand its demonstration-related programs and spent about $1.2 million on operating expenses for these programs in the first year.

The practices that participated in the demonstration also had a leg up in terms of electronic health record systems. Eight of the 10 participants had an electronic health record before the project began. By comparison, in 2005, only 24% of physician practices in the United States had a full or partial electronic health record, GAO said.

The majority of the participants in the demonstration also had past experience with pay-for-performance programs either through a private or public-sector organization.

A Medicare demonstration project testing pay for performance among large multispecialty physician groups is yielding good data on care coordination programs but expanding the program to small, single-specialty practices could present challenges, according to an analysis by the Government Accountability Office.

Small practices would have difficulty absorbing the high start-up costs associated with care coordination programs and the hefty price tag for electronic health record adoption and implementation, the GAO found.

The GAO report to Congress analyzed the Physician Group Practice Demonstration project. The demonstration tests an alternative payment approach that combines Medicare fee-for-service payments with incentive payments for achieving cost savings and hitting quality targets.

The demonstration, which began in April 2005, includes 10 multispecialty practices, each with 200 or more physicians. Officials at the Centers for Medicare and Medicaid Services recently added a fourth year to the project, which now is scheduled to end March 31, 2009.

CMS reported the first-year results in July 2007. In the first year, two group practices earned bonus payments of about $7.4 million in total.

But it may be difficult to broaden this approach to other physician practices because of the large size and high revenues of the participating practices, GAO said. All of the demonstration practices had 200 or more physicians, while less than 1% of physician practices in the United States have more than 150 physicians. In fact, about 83% of all physician practices are solo or two-person groups, according to GAO.

The practices weren't just bigger in terms of the number of physicians but also had more support staff and larger annual medical revenues. On average, the demonstration practices had annual medical revenues of $413 million in 2005. By comparison, only about 1% of single-specialty practices in the country have revenues exceeding $50 million a year.

GAO identified three advantages that the participating practices had because of their size: institutional affiliations with an integrated delivery system that gave them greater access to financial capital; past experience with pay-for-performance (P4P) programs; and experience using an electronic health record.

Since most of the participating practices had affiliations with large, integrated delivery systems, they had access to the funds to start or expand quality programs. GAO estimated that on average, each participating practice invested about $489,000 to start or expand its demonstration-related programs and spent about $1.2 million on operating expenses for these programs in the first year.

The practices that participated in the demonstration also had a leg up in terms of electronic health record systems. Eight of the 10 participants had an electronic health record before the project began. By comparison, in 2005, only 24% of physician practices in the United States had a full or partial electronic health record, GAO said.

The majority of the participants in the demonstration also had past experience with pay-for-performance programs either through a private or public-sector organization.

A Medicare demonstration project testing pay for performance among large multispecialty physician groups is yielding good data on care coordination programs but expanding the program to small, single-specialty practices could present challenges, according to an analysis by the Government Accountability Office.

Small practices would have difficulty absorbing the high start-up costs associated with care coordination programs and the hefty price tag for electronic health record adoption and implementation, the GAO found.

The GAO report to Congress analyzed the Physician Group Practice Demonstration project. The demonstration tests an alternative payment approach that combines Medicare fee-for-service payments with incentive payments for achieving cost savings and hitting quality targets.

The demonstration, which began in April 2005, includes 10 multispecialty practices, each with 200 or more physicians. Officials at the Centers for Medicare and Medicaid Services recently added a fourth year to the project, which now is scheduled to end March 31, 2009.

CMS reported the first-year results in July 2007. In the first year, two group practices earned bonus payments of about $7.4 million in total.

But it may be difficult to broaden this approach to other physician practices because of the large size and high revenues of the participating practices, GAO said. All of the demonstration practices had 200 or more physicians, while less than 1% of physician practices in the United States have more than 150 physicians. In fact, about 83% of all physician practices are solo or two-person groups, according to GAO.

The practices weren't just bigger in terms of the number of physicians but also had more support staff and larger annual medical revenues. On average, the demonstration practices had annual medical revenues of $413 million in 2005. By comparison, only about 1% of single-specialty practices in the country have revenues exceeding $50 million a year.

