The proposed 2015 payment rate cut to Medicare Advantage health plans is less than expected and less than the reduction this year, but insurers and their allies in Congress are expressing displeasure with the prospect of a second consecutive haircut.
The Centers for Medicare & Medicaid Services is proposing a Medicare Advantage pay cut of at least 1.9 percent despite urging from lawmakers and insurers to maintain current payment rates in 2015.
"Preliminary estimate of the combined effect of the Medicare Advantage growth percentage and the fee-for-service growth percentage is estimated to be -1.9 percent," CMS said Friday. The agency released a 148-page document detailing proposed MA payment and other changes in the fiscal year starting in October. "This historically low growth in Medicare per-capita spending is tied, in part, to successful initiatives undertaken to promote value over volume and help curb fraud, waste, and abuse in the Medicare fee-for-service program in recent years."
Supporters of the MA program, including some of the country's leading insurers, say a second straight year of cuts would impede progress toward a value-based healthcare system and would lead to higher out-of-pocket expenses for seniors.
"The proposed funding cuts threaten the stability of the Medicare Advantage program, which has proven to provide high levels of satisfaction and quality of care for millions of beneficiaries," Aetna officials said in a statement provided to HealthLeaders Media Thursday. "Research shows that these plans outperform Medicare fee-for-service in 9 out of 11 clinical quality measures and have high levels of member satisfaction."
After MA payments took a 6 percent hit in 2014, insurers nationwide and lawmakers in Washington began pressing CMS to maintain the current payment rate level next year. The opposition effort includes a Feb. 14 letter to CMS signed by a bipartisan group of 40 US senators. And at the grassroots, America's Health Insurance Plans has launched a campaign urging seniors to contact their representatives in DC called Seniors are Watching.
According to the senators' letter to CMS, MA health plans are in line with crucial health care reform goals and are performing well. "Studies show that enrollees in the MA program enjoy better health outcomes and receive higher quality care than their counterparts in the Medicare fee-for-service program," the lawmakers' letter states.
After the CMS proposal was announced, Senator Orrin Hatch (R-UT), said in a statement, "These Medicare Advantage cuts are misguided, threaten a successful program for seniors, and must be overturned. Medicare Advantage is extremely popular for a reason. Run through the private market, seniors gain access to high-quality and coordinated care with additional benefits that they otherwise wouldn't get."
Two consecutive years of deep cuts could have dire consequences for insurers. "If rate reductions are imposed, health plans will have to make difficult choices that could create disruption and confusion among beneficiaries," Aetna said. "Reducing benefits and plan options, charging higher premiums and copays, offering products with limited provider networks, and, in some cases, leaving the market, are all possible consequences of a second round of cuts to the program."
According to a recent Oliver Wyman report commissioned by AHIP, seniors and people with disabilities enrolled in Medicare Advantage plans would face premium increases and benefit losses of $35 to $75 per month, or $420 to $900 annually, if MA payments were to be reduced by 6 percent next year.
After MA payments were cut 6 percent for 2014, beneficiaries experienced monthly cost increases and benefit cuts from $30 to $70, the Oliver Wyman report found.
Citing the likelihood of "significant upheaval in the MA market," the Oliver Wyman report warns of the "potential for plan exits, reductions in service areas, reduced benefits, provider network changes, and reduced MA enrollment."
In a prepared statement released Friday night, AHIP President and CEO Karen Ignagni cautioned against any further cuts to MA payments.
"The new proposed Medicare Advantage cuts would cause seniors in the program to lose benefits and choices on which they depend," she said. "Last year’s six percent cut to Medicare Advantage rates resulted in higher premiums, reduced benefits, fewer coverage options, and loss of provider choices for seniors. Another round of payment cuts would be devastating to the more than 15 million seniors and people with disabilities that have chosen to enroll in Medicare Advantage for the better benefits and higher quality coverage these plans provide."
In AHIP's view, the MA payment cut could be much higher than 1.9 percent. "There are a number of factors that impact total Medicare Advantage payment rates. The growth rate percentage included in the rate notice is only one factor and does not represent what the total cut will be when other factors are included. In fact, there is no single number in the rate notice that represents the cumulative impact on rates," AHIP said.
Aetna officials encouraged CMS to avoid casting too great a burden on Medicare Advantage as federal healthcare reform initiatives move forward.
