SGR Death Throes?

Congress Moves Closer to Medicare Pay Fix 

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Medical Economics Feature – September 2013 

Tex Med. 2013;109(9):33-37.

By Amy Lynn Sorrel 
Associate Editor 

Congress appears closer than ever to replacing what both physicians and lawmakers agree is a broken Medicare physician payment system, as legislative proposals in the U.S. House and Senate take shape. While physicians welcome the attention – and the leadership of some Texas congressmen – they are not exactly holding their breath.

After all, Congress' track record over the past decade isn't exactly stellar, says Manuel Acosta, MD, a general surgeon in El Paso and chair of the Texas Medical Association's Border Health Caucus. Instead of taking action, the federal government has pushed off a double-digit impending Medicare pay cut every year since 2003 and raised doctors' pay no more than 2 percent – well below what it costs physicians to provide the care. The scheduled reduction for Jan. 1, 2014 – now at roughly 25 percent – stems from what Dr. Acosta describes as a flawed Sustainable Growth Rate (SGR) formula that fails to keep up with the cost of care and deters doctors from caring for senior patients.

With roughly 80 percent of his patients in Medicare and Medicaid, the low pay rates and uncertainty over the years have meant he, like many doctors, had to borrow money to stay in business, particularly in his border town, where doctors treat a higher percentage of low-income elderly patients with complicated conditions. "Somebody has to see these patients, but there will be a moment when nobody will because of the amount [Medicare] pays."

In fact, the percentage of Texas physicians accepting all new Medicare patients dropped from 78 percent in 2000 to only 58 percent in 2012, according to TMA's latest survey.

TMA leaders find the latest reform efforts encouraging, but remain cautiously optimistic as details emerge.

A draft bill by the House Energy and Commerce Committee is the most substantive to date and has garnered bipartisan support. Instead of just delaying the inevitable annual pay cut, HR 2810, the Medicare Patient Access and Quality Improvement Act of 2013, creates a two-phase plan to eliminate the SGR and provide five years of stable fee updates. It then transitions to a new quality reporting system that links physician pay to a set of physician-endorsed quality measures, while allowing doctors to opt into alternative payment models.

Bill supporters reached their goal of passing the measure out of the Energy and Commerce Committee and sending it on to the full House of Representatives by the Aug. 1 recess. Meanwhile, the Senate Finance Committee has held several hearings on the topic as it develops its own draft. Those efforts have so far overshadowed a similar bipartisan proposal reintroduced earlier in the year by U.S. Reps. Allyson Schwartz (D-Penn.) and Joe Heck, DO (R-Nev.), but that bill, the Medicare Physician Payment Innovation Act, nevertheless provides yet another sign of political will to address the issue.

The interest is driven largely by the slashed price tag on repealing the SGR. The Congressional Budget Office (CBO) estimates that cost at $138 billion over 10 years – just over half the $244 billion it would have cost in 2012 and still below the roughly $150 billion Congress already spent to preserve the formula with short-term patches.

Dr. Acosta says TMA and the Border Health Caucus continue to meet with representatives locally and in Washington. While lawmakers are receptive to physicians' plea for a fix, Congress has used a Band-aid approach for so long that "I don't know yet if [these proposals] are going to be the answer. The answer will be fair payment for what we do."

U.S. Rep. Michael C. Burgess, MD (R-Texas), is vice chair of the House Energy and Commerce Health Subcommittee and one of the bill drafters along with U.S. House Ways and Means Health Subcommittee Chair Kevin Brady (R-Texas). He acknowledges that "physicians have been burned so many times that they are reluctant to embrace anything for fear of being disappointed again." Referring to the revised fiscal estimate, however, he says the time for reform is now.

"Clearly there's an opportunity to do something meaningful, beyond just a one-year patch as has been done in past," Representative Burgess told Texas Medicine. "I'm doing everything I can to make sure we keep this process moving and ultimately get something that's not just acceptable to doctors, but actually helps patients and physicians and allows the house of medicine to reclaim some of its rightful place in developing and administering these quality measures."

Sen. Max Baucus (D-Mont.), chair of the U.S. Senate Committee on Finance, echoed those sentiments heading into a July hearing on SGR reform. "It is time to repeal this broken formula, and we need to do it this year. But we cannot just repeal the SGR. We need to change the entire fee-for-service system that Medicare uses to pay physicians." he said. "Physicians want to improve their performance and efficiency, and Medicare's payment policy needs to incentivize that improvement."

Gone for Good? 

Work on the latest proposals dates back to 2011, when lawmakers began examining solutions and soliciting input from the physician community, including TMA and the American Medical Association. "It is clear that the current SGR, should it be allowed to work as designed, threatens access to care for millions of seniors in this country, as well as the livelihood of medical providers who care for them," says a July memo by the House Energy and Commerce Committee.

Budget battles still lie ahead, however, as critics continue to question where the money will come from to pay for SGR reform, a perennial sticking point in the past. The memo goes on to say that "repeal and replacement of the SGR is a necessary Medicare reform that will ensure the future viability of the program – but it must be done in a fiscally responsible way."

In fact, the bill the committee passed does not include a way to pay for itself – a shortcoming that will have to be resolved before the legislation moves any further.

Representative Burgess acknowledges the fiscal barriers, but highlights several factors that differentiate this go-around and brighten the prospects for reform. "Every other time when we started out with 'How do we come up with money?' it has not been successful. So we decided to do this a different way: Let's come up with a policy and see if we can get broad agreement on the policy, and maybe that will make the [budget] side of things something people are willing to fight for."