GAO identified three advantages that the participating practices had because of their size: institutional affiliations with an integrated delivery system that gave them greater access to financial capital; past experience with pay-for-performance (P4P) programs; and experience using an electronic health record.

Since most of the participating practices had affiliations with large, integrated delivery systems, they had access to the funds to start or expand quality programs. GAO estimated that on average, each participating practice invested about $489,000 to start or expand its demonstration-related programs and spent about $1.2 million on operating expenses for these programs in the first year.

The practices that participated in the demonstration also had a leg up in terms of electronic health record systems. Eight of the 10 participants had an electronic health record before the project began. By comparison, in 2005, only 24% of physician practices in the United States had a full or partial electronic health record, GAO said.

The majority of the participants in the demonstration also had past experience with pay-for-performance programs either through a private or public-sector organization.

Following a 6-month initial investigation, New York Attorney General Andrew Cuomo announced plans to file suit against UnitedHealth Group and four of its subsidiaries for allegedly systematically underpaying consumers for their out-of-network medical expenses.

The attorney general claimed that UnitedHealth Group used faulty data from one of its subsidiaries, the billing information company Ingenix Inc., which resulted in the underestimation of “usual, customary, and reasonable” rates for a range of out-of-network medical expenses and then provided unreasonably low reimbursement to consumers.

The investigation is ongoing and the attorney general's office has issued subpoenas to 16 other health insurance companies who use the Ingenix database. The subpoenas will seek documents that show how the companies calculate reasonable and customary rates, as well as copies of member complaints and appeals, and communications with Ingenix.

The investigation has national implications since five of the nation's largest health insurance companies rely on data from Ingenix, according to the attorney general.

UnitedHealth Group has denied that there are problems with the reference data used by Ingenix, which is “rigorously developed, geographically specific, comprehensive and organized using a transparent methodology,” according to a company statement. The insurer says it is in discussions with attorney general's office and plans to cooperate fully.

Ingenix owns a database of billing information that many health insurers use to determine how much to reimburse consumers who go out of network for care. But the attorney general's preliminary investigation found that the Ingenix data are provided by insurers with a vested interest in keeping the rates low and that there is no auditing of the data that come in, Linda Lacewell, head of the attorney general's Health Care Industry Task Force, said at a press conference to announce the industry-wide investigation.

The database also doesn't take into account whether a service was provided by a physician or a non-physician provider, a factor that would affect the price, Ms. Lacewell said. “Our investigation has revealed that Ingenix is nothing more than a conduit for rigged information that is defrauding consumers of their right to fair payment,” she said at the press conference.

About 70% of insured Americans pay higher premiums for the right to go out of their insurer's network for care. In exchange, the insurer typically promises to pay about 80% of the usual, customary, and reasonable rate. The consumer then is responsible for the balance of the bill.

But the attorney general says UnitedHealth Group subscribers haven't been getting what they paid for when going out of network. For example, for a 15-minute office visit in which most physicians charged $200, United told subscribers that the typical cost was $77 and agreed to pay only $62, leaving consumers to pay the remainder of the $138 bill. “This is not news to us,” Dr. Nancy H. Nielsen, president-elect of the American Medical Association, said at the press conference.

In fact, the charges made by the attorney general are the same as those made by the AMA in an ongoing class action lawsuit it filed against UnitedHealth Group in 2000, which alleges that the insurer has been understating their calculation of usual, customary, and reasonable charges in payments to physicians and when reimbursing patients for out-of-network services.

While consumers are the ones responsible for paying the balance of these bills, it also can create a contentious situation for the physician, Dr. Robert B. Goldberg, president of the Medical Society of the State of New York, said at the press conference. When patients receive an underpayment from their insurers, it's usually the physician's bill that they challenge, he said, since the information from the insurer makes it appear that the doctor has overcharged for the service.

Following a 6-month initial investigation, New York Attorney General Andrew Cuomo announced plans to file suit against UnitedHealth Group and four of its subsidiaries for allegedly systematically underpaying consumers for their out-of-network medical expenses.

The attorney general claimed that UnitedHealth Group used faulty data from one of its subsidiaries, the billing information company Ingenix Inc., which resulted in the underestimation of “usual, customary, and reasonable” rates for a range of out-of-network medical expenses and then provided unreasonably low reimbursement to consumers.