"The healthcare reform law includes more than $200 billion in payment cuts, most of these have not yet gone into effect. It also imposes a new health insurance tax that begins this year," they said. "These funding reductions plus other changes to the program resulted in payment cuts of 6.5 percent in 2014… CMS should keep current payment levels and protect MA beneficiaries from any additional cuts, other than those that are already part of the health care reform law."
CMS expects to set the final Medicare Advantage payment rate for 2015 in early April.
Building electronic health record systems that comply with the federal Meaningful Use program is a daunting task for providers large and small. But basic "regulatory compliance is a far larger day-to-day challenge" than fighting fraud, says one health system CIO.
When it comes to meeting Meaningful Userequirements, picking the right partner and setting the right policies are the best ways to avoid running afoul of the law or federal regulators, according to a pair of healthcare chief information officers.
"You're making a multimillion dollar investment," said Brian Sandager, CIO at Circle Health, the corporate parent of Lowell General Hospital in Massachusetts. "You want to select a partner who's going to be with you for a very long time."
Finding an EHR partner with longevity potential is particularly important because Meaningful Use is a three-stage process, the Circle Health CIO said. "I can't imagine health systems that are dealing with vendors that are consolidating. To be forced into change has to be an awful feeling as a CIO," he said. "Healthcare is complex enough."
While criminal fraud such as an alleged attestation scam in Texas should always be guarded against in Meaningful Use projects, Sandager said regulatory compliance is a far larger day-to-day challenge. "We're more concerned about the technicalities of the law," he said. "A lot of the rules and laws are really complex. … You have to have an open dialogue with CMS."
Vendor Selection
Circle Health contracted with one of the biggest players in the EHR market, Cerner, to help orchestrate the health system's Meaningful Use program. In addition to the stability that comes with an established partner, Cerner also has "their own people in DC," Sandager said.
John Halamka, CIO at Beth Israel Deaconess Medical Center in Boston, said it is important to consider track record when selecting Meaningful Use equipment and an EHR vendor. "Buy only MU Stage 2-certified technology," he said. "KLAS ratings are also helpful. Vendors such as Epic, Athena, eClinicalWorks, and Greenway are low risk."
Based in Orem, UT, KLAS Enterprises LLC provides performance data on a range of healthcare industry vendors.
On the HealthIT.gov website, CMS offers guidance to providers on selecting a Meaningful Use partner. CMS says "most practices" use the following process: developing an initial plan that identifies key electronic health record goals, conducting a vendor assessment to pick an EHR system that supports the provider's goals, and finalizing the EHR plan after a vendor has been chosen.
Once a Meaningful Use program has been launched, setting effective policies and working with physicians are the crucial ingredients to meeting system design deadlines and avoiding compliance problems, Halamka and Sandager both emphasized.
Federal officials have identified the cut-and-paste feature in many EHR systems as a compliance risk, fearing the ability to duplicate elements of patient records could lead to fraud.
"Cut-and-paste is a matter of policy, not technology," Halamka said. "Use templates for notes and EHR tools that enable medication lists, lab values, and vitals to be incorporated into documentation."
Workflow Issues
Sandager said the cut-and-paste EHR issue is more of a cultural phenomenon in the medical field than a matter of criminal intent. "There's a general fear in the provider base," he said of many healthcare providers who he said have been conditioned to commit overkill on documentation. "The tendency is to just dump it all in."
Circle Health has been working with physicians to make sure the healthcare system's EHR program has the best possible workflow, which has done more than trim a few minutes off each doctor's daily administrative tasks, Sandager said. "The bottom line is we get a better record out of it," he said.
There is also a measure of patience involved in ensuring Meaningful Use compliance in any large healthcare organization, the Circle Health CIO said. "With hundreds of providers, one or two are going to need help," he said.
Many providers are set to launch Stage 3 of Meaningful Use, which is designed to help push the US healthcare system to a value-based model. Sandager said Circle Health is actively planning for Stage 3 and offered one last bit of advice: "Make sure you and your EMR partner are looking ahead."
The deadline to buy insurance for 2014 on the public health insurance exchanges is March 31. Reaching out to the uninsured and convincing them to enroll is a make-or-break effort for the hallmark federal healthcare reform program.
With the troubled rollout of the healthcare.gov website and a range of other post-launch challenges, educating potential public exchange enrollees has become a focal point for federal officials and insurers.
Last week during a conference call featuring the January enrollment numbers for the public exchanges nationwide, HHS spokesperson Julie Bataille said federal officials have been organizing outreach activities across the country for months. The effort has resulted in about 2,000 public education events since October.
