IOM Report Calls for Medicare P4P Program

Implementation of pay-for-performance measures in the Medicare reimbursement system likely will improve health care quality but might not reduce costs, according to an Institute of Medicine report released last week. Prepared at the request of Congress, the report states that the current fee-for-service Medicare reimbursement system "tends to reward excessive use of services, high-cost complex procedures and lower-quality care." The current system reimburses health care providers for the treatment of illnesses and injuries and promotes the use of technology but does not reimburse providers for patient education or other measures that might reduce costs over time. The current system also does not reimburse for coordination of care for Medicare beneficiaries who receive treatment from several different providers and does not provide financial incentives to encourage providers to invest in improvements in the overall health of beneficiaries, the report states. Therefore, implementation of pay-for-performance measures in the current system "will not necessarily reduce the cost of care" but "will help ensure that what is paid for will be more beneficial to patients." The report recommends that large providers and companies with the ability to report health care quality information to the federal government begin to report such data. In addition, the report recommends that CMS phase in pay-for-performance measures in the Medicare reimbursement system over time, with voluntary participation for smaller physician practices during the first three years. After three years, the HHS secretary should decide whether to require mandatory participation for all providers, the report states.