The investigation is ongoing and the attorney general's office has issued subpoenas to 16 other health insurance companies who use the Ingenix database. The subpoenas will seek documents that show how the companies calculate reasonable and customary rates, as well as copies of member complaints and appeals, and communications with Ingenix.

The investigation has national implications since five of the nation's largest health insurance companies rely on data from Ingenix, according to the attorney general.

UnitedHealth Group has denied that there are problems with the reference data used by Ingenix, which is “rigorously developed, geographically specific, comprehensive and organized using a transparent methodology,” according to a company statement. The insurer says it is in discussions with attorney general's office and plans to cooperate fully.

Ingenix owns a database of billing information that many health insurers use to determine how much to reimburse consumers who go out of network for care. But the attorney general's preliminary investigation found that the Ingenix data are provided by insurers with a vested interest in keeping the rates low and that there is no auditing of the data that come in, Linda Lacewell, head of the attorney general's Health Care Industry Task Force, said at a press conference to announce the industry-wide investigation.

The database also doesn't take into account whether a service was provided by a physician or a non-physician provider, a factor that would affect the price, Ms. Lacewell said. “Our investigation has revealed that Ingenix is nothing more than a conduit for rigged information that is defrauding consumers of their right to fair payment,” she said at the press conference.

About 70% of insured Americans pay higher premiums for the right to go out of their insurer's network for care. In exchange, the insurer typically promises to pay about 80% of the usual, customary, and reasonable rate. The consumer then is responsible for the balance of the bill.

But the attorney general says UnitedHealth Group subscribers haven't been getting what they paid for when going out of network. For example, for a 15-minute office visit in which most physicians charged $200, United told subscribers that the typical cost was $77 and agreed to pay only $62, leaving consumers to pay the remainder of the $138 bill. “This is not news to us,” Dr. Nancy H. Nielsen, president-elect of the American Medical Association, said at the press conference.

In fact, the charges made by the attorney general are the same as those made by the AMA in an ongoing class action lawsuit it filed against UnitedHealth Group in 2000, which alleges that the insurer has been understating their calculation of usual, customary, and reasonable charges in payments to physicians and when reimbursing patients for out-of-network services.

While consumers are the ones responsible for paying the balance of these bills, it also can create a contentious situation for the physician, Dr. Robert B. Goldberg, president of the Medical Society of the State of New York, said at the press conference. When patients receive an underpayment from their insurers, it's usually the physician's bill that they challenge, he said, since the information from the insurer makes it appear that the doctor has overcharged for the service.

Following a 6-month initial investigation, New York Attorney General Andrew Cuomo announced plans to file suit against UnitedHealth Group and four of its subsidiaries for allegedly systematically underpaying consumers for their out-of-network medical expenses.

The attorney general claimed that UnitedHealth Group used faulty data from one of its subsidiaries, the billing information company Ingenix Inc., which resulted in the underestimation of “usual, customary, and reasonable” rates for a range of out-of-network medical expenses and then provided unreasonably low reimbursement to consumers.

The investigation is ongoing and the attorney general's office has issued subpoenas to 16 other health insurance companies who use the Ingenix database. The subpoenas will seek documents that show how the companies calculate reasonable and customary rates, as well as copies of member complaints and appeals, and communications with Ingenix.

The investigation has national implications since five of the nation's largest health insurance companies rely on data from Ingenix, according to the attorney general.

UnitedHealth Group has denied that there are problems with the reference data used by Ingenix, which is “rigorously developed, geographically specific, comprehensive and organized using a transparent methodology,” according to a company statement. The insurer says it is in discussions with attorney general's office and plans to cooperate fully.

Ingenix owns a database of billing information that many health insurers use to determine how much to reimburse consumers who go out of network for care. But the attorney general's preliminary investigation found that the Ingenix data are provided by insurers with a vested interest in keeping the rates low and that there is no auditing of the data that come in, Linda Lacewell, head of the attorney general's Health Care Industry Task Force, said at a press conference to announce the industry-wide investigation.

The database also doesn't take into account whether a service was provided by a physician or a non-physician provider, a factor that would affect the price, Ms. Lacewell said. “Our investigation has revealed that Ingenix is nothing more than a conduit for rigged information that is defrauding consumers of their right to fair payment,” she said at the press conference.

