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SGR Replacement Poses Daunting Challenges

 |  By Christopher Cheney  
   January 04, 2016

A new Medicare payment system for physicians and other frontline providers is slated to launch in January 2019. Given the difficulties involved in crafting the new rules, federal officials have a busy three years ahead of them.

This is not going to be easy.

Last year's passage of the Medicare Access and Children's Health Insurance Program Reauthorization Act (MACRA) has set in motion a lengthy and likely arduous effort to replace Medicare's reviled Sustainable Growth Rate (SGR) formula for physician reimbursement.

Barbara L. McAneny, MD

MACRA has two essential elements: the Merit-Based Incentive Payment System (MIPS), which ties annual Medicare Physician Fee Schedule payments to value, and an incentive program to encourage physicians and other frontline healthcare workers to participate in Alternative Payment Models (APMs) that reimburse Medicare providers based on value of services rather than service volume.

The most daunting challenge facing the federal officials who are crafting the reimbursement rules for MACRA is accounting for the healthcare industry's variety of providers and the country's diverse economy, says Barbara McAneny, MD, FACP, CEO of the New Mexico Cancer Center in Albuquerque and member of the American Medical Association Board of Trustees.

"We need to figure out how we're going to take care of everybody, including the small-town doctor and the pathologist at a small community hospital. Pathologists become a commodity in the accountable-care-organization world, getting paid less and less, and then they give up," McAneny says.

While noting that almost any payment system would be better than the annual high-stakes battle in Congress over adjusting and reauthorizing SGR, the practicing oncologist says she fears officials at the Centers for Medicare & Medicaid Services (CMS) is creating a new Medicare reimbursement monstrosity. "What they should do is offer a menu of payment model options. We are facing a significant physician shortage in this country. … Therefore, we need to make sure we keep every physician as functional and financially sustainable as possible."

SGR Replacement Process Churning

CMS has taken several steps to lay the foundation for the MACRA ruling-making process.

On July 16, the Medicare Learning Network made a presentation to healthcare providers that gave a "general summary" about the MIPS and APM provisions of MACRA. In October, CMS released a Request for Information from the public about MACRA rule-making that generated more than 460 comments. Last month, CMS released a proposed Measure Development Plan (MDP) that seeks to revise and consolidate Medicare quality measures linked to physician reimbursement. The MDP, which is open to public comment through March 1, is designed to "leverage quality measure development as a key driver to further the aims of the CMS Quality Strategy: better care, smarter spending and healthier people," the document states.

The highlights of the statutory requirements of MACRA and the proposed rules to implement the SGR replacement legislation include:

  • Beginning in 2019, CMS will apply a positive, negative, or neutral payment adjustment to each MIPS-eligible healthcare professional based on a composite performance score across at least four performance categories: quality, resource use, clinical practice improvement activities, and meaningful use of certified electronic health record (EHR) technology.
  • MIPS will build upon existing quality measure sets from the Physician Quality Reporting System (PQRS), Value-based Payment Modifier (VM), and Medicare EHR Incentive Program for Eligible Professionals (EPs), commonly referred to as Meaningful Use. MACRA will sunset payment adjustments for PQRS, VM, and the EHR incentive program and establish MIPS.
  • In 2019 and 2020, MIPS is set to apply to payments made to physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists. Beginning in 2021, CMS can expand the applicability of MIPS to other healthcare professionals, including certified nurse midwives, clinical social workers, clinical psychologists, physical therapists, and speech-language pathologists.
  • Creation of a payment incentive program from 2019 to 2024 to encourage physicians to participate in APMs such as the Medicare Shared Saving Program.
  • Technical guidance and assistance for small practices and practices in health professional shortage areas (HPSAs) to ease MIPS adoption. The proposed technical guidance and assistance would apply to physicians in practices of 15 or fewer professionals, with priority given to practices located in rural areas, HPSAs, and medically underserved areas, as well as practices with low composite scores.

Proposed MACRA Rules Drawing Criticism

Particularly in rural and medically underserved areas of the country, physicians and other frontline providers are going to need more than technical assistance to survive financially under the proposed rules for MACRA, McAneny says. "We're going to need to come up with some capital to redesign the healthcare delivery system."

Linking APM participation to a 5% annual lump-sum bonus for Medicare Physician Fee Schedule payments as proposed in July's Medicare Learning Network presentation on MACRA would not compensate small physician practices adequately for the investments required to redesign the way they deliver healthcare services, she says.

For small practices, financing is often an insurmountable obstacle that blocks participation in accountable care contracting arrangements such as the Medicare Shared Saving Program, according to McAneny. "The infrastructure to build an accountable care organization costs millions of dollars. Where is a little practice going to come up with that money?"

In its response to the CMS Request for Information document released in October, the Reston, VA-based American College of Radiology offers a laundry list of proposed changes to the MIPS and APM provisions of MACRA, including a call on CMS to reduce the administrative burden on physicians. "Administrative burdens must be limited and reporting tasks streamlined so that the delivery of patient-centered care is the principal focus in all clinical settings."

The reporting requirements under MACRA are a potentially fatal flaw for the new law, McAneny says. "The administrative burden from MIPS is going to be overwhelming. … It already costs 14 cents on the dollar [for a physician] to get paid. No other industry would put up with that."

Harold Miller

MIPS may be fundamentally misguided, says Harold D. Miller, president and CEO at the Pittsburgh-based Center for Healthcare Quality and Payment Reform.

"MIPS is pay-for-performance on steroids, and there is a serious risk that it will do more harm than good. It is based on the flawed premise that physicians need 'incentives' to improve quality and control costs, despite years of evidence showing that P4P systems have little positive impact on quality or costs, and that they can have serious negative impacts on patients and physicians," he says. 

"The problem with P4P systems like MIPS isn't that the incentives aren't big enough; the problem is they penalize individual physicians for costs and aspects of quality they can't control, and they don't change the underlying fee-for-service payment system so that physicians have the flexibility and resources to actually redesign care in ways that will improve quality and reduce costs in the areas they can potentially improve. MIPS is a particularly bad structure because the only way a physician can get a higher payment is if some other physician gets a lower payment, when the goal should be to have every physician receiving the resources they need to improve care so that all patients can benefit,:"; says Miller.   

"In contrast," he says, "properly designed alternative payment models can create a true win-win-win: better care for patients, lower costs for payers, and physician practices that are financially viable. … They do that by fixing the problems in the underlying fee-for-service system to enable physicians to deliver care differently; and they hold physicians accountable, but only for aspects of costs and quality they can truly control."

Despite the difficulties of implementing MACRA, McAneny has a succinct response about whether she would prefer to reinstate SGR: "No. It's a new set of problems, but at least I know my practice is going to continue past January 1 of every year."

CMS officials provided several online links to information about MACRA, but they did not respond to requests for comment before this column's publication deadline.

Christopher Cheney is the CMO editor at HealthLeaders.

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