Outreach work has been intense in states where there is a high percentage of previously uninsured residents, Bataille said. "There's a lot of work we are doing to raise awareness in Texas in particular," she said. "We are very [committed] that the people of Texas are aware of the options that are available."
During the conference call, HHS Secretary Kathleen Sebelius announced 3.1 million people had enrolled for health insurance in the public exchanges through the end of January. Last June, Sebelius said enrolling seven million people through the public exchanges was a "realistic target."
The deadline to enroll for 2014 health insurance in the public exchanges is March 31, so reaching Sebelius' target is probably unrealistic at this point.
Humana Finds Local Outreach Partners
Roy Beveridge, MD, Humana's chief medical officer, told me last week that the company is engaged in a nationwide educational effort to boost enrollment in its exchange-based insurance policies. "Humana has committed to providing health reform education for Humana members and non-members alike through the development of strategic partnerships that work to eliminate confusion and provide people with the information they need to make informed, individualized decisions," Beveridge wrote in an email. "Our goal is to make health care easy, so we're going out to communities and giving people the tools and education they need to understand their healthcare options."
Humana's educational partners include CVS Caremark and the YMCA.
"The opportunity is to provide coverage to people who didn't have it before," John Montgomery, MD, Humana's chief medical officer in Florida, told me recently. "A lot of people don't know: don't know what to do; don't know what benefits are available."
Montgomery says CVS Caremark and the YMCA are natural outreach partners for Humana in Florida. "Where the YMCA sites are mirrors our market," he said. "Those partnerships give us opportunities to educate people about health insurance."
In Mississippi, Humana is orchestrating a 36-county push to educate residents about the new public exchange, according to Stacey Carter, who is leading the company's Mississippi Education Initiative. "A lot of people feel the ACA is for the less fortunate," Carter told me last week. "We are trying to get people the numbers for who can benefit from the ACA, and there are a lot of people who can benefit."
Carter said the outreach effort is essential because many Mississippi residents have never had health insurance before. "A lot of these people have never used the system before," she said.
One of Humana's buses
In Mississippi, Buses Campaign for Enrollment A unique element of Humana's Mississippi Education Initiative is a pair of Internet-equipped buses that have logged more than 10,000 miles since October crisscrossing the state. The buses have visited rural areas and they have set up at a variety of locations, from churches and libraries to Walmart stores. "These vehicles are being used to reach people in their community," Carter told me. "It's helped with Humana's brand awareness as well. People are getting to know Humana."
Carter said outreach techniques such as the buses are effective because they create an opportunity to have the kind of one-on-one contact that is needed for many residents to navigate the options available to them through the new public exchanges. "You really need to sit down and have a personal conversation with people," she said. "Even though the enrollment deadline is March 31, we're still going out to educate people this summer."
With millions of Americans eligible for affordable healthcare for the first time in their lives, there are millions of reasons for public exchange outreach efforts to continue aggressively.
Assigning responsibility for the costs linked to maintaining adequate supplies of medications is at the heart of the medication shortage issue, says one pharmaceutical economist.
New rules and greater cooperation between major players appear to be leveling off a spike in medication shortages that began nearly a decade ago. But with at least 38 new drug shortfalls last year, providers are continuing to scramble to make sure the best treatments are available to their patients.
"We, on a routine basis, have to deal with shortages of medication that require mitigation," said Dan Johnson, director of pharmacy services at St. Anthony's Medical Center in St. Louis. When shortages occur, the hospital's pharmacists coordinate with the medical staff, wholesalers, and manufacturers to find alternate therapies or new sources for scarce medications.
In some cases, Johnson says the only option is to "restrict the drug to the patients who really need it."
Erin Fox, director of the Drug Information Service at the University of Utah in Salt Lake City, says a recent shortage of oncology drugs demonstrates the potentially severe consequences for patients.
"When you have a limited supply, you have to decide which patients will get a medication and which might not," Fox said, noting "there is no other effective alternative" for several cancer medication regimens.
"That's a really hard position for providers to be in," she said.
FDA Drug Shortage Report
In July 2012, the Food and Drug Administration Safety and Innovation Act became law. In addition to requiring drug manufacturers to provide timely notice of impending or unexpected medication shortages, FDASIA required the FDA to issue annual reports on pharmaceutical shortfalls.
