Medicare cost-cutting study to continue

Diane Cochran

Aug. 19, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- The government will extend a study aimed at cutting health care costs after Billings Clinic and nine other medical centers saved Medicare as much as $55 million over two years.

The federal demonstration project, designed to save money by rewarding providers for care quality instead of quantity and thus reducing hospitalizations, will continue for a fourth year, the government said recently.

"We are encouraged by the results so far," said Mike Fierberg, a spokesman for the Centers for Medicare and Medicaid Services in Denver. "We want to get another year's worth of data to help demonstrate the value of the demonstration protocols for possible use on a broader scale."

Launched in 2005, the project challenged medical centers in 10 states to reduce their charges to Medicare while improving patient care.

The government wanted to know if proactive disease maintenance for patients with three chronic illnesses -- diabetes, heart failure and coronary artery disease -- could save money by keeping those patients out of the hospital.

It did at Billings Clinic, where hospitalizations among a group of 500 heart failure patients dropped by 40 percent even as providers achieved all 10 quality measures set forth by the government.

"Out of this, hopefully, we're going to have some real changes in how Medicare pays," said Dr. Douglas Carr, medical director for Billings Clinic. "I'd like to have them say we've pretty much proven if you follow heart failure patients with this method, it saves lives and saves money."

Carr and others are critical of the government's fee-for-service reimbursement method, saying it focuses too much on quantity and not enough on quality.

Medicare and Medicaid pay providers for each procedure they perform regardless of how well it was done or if it was necessary. Critics say the government should instead recognize and reward quality.

As part of the study, Billings Clinic implemented a tracking program for patients with heart failure. Tel-Assurance, which patients use to report basic medical information to a nurse every day by phone, costs $500,000 to $700,000 a year to operate but is not covered by Medicare, Carr said.

A team approach to diabetes management also is not covered, but Billings Clinic providers say it has significantly increased the proportion of the hospital's 5,000 diabetic patients who receive regular preventive care.

That preventive care, such as visits to podiatrists and ophthalmologists, keeps diabetics out of the hospital.

If the government paid for those kinds of services, it would ultimately reduce costs to an already taxed health care system and improve patient health, Carr said.

"We don't think Medicare is paying for the right things," he said.

The government enticed medical centers into the study, on which Billings Clinic spent about $4 million to set up Tel-Assurance and other programs, with the promise of cash rewards.

All 10 study sites did well enough on 27 quality measures to receive financial awards during the second year of the study, which ended in 2007 and whose results are just now being made public. The government paid out a total of $2.9 million in quality incentives, with $148,000 going to Billings Clinic.

But only four sites saved the government enough money to earn a share in the cost-savings. Sites had to cut their annual increase in charges to Medicare by 2 percent to qualify for a portion of the savings. Billings Clinic did not meet the 2 percent benchmark.

Medicare paid a total of $13.8 million to Dartmouth-Hitchcock Clinic in Bedford, N.H., Everett Clinic in Everett, Wash., Marshfield Clinic in Marshfield, Wis., and the University of Michigan Faculty Group Practice in Ann Arbor, Mich.

Those clinics cut their costs to Medicare by a total of $17.4 million, Fierberg said.

Two sites met the 2 percent benchmark during the study's first year, saving the government $9.1 million and earning back $7.3 million in awards.

The sites that did not meet the 2 percent benchmark saved $11.9 million the first year and $16.6 million the second, Carr said.

That would bring the total project savings to $55 million, but Medicare counts only the $26.5 million saved by the sites that met the 2 percent benchmark.

The other participating medical centers are Park Nicollet Health Services in St. Louis Park, Minn., Forysth Medical Group in Winston-Salem, N.C., Geisinger Clinic in Danville, Penn., Middlesex Health System in Middletown, Conn., and St. John's Health System in Springfield, Mo.

Newstex ID: KRTB-0032-27542319