Organized medicine details future of Medicare payment without SGR

Physician associations respond to a congressional request on how to improve the Medicare payment system with ideas for alternative care delivery and pay models.

By Charles Fiegl amednews staff — Posted June 11, 2012

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Organized medicine has given Congress proposed solutions for moving past what physicians and policymakers agree is a flawed Medicare payment system by creating opportunities for physicians to participate in new care delivery models.

Members of the House Ways and Means Committee had requested comments on developing alternative pay models to serve as possible replacements for the current Medicare sustainable growth rate formula that helps determine physician pay. The American Medical Association was among several physician organizations that responded to specific questions from committee members by detailing ways to overhaul the system while abandoning the SGR.

“Innovative payment models can give physicians the resources and flexibility to redesign care to keep patients healthier, better manage chronic conditions, improve care coordination, reduce duplication of services, and prevent avoidable admissions, and do so in ways that will control costs for the Medicare program,” wrote AMA Executive Vice President and CEO James L. Madara, MD, in a May 25 letter to the committee.

In January 2013, the SGR formula is scheduled to cut pay rates by more than 30% if Congress fails to prevent the decrease. Congress has averted SGR cuts repeatedly during the last decade using short-term pay patches. Lawmakers have continued to debate a longer-term solution, but the costs of an SGR repeal would be more than $300 billion over 10 years.

Physicians see several pay models that could be potential components of a post-SGR Medicare payment system, but they will need to be refined over time, the AMA said in its 26-page letter. A transition period is needed to move into innovative pay and delivery systems from the traditional system, which many have described as a fractured one that rewards volume over quality of care. Congress should provide a full menu of options to test during the move to new models, a period that the AMA has said should last five years.

Groups of physicians, hospitals and health systems have begun participating in Medicare accountable care organizations and other shared savings plans. But physicians need to gain experience with other models, including bundled payments, performance-based payments, global and condition-specific payment systems, warranties for care, and patient-centered medical homes, Dr. Madara stated.

The AMA also called for further regulatory changes to encourage participation. Payment initiatives by the Centers for Medicare & Medicaid Services have mandated application processes with deadlines that have been difficult for doctors to meet. The Association urged CMS to make the process more flexible.

“It is difficult to plan ahead for these announcements and organize the projects and resources necessary for a successful proposal,” Dr. Madara wrote. “Going forward, opportunities to engage in new models need to be available on an ongoing basis so physicians can plan for the needed changes and join as they become ready.”

The Medicare agency itself also needs to be improved and provided with adequate funding to meet new demands, he said. “This is necessary to bridge current gaps, such as providing timely incentive payments and real-time data to physicians.”

Other insurance payers have developed what physicians consider innovative models. The AMA letter recommended that CMS join those private-sector efforts or start similar initiatives. They include:

  • A Washington state multipayer medical home project co-sponsored by a regional collaborative — Puget Sound Health Alliance — and the Washington State Health Care Authority.
  • The Geisinger Health System’s ProvenCare program, based in Pennsylvania, which improves quality of care and provides bundled payment with warranties to cover a wide range of each patient’s care.
  • The Alternative Quality Contract global payment program, developed by Blue Cross Blue Shield of Massachusetts, which pays a single amount to cover care for a population of patients.

Creating stability and reducing burdens

A permanent SGR fix is needed to create certainty and stability in the Medicare program, the American College of Physicians wrote in its letter to the committee on May 23. A transformation of the Medicare program would move it from one that incentivizes volume to “one that preserves and promotes the patient-physician relationship and rewards high-quality and efficient care,” said ACP President David L. Bronson, MD.

The college asked Congress to support organized medicine in its efforts to provide guidance to physicians on high-value, cost-conscious care, such as through shared decision-making strategies.

Family physicians touched on a similar theme. “The most effective way to encourage patients of any health plan to seek appropriate high-value health services is for the patient to have a trusting relationship with his or her primary care health team,” wrote Roland A. Goertz, MD, board chair of the American Academy of Family Physicians, in a May 25 letter.

Responding to lawmakers’ questions about regulatory burdens, Dr. Goertz wrote that AAFP members are concerned about time wasted on prior authorization paperwork, overlapping documentation requirements and misaligned incentive programs.

The AMA again called on Congress to ensure that CMS discontinues its practice of early enforcement of noncompliance penalties for electronic health record, electronic prescribing, quality reporting and value-based modifier programs. The Medicare agency is imposing penalties for these programs using physician claims data or performance from a year or two before the year in which the penalty is authorized under law.

CMS should coordinate all incentive program codes, quality measures, operating rules, feedback reports and timelines, Dr. Goertz wrote. “Since each program was created piecemeal by separate laws, physicians are frustrated and confused by the several inconsistencies within these incentive programs.”

Doctors also are prevented from moving beyond the current payment system because of federal regulations that impede care coordination or that unfairly penalize physicians, Dr. Madara said. Congress should waive laws or regulations that stop physicians from engaging in or leading new care delivery models. For instance, federal officials have shown some flexibility by offering waivers to antitrust and anti-kickback statutes for Medicare shared savings programs.

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SGR skews Medicare spending projections

Lawmakers and physicians agree the Medicare sustainable growth rate should be scrapped, but overriding SGR cuts is costly. Official Medicare Part B spending projections assume that deep scheduled pay cuts will take effect, but the Centers for Medicare & Medicaid Services also makes alternative projections based on the likelihood that Congress will circumvent the SGR. The differences between the projections in terms of annual spending figures and year-to-year change are significant.

Part B spending
Year Current law (Change) Alternative projection (Change)
2013 $237.9 billion (-4.2%) $260.3 billion (+4.8%)
2014 $255.1 billion (+7.2%) $280.4 billion (+7.7%)
2015 $272 billion (+6.6%) $300.5 billion (+7.2%)
2016 $288.9 billion (+6.2%) $320.8 billion (+6.8%)
2017 $310 billion (+7.3%) $345.9 billion (+7.8%)

Source: “Projected Medicare Expenditures under Illustrative Scenarios with Alternative Payment Updates to Medicare Providers,” Centers for Medicare & Medicaid Services, May 18 (link)

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