The federal agency released its first "Annual Report on Drug Shortages" this month, with the research focusing on the first three months of 2013. The report notes a slowing in the rate of new medication shortages.
"While the number of new shortages… quadrupled from approximately 61 shortages in 2005 to more than 250 in 2011, after actions by the FDA working with stakeholders, that number significantly decreased in 2012 to 117 shortages. However, shortages continue to pose a real challenge to public health," the report states.
The FDA report indicates reforms in recent years such as FDASIA are having an impact.
"As a result of recent actions by the President, Congress, and FDA, manufacturers are notifying FDA about potential shortages earlier than in the past. Early notification of potential shortages gives FDA additional time to work with sponsors and other groups to identify ways to maintain treatment options and prevent a shortage," the report states.
"Using a range of available tools, including regulatory flexibility when appropriate, FDA's Center for Drug Evaluation and Research (CDER) worked with manufacturers to successfully prevent 140 shortages from January 1 to September 30, 2013. In addition, the number of new shortages tracked by CDER for this same time period is 38, compared to the 117 new shortages during calendar year 2012."
The federal agency can choose from a suite of responses when a drug shortage is reported, including:
Determining whether other manufacturers are willing and able to increase production.
Expediting FDA inspections of manufacturers attempting to restore production.
Working with affected manufacturers to investigate the root cause of a shortage.
Bearing the Cost
"It's a very complex problem. If we could fix it tomorrow, it would be great, but that's unlikely," said Cynthia Reilly, director of the medication safety and quality division at the American Society of Health-System Pharmacists.
"We really can't hold one party responsible for drug supply," she said. "Realistically, part of the reason we have great drugs to treat patients is we have a free market."
Enrique Seoane-Vazquez, PhD, an associate professor at the Massachusetts College of Pharmacy and Health Sciences University in Boston, said assigning responsibility for the costs linked to maintaining adequate supplies of medications is at the heart of the drug shortage issue.
"If a hospital doesn't have a medication, nobody is responsible even if you die," said Seoane-Vazquez, who serves as director of MCPHSU's International Center for Pharmaceutical Economics. "This is the main problem… the lack of responsibility."
He said the players at the opposite extremes of the supply chain—manufacturers and healthcare providers—would face significant costs if they were compelled to bear the burden of avoiding drug shortages alone.
"They don't produce an extra amount in case there is a shortage," Seoane-Vazquez said of pharmaceutical companies. "They produce enough to satisfy the needs of their clients."
For hospitals, stockpiling supplies of medications presents a financial drain, he said. "Hospitals could be required to have the medications to meet the needs of their patients, but it will cost you more," Seoane-Vazquez said.
Transparency Needed
In addition to sorting out the economic imperatives of operating a robust medication supply chain, Fox said boosting transparency in the pharmaceutical industry is needed to ensure a steady supply of quality medications. The University of Utah College of Pharmacy faculty member said the common practice of drug companies contracting out medication lines is problematic.
"Just like our food, we need to know where our drugs are coming from," Fox said. "Some companies are forthcoming with that information and some companies are not… I want to know: is that product quality, or is it going to be recalled? I want to know those medicines are safe."
Fox said the shortage of medications is particularly acute for injectable drugs, noting there are fewer than 10 manufacturers worldwide.
In a prepared statement earlier this month, Ralph Neas, president and CEO of the Generic Pharmaceutical Association, said his group's members are playing a key role in providing a supply of affordable medications to patients around the world.
"Generic pharmaceuticals play a critical role in any strategy to hold down health costs," Neas said. "We will continue to work with policymakers to ensure any proposed laws and regulations do not undo the framework responsible for decades of more affordable generics and trillions of dollars in savings."
Neas describes 2013 as "a year of milestone achievements" for the generic drugs industry. "Generic utilization hit an all-time high as 84 percent of prescriptions dispensed are now generic," he said.
"Congress passed the Drug Quality and Security Act to establish a nationwide, reliable system for tracking prescription medicine that further safeguards our nation's prescription drug supply and protects patients. The law also enhances the ability of regulators to limit risks posed by counterfeit or adulterated products and reassures patients that the generic medicines they receive are secure from the manufacturer all the way to the pharmacy."
Embracing Shared Responsibility
St. Anthony's pharmacy director says the best way to achieve a permanent solution to the nation's drug shortage problem is through teamwork among the players in the supply chain. "We're all part of the problem," Johnson said. "We all need to work together."