So far, that policy starts out by eliminating the SGR by the end of 2013 and providing a five-year period of fee-for-service payments that include an inflation update of 0.5 percent per year from 2014 through 2018.

"That in and of itself is bigger and better than anything that has ever happened in an SGR patch in the past," Representative Burgess said.

During that timeframe, scheduled penalties under existing reporting programs would remain, such as the value-based modifier, the Physician Quality Reporting System (PQRS), and the meaningful use of electronic health records. (See "Penalties Add Up," May 2013 Texas Medicine, pages 35-39.)

Beginning in 2019, the annual fee-for-service update would continue, but payment incentives and potential penalties under a new quality reporting program also would kick in. During the five-year transition, the bill invites physician organizations to help develop the quality reporting measures to be used, with the goal of building on and eventually replacing PQRS, while aligning with other quality programs.

The committee memo says the five-year transition period responds to the medical community's request for enough time to develop and test quality measures and clinical practice improvement activities that would link doctors' pay to their quality performance.

Failure to report, however, could mean up to a 5-percent fee cut starting in 2019.

Representative Burgess says the reporting requirements are not meant to be additive, and the bill offers some flexibility for physicians who choose to report under other structures. Under a so-called "Payment Choice Program," for example, eligible physicians and groups could opt out of fee-for-service at any time and participate in approved alternative payment models such as patient-centered medical homes.  

Getting It Right 

The proposal generally reflects a set of core reform principles that AMA, TMA, and other state and national medical societies have advocated to Congress since October of last year for transitioning from the SGR to a new, "high-performing" Medicare system.

Log on to the TMA website to read the TMA/AMA letter to Congress.

Although the SGR must be eliminated, "the physician community recognizes that this is only one-half of the equation," medicine told congressional leaders in an October 2012 letter. Successful delivery reform that provides patient choice also is a must. So are new payment models that reflect the expense of providing services and efforts to improve quality and manage costs and that are accessible to practices of all sizes and settings.

It is critical that Congress gets it right, says TMA President Stephen L. Brotherton, MD. Lawmakers have "finally gotten the idea that you can't stick a finger in the dike when the hole is 10 by 10. But unless we get something that pays physicians at a level consistent with what it costs to keep our offices open, physicians are going to continue to leave" the Medicare program.

The legislation "represents continued progress, though work remains to be done," AMA President Ardis D. Hoven, MD, said, adding that "the details matter considerably. … Physicians want to move past the failed SGR formula and toward a Medicare program that supports the best health outcomes for their patients and provides a stable, rewarding practice environment. We will continue to work with the committee and the full Congress this year to improve Medicare for patients and physicians."

Foremost, TMA and AMA recommend that any Medicare payment updates must account not only for the costs of providing services, but also for any administrative expenses associated with additional quality reporting requirements. And if the current SGR system is any indication, inadequate funding "when there's going to be more people consistently injected into the system is doomed to fail," Dr. Brotherton said.

The proposal to design new methods for evaluating and rewarding quality care "is much needed," he wrote to congressional leaders in a June letter. But those measures must be evidence-based and developed with clinical input from practicing physicians.

"If there are quality deficits that we know need to be fixed, that care will be cheaper when they get fixed, and we can all agree it's a good idea, those are probably reasonable [quality measures] that we could include" in a new Medicare payment system, Dr. Brotherton told Texas Medicine. "But at this point, nobody has come up with the Golden Fleece."

As an example, the Fort Worth orthopedic surgeon pointed to the nationally developed Surgical Care Improvement Project (SCIP) measures, which recommend hospitals use certain pre- and postsurgery checklists to help avoid infections, complications, and the like, and hopefully reduce costs. In fact, the measures in some cases have had the opposite effect, Dr. Brotherton says.

"Those are quality measures put out with a mandate: Follow these or your [hospital] payment is going to drop. And we found out that when we did that, it didn't make things better; it made things worse. There were more complications, and they were more expensive. If you follow all of the recommendations for antibiotic use, for instance, the infection rate does not go down; and if you follow the DVT [deep vein thrombosis] recommendations, infection rates can go up."

Physicians should not be financially responsible for systems that are untested or don't work, he says. Nor should they be punished for factors beyond their control, TMA's letter states. For example, any new performance-based payment system also must properly adjust for risk factors, such as patients' socioeconomic status and education level, and patient responsibility factors, such as decisions to forego care.

In a July 22 hearing to review the House Energy and Commerce proposal, Health Subcommittee member U.S. Rep. Eliot L. Engel (D-N.Y.) expressed similar concerns, saying proper risk adjustment should account for socioeconomic challenges associated with providing good health care "to help ensure an adequate workforce, especially in high-need areas. … Recognizing that outside factors may influence the health outcomes of patients who struggle is an important consideration in adequately reimbursing physicians."

Representative Burgess said thus far lawmakers have not only solicited feedback from physicians, patient groups, and other interested parties, but they also have responded with changes that reflect that input. More work still lies ahead, and as lawmakers refine the reform legislation, "I expect that [collaboration] will continue."

A fleshed out House bill is expected to emerge by the end of the year. After that, Congress will have to hash out any differences between House and Senate versions of SGR reform.

While he could not promise that the legislation would survive the budget battles likely to occur this fall as Congress reengages in debates over the national debt and tax reform, Representative Burgess hopes it will provide a robust framework for SGR reform discussions. "In the meantime, we have got bipartisan agreement on a policy going forward that does repeal SGR and does fix some of the problems facing physicians. It streamlines quality reporting and moves it back more into the realm of medicine and out of the realm of bureaucracy, which to me is a big win."

Amy Lynn Sorrel can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email. 


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