There's More in Senate Finance Bill Than Meets The Eye

Initial media coverage of the just-released Senate Finance Committee reform bill has focused mainly on the political implications. Not a single Republican has yet signed onto the bill, which has drawn fire from both left and right, and it's still unclear whether Senator Olympia Snowe (R-ME) will support the bill, which must still be merged with the more liberal Senate HELP Committee measure. If she does, the Democrats might avoid a brutal fight to push the legislation over the top through the budget reconciliation process.

But what this analysis misses are the Senate Finance bill's substantial proposals to reform the healthcare delivery system. This measure, after all, is the fruit of several months of work and negotiations between the Democratic and Republican senators known as the "Gang of Six" and led by Finance Committee Chairman Max Baucus (D-MT). These senators are very knowledgeable about health care, and the bill shows it.

Among other things, the legislation would establish a value-based purchasing (VBP) initiative, as reported earlier. Starting in 2013, hospitals' Medicare payments "would be adjusted based on performance under the VBP program." The measures for this program would be culled from those on which hospitals must now report data to get financial incentives. In 2014, efficiency measures would be added. The value-based incentive payments would be financed by reducing total Medicare payments to hospitals by 1 percent in 2013, rising to 2 percent in 2017 and later years. (This is a smaller amount than was earlier discussed.) Hospitals that met or exceeded performance standards would receive unspecified bonuses.

The current statute prohibiting Medicare from paying hospitals for hospital-acquired conditions would be expanded. Starting in 2014, hospitals in the top quartile for these conditions would lose one percent of their overall Medicare reimbursement, based on the prior year's performance.

On the physician side, the bill would extend the current 2 percent incentive for submitting PQRI quality data beyond 2010, while imposing a 1 percent penalty on physicians who don't participate, beginning in 2012; the penalty would rise to 2 percent in subsequent years. The measure would also integrate the PQRI program with the meaningful use criteria for receiving health IT subsidies. And physicians would receive reports on how their resource use compared with that of their peers. Beginning in 2015, physicians' Medicare payments would be reduced by 5 percent if their total resource use were above the 90th percentile for all Medicare participating doctors.

The legislation would also establish quality reporting programs for inpatient rehabilitation facilities, long-term acute-care hospitals, and hospices. And it would direct HHS to create plans for implementing value-based purchasing programs in home health agencies and skilled nursing facilities by 2011 and 2012, respectively.

Going beyond these specific reimbursement changes, the bill also would encourage the formation of "accountable care organizations" (ACOs) by recognizing groups of providers who meet government requirements as ACOs and allowing them to share in any savings they achieve for Medicare. Among the organizations that would be eligible are "practitioners in group practice arrangements; networks of practices; partnerships or joint-venture arrangements between hospitals and practitioners; hospitals employing practitioners; and such other groups of providers of services and suppliers as the [HHS] Secretary determines appropriate."

There's much more here, including bonus payments of up to 2 percent for Medicare Advantage plans that engage in certain "care coordination and management activities." The point is that this bill has a great deal of depth, much of which will undoubtedly be incorporated into the final Senate bill and the legislation that emerges from the House-Senate conference. Stay tuned.