The new FDA shortage reporting rules are seen as a significant step toward greater cooperation. "That gives us a chance to allocate drugs before we run out," he said.
"It really is a situation that we are all in it together," Johnson said. "If we don't work together… sometimes we make these situations worse."
Vulnerabilities in electronic health records systems are creating opportunities for fraud among healthcare providers and contractors working to achieve Meaningful Use attestation, says the Office of Inspector General.
With CMS spending at least $18.8 billion through December on Meaningful Use electronic health record projects, a pair of recent critical inspector general reports and a federal fraud case filed last week in Texas are raising alarm about the healthcare IT reform effort.
In a US grand jury indictment filed Jan. 22, Joe White, former CFO of a now defunct rural hospital chain in Texas including Shelby Hospital, was charged with bilking nearly $800,000 from the EHR incentive program for Medicare. White is accused of falsely attesting to compliance with the first stage of Meaningful Use, which requires hospitals to meet 18 of a possible 23 EHR objectives, including 13 core objectives.
In addition to the false attestation charge, White is accused of aggravated identity theft for allegedly forging a colleague's identifying information on Meaningful Use attestation documents. The former financial officer faces as many as five years in prison on the attestation charge, two years in prison on the identity theft charge and fines totaling $500,000.
According to the grand jury indictment, EHR contractors and others were allegedly directed to enter information from paper records into Shelby Hospital's EHR to help satisfy the requirements for stage one of Meaningful Use.
''I'm aware of allegations of some providers attesting to Meaningful Use even though they have not satisfied the Meaningful Use objectives," said Rick Rifenbark, a Los Angeles-based partner in the law firm Foley & Lardner. "With respect to EHR systems more generally, there are also concerns of fraud committed through the use of cut and paste features, so called 'cloned documentation,' templates, and 'check the box' features. While these features may increase the efficiency of the EHR system, they can result in fraud to the extent that medical record entries are not tailored to specific medical visits."
In two reports released in December and January, the Office of Inspector General the US Department of Health and Human Services criticized CMS and healthcare providers over fraud safeguards. Both reports singled out the cut-and-paste feature of EHR systems as problematic.
In the IGO report released last month, titled "CMS and Its Contractors Have Adopted Few Program Integrity Practices to Address Vulnerabilities in EHRs," the IG states the "transition from paper records to EHRs may present new vulnerabilities."
The December IGO report found many hospitals unprepared to guard against abuse of the cut and paste feature. "Only about one quarter of hospitals had policies regarding the use of the copy paste feature in EHR technology, which, if used improperly, could pose a fraud vulnerability."
CMS officials offered written responses to both IGO reports.
"Given its potential for use in fraud, CMS intends to develop appropriate guidelines to ensure appropriate use of the copy paste feature in EHRs," CMS reported in a letter to the IOG dated Nov. 22, 2013. "The CMS has been engaged … to consider the unique issues presented by digital clinical data, including determining authenticity of information in EHRs."
In a response to the December IOG report dated Nov. 1, 2013, CMS officials wrote they were "conducting prepayment and postpayment audits to determine whether providers are properly receiving Meaningful Use incentive payments and complying with program rules."
Rifenbark said federal authorities are not the only officials trying to catch Meaningful Use fraud. "States will also conduct audits with respect to their Medicaid EHR incentive programs," the member of Foley & Lardner's healthcare industry team said. "All of these efforts are designed to detect and prevent Meaningful Use scams."
The California lawyer said maintaining proper documentation is crucial for healthcare providers to avoid Meaningful Use fraud liability at their facilities.
"Providers should be sure to carefully document their satisfaction of the meaningful use objectives and quality measures and retain such documentation in the event of audit," he said. "With respect to the Medicare EHR incentive program, such documentation should be retained for at least six years post attestation. State Medicaid EHR incentive programs may require a longer documentation retention period."
Insurers say they have to design their provider networks for the new public exchanges with cost control in mind. Critics say excluded hospitals in rural and economically disadvantaged areas of the country are at risk of financial ruin. CMS will try to have the final say this year.
Battle lines are being drawn over the crafting of commercial insurance networks for the new public health insurance exchange marketplace.
Under the banner of "high-value provider network," insurers say they have to carefully design their network of providers to contain the costs associated with serving the new exchange market. With many people getting healthcare for the first time through the public exchanges, payers are bracing for a population of patients with chronic diseases and other costly medical needs.
