The sustainable growth rate formula's days may be numbered, but the SGR won't be repealed until an alternative system for making Medicare payments to physicians is found.
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Media reports that the IRS targeted conservative political groups prompted leaders of the Senate Finance Committee Tuesday to call for an investigation, but did not prevent the committee from holding its scheduled hearing on the matter of Medicare payments to physicians.
While the sustainable growth rate formula has long been discounted as a flawed system for calculating payments to doctors and there have been regular calls for its repeal, Congress and other stakeholders have been unable to agree on what should replace the formula.
On May 10, Sen. Max Baucus (D-MT), the committee chairman and ranking member Sen. Orrin Hatch (R-UT) appealed to healthcare providers to proffer solutions for improving Medicare's physician reimbursement system.
In his opening statement, Baucus emphasized a window of opportunity to act created by a significantly lower estimate of what it would cost to real the SGR. In a recent report the Congressional Budget Office report lowered from $245 million to $138 million the estimated cost of repeal over 10 years.
Agreement from across the aisle was swift. "The CBO score has a tendency to fluctuate," said Sen. Orrin Hatch (R-UT), ranking member. "We must act now."
"We should not simply repeal the SGR. We must also change the underlying fee-for-service system," Baucus added. He underscored the need for "concrete policies that can be implemented now to replace the SGR" and called on three experts "to help us identify short-term, ready-to-go solutions."
The three were Mark E. Miller, Ph.D., executive director of the Medicare Payment Advisory Commission, A. Bruce Steinwald, a consultant who formerly worked for the General Accounting Office, and Kavita K. Patel, MD, fellow and managing director of the Engleberg Center for Healthcare Reform at the Brookings Institute and a practicing physician.
The trio didn't precisely meet the chairman's directive, but each described potential SGR replacements−or at least concepts−that address some of the issues that have emerged during a series of Congressional hearings on the topic.
MedPAC to oversee legislated fee-schedule updates?
Increases in the Medicare population, the number of physicians reaching retirement age, and physician frustration with the annual doc fix could combine to strain beneficiary access in some markets. MedPAC's Miller suggested that it could be necessary to replace SGR with a 10-year schedule of low, legislated fee-schedule updates with MedPAC conducting an annual review of the payment rates and recommending changes.
The updates wouldn't be based on an expenditure- or volume-control formula. Instead, Miller explained, the updates "would allow total Medicare expenditures for fee-schedule services to increase annually—roughly doubling over the next 10 years."
About two-thirds of the increase would be attributable to increased beneficiary enrollment and one-third would be attributable an increase in per beneficiary service use, he said. The proposed updates would reduce fees for most services, he added, but the reductions would be less than under the SGR. Primary care should be exempt from the reductions because "the most recent data show that access risks are concentrated in primary care."
Moving beyond bundling
"For many years the medical profession has been staunchly in favor of SGR repeal without being willing, in my view, to offer a quid pro quo. This appears to be changing as many medical organizations have shown leadership in encouraging physicians to adopt value-based criteria,"A. Bruce Steinwald told the committee. A former GAO employee, he is familiar with controlling spending on physician services under Medicare Part B.
With the SGR out of the way, Steinwald would expect Medicare to have "greater opportunity to use its extensive data to make distinctions between high-value and low-value care." Bundling of services and profiling physician utilization patterns could be put in place today, but other steps may require new legislation, such as requiring prior authorization for expensive diagnostic procedures or tiering beneficiary copayments according to service value. He noted that both "are used extensively in the private sector."
Baucus lamented that although physicians are eager to move to a new system with new payment models such as accountable care organizations, payment bundles, and medical homes, the models being developed by the Innovation Center at the Centers for Medicare & Medicaid Services "are not ready to replace the fee-for-service system."
Better collaboration between doctors, specialists
With the growing complexity of caring for Medicare beneficiaries, Kavita K. Patel, MD, of the Brookings Institute, stated that new payment models should encourage collaboration between specialists and primary care physicians.
Patel, a practicing primary care internist at Johns Hopkins Medicine, suggested a care coordination pathway be developed for the care of a patient with chronic disease. The pathway would consolidate potential bonus payments from several quality initiatives?such as PQRS, value-based modifers, meaningful use, and electronic prescribing?into one lump sum payment.
She noted that those payments are generally administered as either a flat percentage or are adjusted to all FFS payments. Shifting some existing FFS payments to a single care coordination payment would "give providers more support in moving toward condition-based, episodic payments, or global payments that allow for management of population health payments that would otherwise be impossible in the current payment setting."
Follow up Senate hearings on the SGR have not been scheduled. Sen. Baucus and Sen. Hatch are expected to develop legislation, but that probably not happen until summer. Last week the two co-signed a letter to physicians and other groups asking for specific input on replacing the SGR.
Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
