Themedicare payments: Centers for Medicare and Medicaid invited providers

The Centers for Medicare and Medicaid Services (CMS) announced a new plan on Tuesday that would pay interested doctors, hospitals, and other providers

Hospitals are interested in the new payment structure that Medicare announced Tuesday but say they still need to look more closely at the program's financial incentives.

The health-care law includes a variety of provisions meant to shift Medicare’s payment system toward a focus on quality. Yet many of these aspects of the law

The U.S. agency that runs government health insurance is launching a program that would bundle insurance payments for multiple procedures in the hope of improving patient care while also saving money.

The Centers for Medicare and Medicaid invited providers on Tuesday to help develop four models to bundle payments.

The program is meant to encourage hospitals, doctors and other specialists to coordinate in treating a patient's specific condition during a single hospital stay and recovery.

"Today Medicare pays for care in the wrong way," Health and Human Services Secretary Kathleen Sebelius told reporters on a press call.

"Payments are based on the quantity of care, and not on the quality of that care," she said. "There is little financial incentive for the kind of care coordination that can help patients from returning to the hospital."

The four models give providers flexibility on how they get paid and for which services, as well as give them financial incentives to avoid unnecessary or duplicative procedures.

"Hospitals and other providers recognize that they have to accommodate the current (fiscal) environment," said Nancy Foster, vice president for quality at the American Hospital Association, an industry group that represents hospitals and other providers.

She said that while some hospitals or doctors may get less money overall in a bundled payment, they will still get their costs covered and perhaps earn rewards for better coordinating care.

The CMS Innovation Center, created under President Barack Obama's healthcare overhaul last year, has been looking into bundling payments as part of a larger effort to improve patient care and reduce costs.

"From a patient perspective ... you want your doctors to collaborate more closely with your physical therapist, your pharmacist and your family caregivers," CMS Administrator Donald Berwick said in a statement. "But that sort of common sense practice is hard to achieve without a payment system that supports coordination over fragmentation."

For more about the program and the four proposed models, please see a CMS fact sheet at http://r.reuters.com/gaf43s.

About 45 million elderly and disabled Americans are enrolled in federal Medicare plans, which have come under heightened scrutiny as Congress tries to cut the U.S. deficit ahead of a November deadline. The government's soaring healthcare bill is one of the biggest contributors to the deficit.

Further cuts to the $427 billion Medicaid program also are likely at the federal level. The insurance program for the poor is funded jointly by federal and state governments, but administered by the states with federal oversight.

(Reporting by Alina Selyukh and Anna Yukhananov; editing by Andre Grenon, Gary Hill)