Creating provider networks that follow accessibility regulations while selectively choosing participating providers is key to making healthcare policies affordable, John Montgomery, MD, Humana's vice president and medical officer for Florida commercial markets, told me last week. "We really had to balance access and service area size with affordability," he said.
On Tuesday, America's Health Insurance Plans released an email highlighting praise for "high-value provider networks," with sources ranging from Health and Human Services Secretary Kathleen Sebelius to academics to analysts to news reports.
Sebelius, formerly Kansas insurance commissioner, is quoted as saying: "You have to have a network, a number of providers, ob-gyns, neurologists, pediatricians, folks who deal with patients or you can't get your product license... You will have access to specialty care needed. You will have access to hospitals. You will have access to prescription drugs, mental health services. Substance abuse will be part of plans as well as lots of preventive care without co-pays. These are real, robust insurance products, and I think people will be incredibly pleased with the prices."
'Devastating to Rural Hospitals'
Under the banner "narrow networks," critics are assailing commercial insurers who are selectively choosing their public exchange network providers and service areas. From coast-to-coast, providers left out of new exchange networks are claiming that their organizations, and in some cases their entire communities, are being redlined.
The critics are particularly concerned about provider networks that exclude hospitals in rural or economically disadvantaged areas, where transportation is a major healthcare access barrier.
"It's going to be devastating to rural hospitals," Dr. Earl Ferguson, a California cardiologist and medical director of the National Rural Accountable Care Organization, told me this week.
Ferguson said the financial sustainability of rural hospitals is at stake. "The bottom line is we need to do what's right. We've got to get on this, and we're got to show people what can be done."
A hospital CEO in rural New Hampshire told me last month that his service pricing was not a factor when the only player in the Granite State's public exchange decided to leave his facility out of its provider network. With costs outstripping revenue by 40 percent, he said any income from commercially insured patients is better than no income, adding the hospital would have accepted almost any offer to participate in the public exchange.
CMS Steps into the Fray
With the battleground set, CMS threw down the gauntlet last week and released proposed guidelines for the public exchanges for 2015.
"CMS is working to strengthen the network adequacy requirements that took effect for this year for the first time under the Affordable Care Act," a CMS spokesperson told me last week. "These are important provisions and include requirements that insurers have adequate provider networks for consumers, including access to essential community providers that serve low-income, medically underserved individuals."
In the struggle ahead, insurers will face a formidable adversary in the physician community, which is showing growing determination to fight over crucial points in the healthcare reform debate.
"Healthcare delivery has changed to a business," Ferguson told me. "We need to get back to being a profession."
The American Medical Association is backing an effort in Congress to push Medicare toward a value-based reimbursement system, but doctors are demanding a seat at the table when rules are set for transparency and assessing providers' performance.
Physicians appear energized over a deal announced in Congress last week to repeal Medicare's fee-for-service payment system and replace it with a value-based model. But they say it is critically important for them to be involved in the process of crafting the new reimbursement scheme.
"The consensus is the fee-for-service system is unsustainable," said Peter Roman, MD, specialist medical director for Lowell General Hospital PHO in Massachusetts and a private practice orthopedic surgeon. "We need to move to a system that rewards value, with value defined as quality divided by cost."
On Thursday, members of Congress announced a bipartisan deal to repeal and replace the Sustainable Growth Rate formula, Medicare's current payment system for physicians. The pact calls for a five-year period of stability with a 0.5 percent annual pay rate hike for doctors. In the last five years of the plan, a series of reforms would be launched to push Medicare physician reimbursement to a value-based model.
Part of the SGR repeal deal calls for streamlining existing Medicare quality assessment programs for doctors and increasing transparency of medical care costs through mechanisms such as the Physician Compare service on Medicare's website.
If the SGR repeal deal becomes law, Roman says the transition to a value-based reimbursement system will be successful only if physicians are included on the panels that would design quality assessment programs and transparency rules for physicians. "You have to have some doctors involved if you want doctors to own it," he said.
Ardis Dee Hoven, MD, president of the AMA, told HealthLeaders on Monday that the reimbursement plan outlined in the SGR repeal deal "is a much better system than what currently is in place." But she insisted that doctors must play a role in determining rules for quality assessment and transparency. "We are the ones driving the bus on these quality issues," she said. "Physicians have led the drive for more accurate reporting."
While wary of the future course of Medicare quality assessment and transparency regulations, Hoven said the SGR repeal deal provides the framework to make significant improvements. "As a starting point, it's a reasonable place to start," she said.
