Illustration by Jem Sullivan /

Medicare pay: Insurers preview a post-SGR world

As Congress struggles with its chronic pay formula problem, private plans offer examples of how Medicare might be overhauled to pay for value instead of volume.

By Charles Fiegl amednews staff — Posted Feb. 4, 2013

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A frustratingly familiar solution to the latest Medicare sustainable growth rate cut was signed into law after the new year with another pay patch enacted by Congress. The relief physicians felt at not sustaining a major cut — in this case 26.5% — was tempered by the knowledge that the next major reduction threatens to strike when the temporary measure expires.

Medicare's physician payment system continues to be panned universally by lawmakers, health economists, physicians, hospitals and insurers who would prefer a more stable, innovative system. But cost issues and a variety of other factors have stymied meaningful pay reform for the government-run entitlement program. For lawmakers, it was easier to pass the $25 billion stopgap measure at the last minute than to approve a package 10 times as costly — one that repeals the SGR and moves the Medicare pay system to one that rewards quality and efficiency.

Still, physicians and insurers are not waiting for Medicare to change. Many already participate in new models led by private payers, who are under fewer constraints and are trying out methods that Medicare might use in a post-SGR world.

In 2012, Congress ordered its research and auditing agency, the Government Accountability Office, to evaluate private-sector initiatives that base or adjust physician payment rates on inputs that are different from the SGR. The GAO report highlighted a dozen payers using new models that provide a possible glimpse into a next-generation pay system — one that offers several ways to compensate doctors for services that involve better care and patient health at a lower cost.

Common themes in the insurer models: measuring performance and making payments at the physician-group level, rather than the individual level; using a standard set of metrics; tying financial incentives to benchmarks as opposed to gauging performance relative to peers; and paying incentives soon after the performance period ends. Such themes appear to have general support from physician organizations, the GAO said.

What's certain is that organized medicine has been united in its call for Medicare to move beyond the SGR and transition to a new system. Medicare offers an opportunity for physicians to deliver high-quality patient care while lowering costs, said American Medical Association President Jeremy A. Lazarus, MD.

“The AMA is working on a proposal to move toward an array of Medicare delivery and payment models, giving physicians the flexibility to choose options they can use to help lower costs and improve the quality of care for their patients,” Dr. Lazarus said. “To succeed, these models must be accessible for physicians in all practice sizes and settings, and must include physicians in all specialties. It will be critical for physicians to have the information needed to identify ways their practices can make improvements on cost and quality measures.”

More pay models, greater flexibility and the use of more data have been cited by physician organizations as key parts needed in Medicare's next phase. Critics have described Medicare's fee-for-service system as a one-size-fits-all approach that pays based only on volume of services. Experts agree that fee-for-service still will have a place in Medicare's future, but physicians want more choices and are seeking to lead in these newer pay models.

Doctors try out medical homes

A desire to flatten the trajectory in health spending growth through more care coordination led CareFirst BlueCross BlueShield to begin recruiting physicians in the District of Columbia, Maryland and Virginia for a new payment initiative that launched in January 2011. The insurer offered higher fees to primary care physicians for participation in a patient-centered medical home model.

The model is still rooted in fee for service, but it offers incentives to encourage primary care physicians to coordinate care and improve quality. The voluntary CareFirst program is open to groups or panels of at least five physicians. Interested doctors must follow program guidelines, such as working with care coordinators and developing care plans for patients. For some practices, a change in behaviors rather than a complete overhaul is necessary, said Michael Sullivan, a CareFirst spokesman.

One big incentive to join is a 12% increase on all fees for primary care services. Other bonuses stem from improving quality scores, for example, by being an accredited medical home or by using electronic health records and prescribing electronically. Each practice also receives a spending target and a goal to reduce health costs below that mark.

“A plan of care has to be done with a care coordinator — it's not something solely they can do on their own,” Sullivan said. “In most cases [physicians] appreciate it. The coordinator does the follow-up, and it's what works best for the practice.”

Physicians welcome the offer of a 12% hike in fees and appear to be satisfied with the program, said Gene Ransom III, CEO of MedChi, the Maryland State Medical Society. Many members believe models such as medical homes and accountable care organizations better control program costs and improve quality of care. They prefer new innovations over blunt measures like the sustainable growth rate formula and Medicare's Independent Payment Advisory Board, he said.

“Physicians have realized the times are changing, and we need to be actively involved in these new innovative models to protect the private practice of medicine,” he said.

The CareFirst model has no downside risk, Sullivan said. If practice members decide the model is not for them, they can drop out but will receive fees at the 100% rate instead of fees with the 12% increase.

After its first year, the program achieved overall savings that put spending 1.5% below the target. A majority of physicians, 60%, earned awards and averaged costs that were 4% below their targets. Outcomes bonuses added on average 20 percentage points to fees. In the end, a service that had paid $100 in the past ended up paying $132.

The CareFirst model will be expanded to Medicare patients in Maryland later in 2013. The insurer received a $24 million grant from CMS to launch a three-year program serving tens of thousands of beneficiaries. The company intends to extend the Medicare model to physicians already involved in its private initiative, which would lead to a greater proportion of those doctors' patient panels having their services paid under the medical home arrangement.

Shared savings with lower costs

Medicare recently began experimenting with shared-savings models, such as accountable care organizations, that give additional payments to physicians for finding ways to deliver care at a lower cost. Private insurers such as Cigna already offer the model through their plans.

The Bloomfield, Conn.-based payer runs collaborative accountable care programs in 22 states with more than 4,500 primary care physicians and 6,500 specialists covering 510,000 beneficiaries. Eventually, the insurer hopes to expand the model to encompass 1 million enrollees — about 10% to 20% of total members — by the end of 2014.

