IOM Rejects Geography-Based Value Index for Medicare

"Geographies don't make decisions. Providers and provider organizations do," says a member of the Institute of Medicine. The focus should instead be on incentives designed to hold providers accountable for quality outcomes, an IOM committee urges.

The Institute of Medicine spoke out strongly this week against the federal government's use of geographically based value indexes as a way to address the significant variations in Medicare payments across regions of the nation.

"Geographies don't make decisions. Providers and provider organizations do," said Doug Hastings, a Washington, DC-based attorney and a member of the IOM committee that drafted the report: Geographic Variation in Health Care Spending and Promotion of High-Value Care.

"Also, the data showed there is as much variation within any geographical area we looked at including increasingly smaller ones, as there is between them suggesting that the criteria would be unfair because it would reward low-value providers in high-value regions and punish high-value providers in low-value regions," Hastings said at an IOM teleconference.

Committee Chair Joseph Newhouse, a professor of management at Harvard University, said the focus should instead be upon incentives designed to hold providers accountable for quality outcomes.

"We believe [the Centers for Medicare & Medicaid Services] has started down this route with a number of demonstrations that emphasize value, including accountable care organizations and medical homes, and we would encourage them to try to sort out which of these innovations seem to work well, which do not work so well, and proceed expeditiously with those that seem to work well." 

The IOM committee recommended that:

• Congress encourage and provide resources for CMS to make accessing Medicare and Medicaid data easier for researchers. CMS should collaborate with private insurers to collect, integrate, and analyze standardized data on spending, clinical and behavioral health outcomes, to enable more extensive comparisons of payments and quality and evaluation of value-based payment models across payers.
• Congress should not adopt a geographically based value index for Medicare. Because geographic units are not where most healthcare decisions are made, a geographic value index would be a poorly targeted mechanism for encouraging value improvement. Adjusting payments geographically, based on any aggregate or composite measure of spending or quality, would unfairly reward low-value providers in high-value regions and punish high-value providers in low-value regions.
• To improve value, CMS should continue to test payment reforms that incentivize the clinical and financial integration of healthcare delivery systems and thereby encourage their (1) coordination of care among individual providers, (2) real-time sharing of data and tracking of service use and health outcomes, (3) receipt and distribution of provider payments, and (4) assumption of some or all of the risk of managing the care continuum for their populations. Further, CMS should pilot programs that allow beneficiaries to share in the savings due to higher-value care.
• During the transition to new payment models, CMS should conduct ongoing evaluations of the impact on value of the reforms included in Recommendation 3 by measuring Medicare spending and beneficiaries' clinical health outcomes. CMS should use the results of these evaluations to iteratively improve these payment models. CMS should also monitor how these reforms impact Medicare beneficiaries' access to medical care.
• If evaluations of specific payment reforms demonstrate increased value, Congress should give CMS the flexibility to accelerate the transition from traditional Medicare to new payment models.