About 70% of insured Americans pay higher premiums for the right to go out of their insurer's network for care. In exchange, the insurer typically promises to pay about 80% of the usual, customary, and reasonable rate. The consumer then is responsible for the balance of the bill.

But the attorney general says UnitedHealth Group subscribers haven't been getting what they paid for when going out of network. For example, for a 15-minute office visit in which most physicians charged $200, United told subscribers that the typical cost was $77 and agreed to pay only $62, leaving consumers to pay the remainder of the $138 bill. “This is not news to us,” Dr. Nancy H. Nielsen, president-elect of the American Medical Association, said at the press conference.

In fact, the charges made by the attorney general are the same as those made by the AMA in an ongoing class action lawsuit it filed against UnitedHealth Group in 2000, which alleges that the insurer has been understating their calculation of usual, customary, and reasonable charges in payments to physicians and when reimbursing patients for out-of-network services.

While consumers are the ones responsible for paying the balance of these bills, it also can create a contentious situation for the physician, Dr. Robert B. Goldberg, president of the Medical Society of the State of New York, said at the press conference. When patients receive an underpayment from their insurers, it's usually the physician's bill that they challenge, he said, since the information from the insurer makes it appear that the doctor has overcharged for the service.

Prempro Damages Reduced

A Nevada District Court judge has significantly reduced compensatory and punitive damages awarded to three women who alleged that the hormone therapy drugs Premarin and Prempro caused their breast cancer. Last month, Washoe County District Judge Robert Perry reduced the original damages against the drug maker Wyeth from $134.3 million to $57.8 million. The bulk of the reduction came from the punitive damages, which were lowered from $99 million to $35 million. Despite the reduction in the damage award, Wyeth still is planning to appeal the findings to the state supreme court. “While it's encouraging that the district court acknowledged the excessiveness of the award to some extent, it doesn't change the fact that the verdict was irreparably flawed and fraught with error,” Wyeth spokesman Doug Petkus said in a statement.

ACOG Tightens Industry-Gifts Advice

Ob.gyns. should keep in mind that even gifts of nominal value offered by pharmaceutical and device companies are intended to influence behavior, the American College of Obstetricians and Gynecologists wrote in an updated opinion on relationships with industry. ACOG advises that cash gifts should not be accepted and that if physicians choose to take any other gifts, they should benefit the patient primarily. For example, textbooks and study aids could be considered acceptable gifts if they have a legitimate educational value, states the opinion produced by the ACOG Committee on Ethics, which updates an opinion issued in 2004. The statement includes recommendations on product promotion to individual physicians; support of educational activities and awards; donations, parties, and opportunities for investment; industry sponsorship of research; and speakers bureaus and consulting. The ACOG committee opinion was published in the March issue of Obstetrics and Gynecology.

Don't Blame Technology for Costs

Medical devices and in vitro diagnostics account for a relatively small 6% ($112 billion) of the nation's overall health expenditures and should not be blamed for rising health costs, said officials from the device industry's lobby, AdvaMed, at a briefing in February. The group released what it called one of the first-ever studies to examine device cost trends. The study—paid for by AdvaMed—was conducted by Roland Guy King, a former chief actuary for the Medicare and Medicaid programs. Devices and diagnostics accounted for a steady 6% of expenses from 1989 to 2004. Prices grew more slowly—1.2% annually—than the medical consumer price index, which is about 5% a year, or the consumer price index, which is about 2.8% annually, according to the study. “The highly competitive medical device marketplace is working and delivering tremendous value both in patient care and in economic terms,” said Stephen J. Ubl, AdvaMed president and CEO.

FDA Would Expand Promotion

The Food and Drug Administration last month proposed draft guidance that would allow drug and medical device makers to distribute medical or scientific journal articles and reference publications that involve unapproved uses of FDA-approved drugs and medical devices. Drug and device makers had been allowed to disseminate such materials under guidelines set by the FDA, but that authority expired in September 2006. The FDA's new “Good Reprint Practices” draft guidance states that the article or reference should be published by an organization that has an editorial board and fully discloses conflicts of interest. In addition, articles should be peer reviewed, and manufacturers should not distribute special supplements, publications funded by product manufacturers, or articles not supported by credible medical evidence. Rep. Henry Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform, blasted the FDA for its proposal.