'You're Going to Shop Around'
Physicians are crucial to moving the US healthcare industry to a value-based model because they understand the complexities of the field, says Anders Gilberg, senior vice president of governmental affairs at the Medical Group Management Association in Englewood, CO. "The challenge here is there's no one-size-fits-all program," he said.
The proposed SGR repeal deal leaves room for doctors and other stakeholders to influence how the new value-based system would be designed, Gilberg said, calling the pact a foundation for change. "We don't know how this is going to play out," he said. "So much is going to be left to the secretary [of Health and Human Services] to flesh out. … What this does is create a set of criteria."
When new standards for physician assessment are set, the selection of indicators to be measured will be a key factor in creating a value-based system, Roman said. "The measures that work are the measures that look at quality and outcomes. A measure should be meaningful and the physician should have the ability to control it."
To quantify value and promote transparency, Roman says reformers should focus on costs rather than physician fees, noting the fees that doctors can charge for their professional services are largely mandated. "We're all on the same fee schedule, but there are huge variations of cost."
Effective healthcare value measurements assess physician performance in areas of their fields where outcomes and costs differ from doctor to doctor, Roman said. "A good measure would be one where there is a high degree of variation," he said.
In orthopedics there is a wide cost gap between doctors who prescribe professional rehab for their patients and doctors who send their patients home with rehab instructions. Hip replacement with rehab can cost twice as much as sending a patient home, Roman says.
With more and more patients facing high deductibles and other out-of-pocket expenses, making cost figures public would help patients find their most affordable treatment options, the orthopedic surgeon said. "If you have a high deductible, you're going to shop around," he said.
The ACO Model
Earl Ferguson, MD, a California cardiologist and author of the recently released book "American Healthcare Reform," said physician reimbursement reform is needed, but any new rules should avoid imposing more administrative demands on physicians. "We need to incentivize efficiency, productivity and quality, and decrease costs," he said. "But it's getting so complex, it's taking physicians away from actual medicine."
Ferguson, who is medical director of the National Rural Accountable Care Organization, said ACOs are showing great promise as a mechanism to move toward improved provider assessment and transparency. "We're going to be able to analyze data not only for providers but also for each physician," he said.
NRACO, which is promoting "a sustainable model for rural healthcare," is planning to use data collected at its ACOs to highlight the best practices at top-performing providers and to help providers that are underperforming. "I think the ACOs are the best model," Ferguson said of the move to a value-based healthcare system. "They're more of a fee-for-value system."
If the SGR repeal deal becomes law and a Medicare-led drive to create a value-based system is successful, the change would be revolutionary, Roman believes. "In a system where you're rewarded for quality and outcomes, the savings would be substantial," he said, contrasting a value-based reimbursement system with the fee-for-service model. "You eliminate the volume incentive."
Congress has forged a long-awaited deal to push Medicare's payment system for physicians to a value-based model. But lawmakers have only seven weeks to agree on how to pay for it.
Analysts, providers, and Medicare patient advocates are cautiously optimistic that the Sustainable Growth Rate formula repeal deal announced Thursday in Congress is a stride forward in the quest to move U.S. healthcare from a fee-for-service model to value-based payment of doctors.
Figuring out how to pay for it may be a bigger challenge.
Put in place a decade ago, the formula for reducing fee-for-service payments to physicians have never taken effect. Instead, Congress has made postponed it year after year.
If a comprehensive deal or new patch is not adopted by March 31, when the most recent "doc fix" patch Congress passed in December is set to expire, the reimbursement rate for doctors is set to be slashed nearly 25 percent.
The bipartisan SGR repeal and replacement deal announced Thursday calls for a five-year period of stability in the Medicare payment system, with a 0.5 percent annual pay rate hike for doctors. In the last five years of the plan, a series of reforms would be launched to push Medicare physician reimbursement to a value-based model.
"This is a classic case of a system put in place and it didn't work; but every year it was not addressed, it became more expensive," said NH Rep. Tom Sherman, (D-Rye), a gastroenterologist at Exeter Hospital who has been championing healthcare reform in the state Legislature.
"The longer Congress didn't deal with it, the less palatable it became for doctors and other providers. A 25-percent pay cut would put most physicians out of practice, out of business… No business can absorb that kind of pay cut."
Rich Scheinblum, VP of fiscal services at Monadnock Community Hospital in Peterborough, NH, says it's critically important to end the uncertainty linked to the cycle of annual SGR extensions and threats of reimbursement cuts.
