Former CMS Administrator Mark McClellan, MD, PhD, (left) and AMA President Cecil B. Wilson, MD, were among those testifying at a May 5 House hearing. "It is past time to replace the SGR with a policy that preserves access, promotes quality and increases efficiency," Dr. Wilson told the subcommittee. Photographed for the AMA

AMA unveils SGR replacement plans

The Association calls on Congress for five years of positive pay updates while Medicare tests a range of payment models, including full private contracting.

By Charles Fiegl — Posted May 16, 2011

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Members of organized medicine have offered Congress more specific alternatives to Medicare's payment formula, which has physician pay in line for a 29.5% cut in 2012.

House lawmakers heard testimony from physician organizations at an Energy and Commerce health subcommittee hearing on May 5. Witnesses discussed the need for a permanent pay fix -- ending the practice of passing stopgap measures to prevent pay cuts mandated by the sustainable growth rate formula. Inaction on an SGR fix has exacerbated the payment problem and threatens patient access to care, doctors said.

The full committee had solicited input before the hearing on how to overhaul the pay system. Dozens of associations responded by supporting the elimination of the SGR.

The overarching question of how to pay for a Medicare rate overhaul was not addressed at the hearing. Estimates show that eliminating the SGR would cost about $300 billion over a decade. The House Ways and Means health subcommittee has scheduled hearings on physician compensation under Medicare, starting with a May 12 event exploring payment models.

The physician organizations called on Congress to transition from the outdated pay system and offer an array of payment options for physicians.

The American Medical Association recommended a three-pronged approach:

  • Repeal the SGR.
  • Implement a five-year period of positive Medicare payment updates based on practice costs.
  • Test and transition to multiple payment models designed to enhance the coordination, quality and appropriateness of care while addressing cost concerns.

"A replacement for the SGR should not be another one-size-fits-all formula," AMA President Cecil B. Wilson, MD, said in his testimony. "Instead, a new system should allow physicians to choose from a menu of new payment models, including shared savings, gainsharing and payment bundling programs across providers and episodes of care."

The American Academy of Family Physicians also supports the five-year transition period of pay increases, said Roland Goertz, MD, AAFP's president. This would give the Center for Medicare & Medicaid Innovation time to coordinate demonstrations and pilot projects to test payment models that could replace the SGR, he said.

Family physicians requested more pay raises for primary care. "This investment includes a mandated payment rate that is at least 2% higher for primary care physicians who are providing primary care and preventive health services," Dr. Goertz said at the hearing.

Overhauling the payment system would ensure that Medicare patients can continue to see their doctors, said Rep. Michael Burgess, MD (R, Texas), a subcommittee member. Repealing the SGR would be costly, but the formula has to go, he said.

"Today we send all the wrong messages to our doctors," Dr. Burgess said. "We say work harder and faster. Deal with weekly expansions of services and regulations out of CMS. Nonphysician bureaucrats will tell you how to practice, and it will be more so, in fact, under the president's health care law. We're going to hold your checks, but we need you to take more patients. Practice costs are rising, but don't expect us to help you meet your costs. And, oh by the way, a 30% pay cut in December.

"Is it any wonder that this country's physicians are fed up?" he asked.

Private contracting on the table

Medicare payment reform should include an option for full private contracting between patients and physicians, said M. Todd Williamson, MD, a spokesman for the Coalition of State Medical and National Specialty Societies. Private contracting also is on a menu of pay options from the AMA.

The organizations support the Medicare Patient Empowerment Act, introduced by Rep. Tom Price, MD (R, Ga.), on May 3. The bill would allow patients and physicians to contract freely for Medicare services without penalty. Patients and physicians would be able to negotiate prices for most outpatient services, but Medicare rates would apply when a patient has an emergency medical condition or requires urgent care.

Medicare does not allow physicians billing the Medicare program to accept fees that are different from rates set by the Centers for Medicare & Medicaid Services. Doctors can contract privately with patients, but only if the physicians completely opt out of Medicare for at least two years and patients agree not to accept any reimbursement from the government for that care.

"The day the Medicare Patient Empowerment Act becomes law, every physician will become accessible to every Medicare patient," predicted Dr. Williamson, a neurologist in Lawrenceville, Ga. "Private contracting is a sustainable, patient-centered solution for the Medicare payment system that will ensure our patients have access to the medical care they need."

Full private contracting wouldn't necessarily mean that all patients are assessed more for care than currently authorized by Medicare. During the hearing, Rep. Phil Gingrey, MD (R, Ga.), asked Dr. Williamson if he's allowed to charge his poorer patients less than the 20% co-pay for most Part B services.

"I can tell you that doctors want to do that a lot, but we can't," Dr. Williamson said. Physicians can face civil and criminal charges if they charge more or less than Medicare rates.

Democrats on the panel raised concerns about the Medicare Patient Empowerment Act. Rep. Frank Pallone Jr. (D, N.J.), asked Michael Chernew, PhD, a professor of health policy at Harvard Medical School, how a Medicare patient would be able to negotiate prices for complex care, such as treatments for prostate cancer.

Rep. Henry Waxman (D, Calif.) submitted letters from AARP and the Medicare Rights Center opposing Dr. Price's legislation.

The patient advocacy groups said the measure would drive up out-of-pocket costs for seniors and set a dangerous precedent.

"Although current proposals under consideration may pertain only to doctors, there is no guarantee that such private contracting rights will not begin to be applied to other providers, such as hospitals, and in other health care settings as well," said Joe Baker, president of the New York-based Medicare Rights Center.

"These proposals serve to fundamentally undermine the purpose of the Medicare program by unraveling the protections against high costs that prevent people from accessing the care they require."

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What's on the Medicare pay menu?

The American Medical Association recommends that Medicare test several physician payment models over five years that could form part of a replacement of the Medicare fee-for-service system:

Partial capitation: An accountable care organization receives a per-patient monthly payment to cover all the costs of care for a group of patients.

Virtual partial capitation: An ACO receives a per-patient budget for a group of patients instead of an upfront fee. Physician payments are adjusted to keep total pay within the budget.

Condition-specific capitation: A group of physicians receives a fixed amount to care for a specific patient condition, such as congestive heart failure.

Accountable medical home: A group of physicians receives upfront resources to restructure the way they deliver primary care. In return, the practice or group commits to reducing hospital admission rates in patients.

Inpatient care warranties: Physicians and hospitals set Medicare payment rates and give warranties for inpatient treatment, agreeing not to charge more for infections and complications.

Mentoring programs: Medicare offers financial and technical support to small physician practices working with regional health improvement collaboratives.

Private contracting: Patients and physicians freely contract for services, allowing them to agree on rates for services without having to forgo Medicare payment.

Source: Statement of the AMA before the House Energy and Commerce Committee Subcommittee on Health, Re: The Need to Move Beyond the SGR, May 5 (link)

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