Medicare Launches EHR Demo

Small- and medium-size physician practices in a dozen health markets across the country will be eligible to receive Medicare incentive payments for using certified electronic health records under a new demonstration being launched by officials at the Department of Health and Human Services. Financial incentives will be awarded to up to 1,200 practices that use certified EHRs to meet certain quality measures. Physicians who participate in the demonstration also would be eligible to receive bonus payments, based on the number of EHR functionalities physicians incorporate into their practices. Over the course of the 5-year project, individual physicians can earn up to $58,000 and $290,000 per practice. HHS will accept applications from officials in communities interested in participating in the demonstration through mid-May.

Prempro Damages Reduced

A Nevada District Court judge has significantly reduced compensatory and punitive damages awarded to three women who alleged that the hormone therapy drugs Premarin and Prempro caused their breast cancer. Last month, Washoe County District Judge Robert Perry reduced the original damages against the drug maker Wyeth from $134.3 million to $57.8 million. The bulk of the reduction came from the punitive damages, which were lowered from $99 million to $35 million. Despite the reduction in the damage award, Wyeth still is planning to appeal the findings to the state supreme court. “While it's encouraging that the district court acknowledged the excessiveness of the award to some extent, it doesn't change the fact that the verdict was irreparably flawed and fraught with error,” Wyeth spokesman Doug Petkus said in a statement.

ACOG Tightens Industry-Gifts Advice

Ob.gyns. should keep in mind that even gifts of nominal value offered by pharmaceutical and device companies are intended to influence behavior, the American College of Obstetricians and Gynecologists wrote in an updated opinion on relationships with industry. ACOG advises that cash gifts should not be accepted and that if physicians choose to take any other gifts, they should benefit the patient primarily. For example, textbooks and study aids could be considered acceptable gifts if they have a legitimate educational value, states the opinion produced by the ACOG Committee on Ethics, which updates an opinion issued in 2004. The statement includes recommendations on product promotion to individual physicians; support of educational activities and awards; donations, parties, and opportunities for investment; industry sponsorship of research; and speakers bureaus and consulting. The ACOG committee opinion was published in the March issue of Obstetrics and Gynecology.

Don't Blame Technology for Costs

Medical devices and in vitro diagnostics account for a relatively small 6% ($112 billion) of the nation's overall health expenditures and should not be blamed for rising health costs, said officials from the device industry's lobby, AdvaMed, at a briefing in February. The group released what it called one of the first-ever studies to examine device cost trends. The study—paid for by AdvaMed—was conducted by Roland Guy King, a former chief actuary for the Medicare and Medicaid programs. Devices and diagnostics accounted for a steady 6% of expenses from 1989 to 2004. Prices grew more slowly—1.2% annually—than the medical consumer price index, which is about 5% a year, or the consumer price index, which is about 2.8% annually, according to the study. “The highly competitive medical device marketplace is working and delivering tremendous value both in patient care and in economic terms,” said Stephen J. Ubl, AdvaMed president and CEO.

FDA Would Expand Promotion

The Food and Drug Administration last month proposed draft guidance that would allow drug and medical device makers to distribute medical or scientific journal articles and reference publications that involve unapproved uses of FDA-approved drugs and medical devices. Drug and device makers had been allowed to disseminate such materials under guidelines set by the FDA, but that authority expired in September 2006. The FDA's new “Good Reprint Practices” draft guidance states that the article or reference should be published by an organization that has an editorial board and fully discloses conflicts of interest. In addition, articles should be peer reviewed, and manufacturers should not distribute special supplements, publications funded by product manufacturers, or articles not supported by credible medical evidence. Rep. Henry Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform, blasted the FDA for its proposal.

Medicare Launches EHR Demo

Small- and medium-size physician practices in a dozen health markets across the country will be eligible to receive Medicare incentive payments for using certified electronic health records under a new demonstration being launched by officials at the Department of Health and Human Services. Financial incentives will be awarded to up to 1,200 practices that use certified EHRs to meet certain quality measures. Physicians who participate in the demonstration also would be eligible to receive bonus payments, based on the number of EHR functionalities physicians incorporate into their practices. Over the course of the 5-year project, individual physicians can earn up to $58,000 and $290,000 per practice. HHS will accept applications from officials in communities interested in participating in the demonstration through mid-May.

