Modified Baucus Bill Adds Value, Quality to Physician Payment Equation

Janice Simmons, for HealthLeaders Media , September 24, 2009

Value over volume would come into play under a new Medicare physician payment system modification inserted into the Senate Finance Committee's healthcare reform bill this week.

Under the proposed physician payment change, backed by Sen. Maria Cantwell (D WA), physician or physician groups could receive bonus payments based on the relative quality of care they achieve while treating patients under the Medicare program.

Cantwell said in her opening remarks at the Senate Finance Committee's mark-up of the healthcare reform legislation that the fee-for-service formula used by Medicare to pay physicians "rewarded doctors for how many patients they see and how many procedures they order." However, physicians in her state, would receive lower payments because of the more cost-effective way they provided care.

Cantwell's proposal, now included in a revised draft of the legislation, would change the Medicare formula to pay providers nationwide based on a ratio of quality to cost—and not quantity. As written in the bill, this payment modification would take place in 2015—based on data obtained from a performance period the year before.

As proposed, the amendment calls for:

  • Using quality measures that factor in differences in the health of patients (such as age), and specifies that quality must be defined based on health outcomes—or the results physicians produce for patients.
  • Improving coordination and efficiency within the healthcare delivery system.
  • Taking into consideration special conditions for providers in rural or other underserved areas.

Cantwell had been working with Sen. Amy Klobuchar (D MN), who also had been calling for changing Medicare's payment structure. Last week, both senators were among 26 bipartisan senators who sent a letter to President Obama urging him to "realign spending in the Medicare program to focus on providing more value to beneficiaries."

Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at

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