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CMS DEMONSTRATION PROGRAM SUPPORTS PHYSICIAN-HOSPITAL COLLABORATIONS TO IMPROVE QUALITY OF CARE WHILE GETTING BETTER VALUE

The Centers for Medicare & Medicaid Services (CMS) today announced a three-year demonstration program to examine whether allowing hospitals to provide financial incentives for physicians to support better care can improve patient outcomes without increasing costs. 

In the demonstration program, the hospital would be paid its usual inpatient rate for the patient’s care, but would pay to the physician a portion of the savings resulting from quality improvement and efficiency initiatives taken by the physician.  Such incentive payments would only be allowed for documented, significant improvements in quality of care and savings in the overall costs of care.  The program is known as the Physician-Hospital Collaboration Demonstration (PHCD).

“The most costly and intensive physician services are provided in hospitals, yet our payment systems do not support steps by hospitals and doctors to work together to improve care,” CMS Administrator, Mark B. McClellan, M.D., Ph.D., said.  “This demonstration program will support efforts to track and improve the overall episode of patient care, including follow-up and longer-term outcomes.”

The program is intended to focus on the entire scope of health care for a surgical episode or other episode of illness involving hospital care.  It will encompass physician groups and up to 72 hospitals in a limited number of geographic areas across the country, and will test whether financial incentives from hospital payments to their physicians for quality and efficiency improvement can increase quality while reducing hospitals’ and Medicare costs. For example, incentive payments to surgeons for achieving lower infection rates and fewer readmissions with complications could both improve patient outcomes and lower overall hospital and Medicare costs.

The demonstration requires tracking patients for an entire episode of care, which generally extends well beyond a hospitalization, to determine the impact of hospital-physician collaborations on preventing short and longer-term complications, duplication of services, coordination of care across settings, and other quality improvements that hold great promise for eliminating preventable complications and unnecessary costs.

CMS will support projects submitted by consortia, comprised of physician groups and their affiliated hospitals in improving quality and reducing overall costs for the episode of care. A limited number of projects will be operated in various geographic areas; no more than 72 hospitals will be included across all areas.  This demonstration will examine the effects of the incentive payments system-wide, as hospitals and physicians within a geographic area collaborate on similar quality improvement initiatives and work together to assure that appropriate longer-term outcomes and other quality measures can be tracked appropriately.

“We will give preference to proposals submitted by a health care group consortium, composed of health care groups and affiliated hospitals, because we need a sufficiently large demonstration size to reliably measure impacts on longer-term patient results and overall Medicare costs,” Dr. McClellan said. “This is very different from traditional ‘gainsharing’ with its short-term focus.  We are aiming to support the best efforts of physicians and hospitals to improve quality and efficiency in the overall care for their patients.” A consortium may consist of health care groups and up to 12 of their affiliated hospitals in a single geographic area comprising no more than one state.

PHCD is authorized under Section 646 of the Medicare Modernization Act of 2003.  This provision was explicitly designed to promote higher-quality, better coordinated care.

For more information visit Details for MMA Section 646 Physician Hospital Collaboration Demonstration