The model focuses on at-risk populations and aims to help physicians provide the type of care they already want to provide, said Dick Salmon, MD, PhD, Cigna's national medical executive for performance measurement and improvement. The model includes support for expanded office hours and physician notifications of patient hospital admissions.

Such information is valuable especially when similar reports cannot be generated internally. “We provide groups with patient lists so they can do appropriate transition-of-care services when they leave the hospital and make sure no one falls through the gap,” Dr. Salmon said.

Modest advance payments are made available to physicians when there is a contractual commitment to enhance care, he said. Such fees can support weekend and night office hours or the adoption of an e-prescribing system. The idea is that up-front payments will support changes that reduce costly care and boost productivity at the site of service.

So far, larger groups of physicians have participated in the model, but Cigna is developing programs that will be good matches for small practices, Dr. Salmon said.

Performance contracts and more

Newer payment models that Medicare might emulate rely on sharing data to lower costs and improve on quality performance, GAO reported. Information on high-risk patients with multiple chronic conditions can be used to target care coordination services. Primary care physicians operating under other models can view lists of specialists showing health care utilization and quality trends.

More data are needed to help physicians succeed in newer payment models, said Pat Courneya, MD, the health plan medical director at HealthPartners. In its study, the GAO focused on two HealthPartners programs operating in Iowa, Minnesota, North Dakota, South Dakota and Wisconsin. One initiative contracts with physicians and others to withhold 1% to 5% of revenue, and then links those funds to performance measures on quality, member satisfaction and efficiency. The details of such arrangements are negotiated with physician groups, and shared objectives are established.

HealthPartners works with groups on using analytics to identify certain patient populations and trends. Not all practices are on the same level to work with the data, and agreements are structured so physicians are not exposed to undue financial risks, Dr. Courneya said.

Eight in 10 HealthPartner beneficiaries receive care from practices where such contracts are in place. About 60% of physicians are receiving bonus payments, he said.

Dean Clinic and Dean Health Plan run several primary care initiatives and pilot projects that are moving toward paying for value instead of volume in Wisconsin, said J.C. McWilliams, vice president of corporate strategy and network management.

The plan has a more robust data set for members at its Dean Clinic, but it aims to share information on managing chronic illness and acute care events and promoting wellness with all physicians. “We want the same good care for all patients,” he said.

The health plan will share information on how specialists are performing on quality and efficiency. If a particular orthopedic surgeon, for example, provides lower quality that leads to higher spending, the primary care physician might change referral patterns to physicians with higher quality and lower cost scores.

Such new models work with primary care physicians because they are in control of a large amount of health spending, McWilliams said.

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Organized medicine's Medicare transition plan

Physician organizations have used congressional hearings, meetings with lawmakers and letters to Democratic and Republican leaders to articulate how Washington can transition Medicare into a high-performing program.

For years, doctors have urged Congress to eliminate Medicare's sustainable growth rate formula used to set fees for beneficiary services. Temporary delays to steep pay reductions have barely kept rates above 2001 levels, the American Medical Association, state and specialty organizations said in an Oct. 15, 2012, letter to Senate leaders.

Amid the perennial pay formula battles, physicians have sought to establish core elements and principles to transition Medicare away from the SGR to a new system. In general, aspects of the plan call for investments in infrastructure and updates to reflect the costs to doctors of practicing medicine — including ongoing improvements and new efforts to improve quality.

Such a plan needs to reflect the diversity of physician practices small and large, the AMA has said. The Association wants the reforms to be structured in a way that will:

  • Reward physicians for savings achieved across the health care spectrum.
  • Enhance the prospects for physicians adopting new models to achieve positive payment updates.
  • Tie incentives to physicians' own actions, not to the actions of others or to factors beyond their influence.
  • Harmonize quality measures and alter incentives in current law.
  • Encourage systems of care, regional collaborative efforts, and primary care and specialist cooperation while preserving patient choice.
  • Allow specialty and state medical society initiatives to be credited as delivery improvements, and recognize the central role of the profession in determining and measuring quality.
  • Provide exemptions and alternative pathways for physicians in practice situations in which making or recovering the investments needed to reform care delivery would constitute a hardship.

— By Charles Fiegl

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GAO: Revise Medicare value-based modifier

Congress has authorized Medicare to begin a transition away from fee for service toward a system recognizing high-quality and efficient care. The Government Accountability Office made recommendations to improve the Medicare value-based modifier program, which will use quality reporting and other inputs to adjust payments to physicians practicing in groups of 100 doctors or more starting in 2015. After reviewing private-sector experience in the same area, the GAO suggested that CMS:

  • Develop performance benchmarks that reward physicians for improvement as well as for meeting absolute performance benchmarks.
  • Make value modifier adjustments more timely to reflect recent physician performance better.
  • Develop a strategy to measure the performance of solo and small physician practices reliably, such as by aggregating their performance data to create informal practice groups.

Source: “Medicare Physician Payment: Private-Sector Initiatives Can Help Inform CMS Quality and Efficiency Incentive Efforts,” Government Accountability Office, December 2012 (link)

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External links

“Medicare Physician Payment: Private-Sector Initiatives Can Help Inform CMS Quality and Efficiency Incentive Efforts,” Government Accountability Office, December 2012 (link)

Letter to the Senate Finance Committee from the American Medical Association and other medical specialty and state medical societies with suggestions on how to replace the Medicare sustainable growth rate, Oct. 15, 2012 (link)

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