Prempro Damages Reduced

A Nevada District Court judge has significantly reduced compensatory and punitive damages awarded to three women who alleged that the hormone therapy drugs Premarin and Prempro caused their breast cancer. Last month, Washoe County District Judge Robert Perry reduced the original damages against the drug maker Wyeth from $134.3 million to $57.8 million. The bulk of the reduction came from the punitive damages, which were lowered from $99 million to $35 million. Despite the reduction in the damage award, Wyeth still is planning to appeal the findings to the state supreme court. “While it's encouraging that the district court acknowledged the excessiveness of the award to some extent, it doesn't change the fact that the verdict was irreparably flawed and fraught with error,” Wyeth spokesman Doug Petkus said in a statement.

ACOG Tightens Industry-Gifts Advice

Ob.gyns. should keep in mind that even gifts of nominal value offered by pharmaceutical and device companies are intended to influence behavior, the American College of Obstetricians and Gynecologists wrote in an updated opinion on relationships with industry. ACOG advises that cash gifts should not be accepted and that if physicians choose to take any other gifts, they should benefit the patient primarily. For example, textbooks and study aids could be considered acceptable gifts if they have a legitimate educational value, states the opinion produced by the ACOG Committee on Ethics, which updates an opinion issued in 2004. The statement includes recommendations on product promotion to individual physicians; support of educational activities and awards; donations, parties, and opportunities for investment; industry sponsorship of research; and speakers bureaus and consulting. The ACOG committee opinion was published in the March issue of Obstetrics and Gynecology.

Don't Blame Technology for Costs

Medical devices and in vitro diagnostics account for a relatively small 6% ($112 billion) of the nation's overall health expenditures and should not be blamed for rising health costs, said officials from the device industry's lobby, AdvaMed, at a briefing in February. The group released what it called one of the first-ever studies to examine device cost trends. The study—paid for by AdvaMed—was conducted by Roland Guy King, a former chief actuary for the Medicare and Medicaid programs. Devices and diagnostics accounted for a steady 6% of expenses from 1989 to 2004. Prices grew more slowly—1.2% annually—than the medical consumer price index, which is about 5% a year, or the consumer price index, which is about 2.8% annually, according to the study. “The highly competitive medical device marketplace is working and delivering tremendous value both in patient care and in economic terms,” said Stephen J. Ubl, AdvaMed president and CEO.

FDA Would Expand Promotion

The Food and Drug Administration last month proposed draft guidance that would allow drug and medical device makers to distribute medical or scientific journal articles and reference publications that involve unapproved uses of FDA-approved drugs and medical devices. Drug and device makers had been allowed to disseminate such materials under guidelines set by the FDA, but that authority expired in September 2006. The FDA's new “Good Reprint Practices” draft guidance states that the article or reference should be published by an organization that has an editorial board and fully discloses conflicts of interest. In addition, articles should be peer reviewed, and manufacturers should not distribute special supplements, publications funded by product manufacturers, or articles not supported by credible medical evidence. Rep. Henry Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform, blasted the FDA for its proposal.

Medicare Launches EHR Demo

Small- and medium-size physician practices in a dozen health markets across the country will be eligible to receive Medicare incentive payments for using certified electronic health records under a new demonstration being launched by officials at the Department of Health and Human Services. Financial incentives will be awarded to up to 1,200 practices that use certified EHRs to meet certain quality measures. Physicians who participate in the demonstration also would be eligible to receive bonus payments, based on the number of EHR functionalities physicians incorporate into their practices. Over the course of the 5-year project, individual physicians can earn up to $58,000 and $290,000 per practice. HHS will accept applications from officials in communities interested in participating in the demonstration through mid-May.

In a move that could have significant implications for physicians and hospitals, the insurer Aetna has said it will not pay its network hospitals for care necessitated by certain preventable errors.

The announcement follows a policy shift by the Centers for Medicare & Medicaid Services, which has finalized plans to stop paying for eight preventable events as of October 2008.

