P4P is already on its way and most organizations that manage Medicare lines of businesses are not preparing for the changes in data collection and reporting. Here is a good article outlining the P4P programs already in demonstration with CMS and where they are headed. Now is the time for us to pay attention and begin planning and preparing.

• Outpatient dialysis facilities: Composite rate payments should be increased by the market basket increase for the sector, or 3.1%, minus 0.45% to account for productivity gains. In addition, MedPAC said Congress should direct the secretary of HHS to eliminate disparities in payments to hospital-based and freestanding dialysis facilities under the composite payment rate and combine the composite rate and add-on adjustment for dialysis medications into a single payment.
• Doctors: Payments to doctors should be increased by the expected change in “input prices” for doctor care minus an adjustment for productivity gains, resulting in an overall increase of 2.8%. The cost of the increase would be $1.5 billion in the first year and $5 billion to $10 billion over five years.
• Payment codes: The HHS secretary should establish a new procedure for reviewing payment codes that accompany the tests and services for which doctors bill Medicare to help identify services that are “overvalued.” A new permanent panel of experts should be appointed to review recommendations by the Resource Utilization Committee. The panel also recommended no payment increase for FY 2007 for home health agencies, inpatient rehabilitation facilities, long-term care hospitals and skilled nursing facilities. In addition, MedPAC decided that it will postpone for now a recommendation to address the “relatively poor performance of rural hospitals” under the existing outpatient Medicare payment system, CQ HealthBeat reports.

Reaction

The American Hospital Association said it was “dismayed” with MedPAC’s recommendation to reduce the Medicare payment increases called for under law. AHA Executive Vice President Rick Pollack said, “This poor decision ignores data detailing the pressures facing hospitals and fails to take into consideration the very serious impact any reduction in payment would have on hospitals and the patients we serve.” He added that hospitals’ Medicare margins have fallen continually since 1997, and in 2004, 68% of hospitals lost money treating Medicare beneficiaries. “With this evidence at hand, MedPAC’s recommendation for less than a full market basket update is very troubling and threatens hospitals’ ability to continue to provide vital health care services,” Pollack said. Larry Minnix, president of the American Association of Homes and Services for the Aging, said, “We are disappointed that MedPAC recommended no inflation adjustment for SNFs in 2007, especially since the Commission reported last month that profit margins at non-profit SNFs are nearly zero.” Minnix added, “This recommendation only amplifies the need for our country to take a comprehensive look at how to overhaul long-term care financing to meet the needs of our aging population” (Reichard, CQ HealthBeat, 1/10).