Aetna has added language to its hospital contracts calling for waiving all costs related to a number of serious reportable events. The language comes from the Leapfrog Group's “never events” policy that includes a list of 28 events considered so harmful that they should never occur. The list, compiled by the National Quality Forum (NQF), comprises events ranging from surgery performed on the wrong body part or on the wrong patient, to stage III or IV pressure ulcers acquired after admission to a health care facility.

The policy instructs hospitals to report errors within 10 days to the Joint Commission, state reporting programs, or patient safety organizations. Hospitals also are asked to take action to prevent future events and to apologize to the patient or family affected by the error. Aetna is the first health plan to endorse the Leapfrog policy.

“The major goal is to get hospitals to focus on having the systems in place to prevent these events from happening,” said Dr. Charles Cutler, Aetna's national medical director. Adopting the never events policy is not about saving money—in fact, many of the never events carry no additional cost, he said. Instead, Aetna is seeking to send a consistent message to hospitals about quality. “The intent here is not to be punitive.”

But the Aetna announcement ran into some skepticism from the physician community.

The NQF list of never events is much broader than the eight preventable events selected under the Medicare policy, said Cynthia Brown, director of the division of advocacy and health policy at the American College of Surgeons (ACS). One reason that many of those events were not included on Medicare's list is that they are difficult to measure with the current coding system, she said. Another problem is that it's hard to affix blame to a hospital or a particular physician. “If there's a problem with blood incompatibility, is it the surgeon's fault?” she asked.

When used properly, the NQF never events list protects patients and directs a patient environment enriched with safety and quality, said Dr. Frank Opelka, chair of the ACS Committee on Patient Safety and Quality Improvement. But he cautioned that if payers drift from the intentions of the NQF never events, the specifications could be lost and overreporting could create unintended consequences.

He also questioned whether hospitals would continue to report these types of serious preventable errors if they aren't being paid for the care. “If the reports are generated from a hospital claims system and the payer no longer recognizes the events as payable, isn't the message to stop reporting rather than to prevent the never events?” asked Dr. Opelka, also vice chancellor for clinical affairs at Louisiana State University Health Sciences Center, New Orleans.

The policy is likely to affect all of Aetna's network hospitals over the next 3 years as the company renegotiates its contracts, Dr. Cutler said.

Since Medicare announced its policy shift last summer, other insurers have considered changes to their policies. Officials at Cigna, for example, are evaluating how to implement a similar policy within their hospital network and plans to have a national policy in place by October 2008, said Cigna spokesman Mark Slitt.

In some situations, the message might be to stop reporting rather than to prevent the never events. DR. OPELKA

In a move that could have significant implications for physicians and hospitals, the insurer Aetna has said it will not pay its network hospitals for care necessitated by certain preventable errors.

The announcement follows a policy shift by the Centers for Medicare & Medicaid Services, which has finalized plans to stop paying for eight preventable events as of October 2008.

Aetna has added language to its hospital contracts calling for waiving all costs related to a number of serious reportable events. The language comes from the Leapfrog Group's “never events” policy that includes a list of 28 events considered so harmful that they should never occur. The list, compiled by the National Quality Forum (NQF), comprises events ranging from surgery performed on the wrong body part or on the wrong patient, to stage III or IV pressure ulcers acquired after admission to a health care facility.

The policy instructs hospitals to report errors within 10 days to the Joint Commission, state reporting programs, or patient safety organizations. Hospitals also are asked to take action to prevent future events and to apologize to the patient or family affected by the error. Aetna is the first health plan to endorse the Leapfrog policy.

“The major goal is to get hospitals to focus on having the systems in place to prevent these events from happening,” said Dr. Charles Cutler, Aetna's national medical director. Adopting the never events policy is not about saving money—in fact, many of the never events carry no additional cost, he said. Instead, Aetna is seeking to send a consistent message to hospitals about quality. “The intent here is not to be punitive.”

But the Aetna announcement ran into some skepticism from the physician community.

The NQF list of never events is much broader than the eight preventable events selected under the Medicare policy, said Cynthia Brown, director of the division of advocacy and health policy at the American College of Surgeons (ACS). One reason that many of those events were not included on Medicare's list is that they are difficult to measure with the current coding system, she said. Another problem is that it's hard to affix blame to a hospital or a particular physician. “If there's a problem with blood incompatibility, is it the surgeon's fault?” she asked.

When used properly, the NQF never events list protects patients and directs a patient environment enriched with safety and quality, said Dr. Frank Opelka, chair of the ACS Committee on Patient Safety and Quality Improvement. But he cautioned that if payers drift from the intentions of the NQF never events, the specifications could be lost and overreporting could create unintended consequences.

He also questioned whether hospitals would continue to report these types of serious preventable errors if they aren't being paid for the care. “If the reports are generated from a hospital claims system and the payer no longer recognizes the events as payable, isn't the message to stop reporting rather than to prevent the never events?” asked Dr. Opelka, also vice chancellor for clinical affairs at Louisiana State University Health Sciences Center, New Orleans.

The policy is likely to affect all of Aetna's network hospitals over the next 3 years as the company renegotiates its contracts, Dr. Cutler said.

Since Medicare announced its policy shift last summer, other insurers have considered changes to their policies. Officials at Cigna, for example, are evaluating how to implement a similar policy within their hospital network and plans to have a national policy in place by October 2008, said Cigna spokesman Mark Slitt.

In some situations, the message might be to stop reporting rather than to prevent the never events. DR. OPELKA

In a move that could have significant implications for physicians and hospitals, the insurer Aetna has said it will not pay its network hospitals for care necessitated by certain preventable errors.

The announcement follows a policy shift by the Centers for Medicare & Medicaid Services, which has finalized plans to stop paying for eight preventable events as of October 2008.

Aetna has added language to its hospital contracts calling for waiving all costs related to a number of serious reportable events. The language comes from the Leapfrog Group's “never events” policy that includes a list of 28 events considered so harmful that they should never occur. The list, compiled by the National Quality Forum (NQF), comprises events ranging from surgery performed on the wrong body part or on the wrong patient, to stage III or IV pressure ulcers acquired after admission to a health care facility.

The policy instructs hospitals to report errors within 10 days to the Joint Commission, state reporting programs, or patient safety organizations. Hospitals also are asked to take action to prevent future events and to apologize to the patient or family affected by the error. Aetna is the first health plan to endorse the Leapfrog policy.

“The major goal is to get hospitals to focus on having the systems in place to prevent these events from happening,” said Dr. Charles Cutler, Aetna's national medical director. Adopting the never events policy is not about saving money—in fact, many of the never events carry no additional cost, he said. Instead, Aetna is seeking to send a consistent message to hospitals about quality. “The intent here is not to be punitive.”

But the Aetna announcement ran into some skepticism from the physician community.

The NQF list of never events is much broader than the eight preventable events selected under the Medicare policy, said Cynthia Brown, director of the division of advocacy and health policy at the American College of Surgeons (ACS). One reason that many of those events were not included on Medicare's list is that they are difficult to measure with the current coding system, she said. Another problem is that it's hard to affix blame to a hospital or a particular physician. “If there's a problem with blood incompatibility, is it the surgeon's fault?” she asked.

When used properly, the NQF never events list protects patients and directs a patient environment enriched with safety and quality, said Dr. Frank Opelka, chair of the ACS Committee on Patient Safety and Quality Improvement. But he cautioned that if payers drift from the intentions of the NQF never events, the specifications could be lost and overreporting could create unintended consequences.

He also questioned whether hospitals would continue to report these types of serious preventable errors if they aren't being paid for the care. “If the reports are generated from a hospital claims system and the payer no longer recognizes the events as payable, isn't the message to stop reporting rather than to prevent the never events?” asked Dr. Opelka, also vice chancellor for clinical affairs at Louisiana State University Health Sciences Center, New Orleans.

The policy is likely to affect all of Aetna's network hospitals over the next 3 years as the company renegotiates its contracts, Dr. Cutler said.

Since Medicare announced its policy shift last summer, other insurers have considered changes to their policies. Officials at Cigna, for example, are evaluating how to implement a similar policy within their hospital network and plans to have a national policy in place by October 2008, said Cigna spokesman Mark Slitt.

In some situations, the message might be to stop reporting rather than to prevent the never events. DR. OPELKA