"Assuming it goes through, at least it will provide some sense of stability over the next five years as our organization grapples with all the changes in healthcare delivery," Scheinblum said. "Hopefully, both parties will come together on a permanent fix before the legislation expires."
Transition to Value-Based System
In addition to providing a period of provider payment stability, the SGR repeal deal proposes a series of reforms intended to transform Medicare reimbursement to a value-based system.
Advocates for a value-based system say the fee-for-services model gives physicians an incentive to order unnecessary tests and procedures, which drives up costs. "Doctors were encouraged to fit in as many procedures as possible," said a legislative aide to US Rep. Allyson Schwartz, (D-PA), who introduced a bill with Congressman Joe Heck, (R-NV), that helped form the framework of the SGR repeal deal.
Schwartz's aide said the two-phase transition will allow time for innovation among accountable care organizations, and time for the best ACO models to become more apparent. "This gives us a test period to make sure those work," she said.
Assessing an Paying for Quality
Under the SGR repeal deal, the first major value-based reform would take effect in 2018, when a new quality assessment system is slated to start. According to a document detailing the deal, "In 2018, it establishes a streamlined and improved incentive payment program that will focus the fee-for-service system on providing value and quality."
While Sherman applauded streamlining Medicare's quality assessment efforts into one system, he said creating performance standards for doctors will only work if the "markers" are objective.
The NH gastroenterologist said some procedures in his field lend themselves to objective measurement but others will be harder to gauge for value. Sherman said the "withdrawal time" in a colonoscopy, when a doctor is most focused on finding abnormalities such as polyps, has been proven as an objective measure of physician performance. Withdrawal times faster than 6 minutes are considered at risk of compromising accuracy, he said. "If you go too fast, you're going to miss things," Sherman said.
But treatment of gastrointestinal conditions such as irritable bowel syndrome is hard to quantify, he said. "How do you attach objective measures to such a complex set of symptoms?" the NH physician-lawmaker asked.
There appears to be widespread agreement that doctors should play a role in setting the rules for the new quality assessment system and other reforms needed to achieve value-based Medicare reimbursement.
"It brings physicians into developing these quality measures," Schwartz's aide said the SGR repeal deal.
Sherman says, "There needs to be physician leadership in developing that value-based format," he said. "If it's handed down without physician input, it's not going to have physicians on board from the get-go."
"We cannot afford, neither for ourselves or our patients, not to be part of the process," Sherman said of doctors. "I want it to stay an attractive profession."
March 31 Deadline Looms
Lawmakers face a tight deadline to replace SGR before its three-month patch expires, adding that reaching a comprehensive deal will get harder as Election Day nears.
"They need to move or they will face another short-term patch," said Nicholas Manetto, a director and strategic communications specialist at Washington DC-based FaegreBD Consulting. "The more time that goes on, the less likely this is to get done. The next step is to get this expedited, especially the offsets."
The latest estimate from the House committees places the cost of implementing the SGR repeal deal at $128 billion, according to Schwartz's legislative aid. She says that figure does not include so-called extenders, a set of Medicare policies including therapy services and rural hospitals.
With the extenders thrown in the mix, the SGR repeal deal would cost billions more, Manetto said. "I think the hope is they're going to try to get to a $150 billion mark," he said of a comprehensive doc fix deal.
Noting that early government data on certified accountable care organizations shows "some of the ACOs have returned very substantial savings," Alex Hunter, managing director of Chicago-based Navigant Consulting's healthcare practice, is optimistic that lawmakers and the healthcare industry can push the SGR repeal deal into law.
"This is the right time for collaboration," Hunter said. "I'm beginning to hear more and more from healthcare executives and doctors. They believe the opportunities to make an impact are substantial. More and more people are up to the challenge."
Joe Baker, president of the New York City-based Medicare Rights Center, likes the SGR repeal deal, but is more pessimistic about its prospects.
"We are encouraged that Congress appears committed to advancing a Medicare payment system centered on high-value care, as opposed to high-volume care," Baker said Friday in a prepared statement.
"Yet, we cannot evaluate the merits of this agreement in a vacuum. Congress has yet to make critical decisions about extenders policies of critical importance to people with Medicare and about how the SGR package will be paid for."
Seeking to avert a cut in Medicare's physician payment rate set for April 1, lawmakers in the House and Senate have embraced a pact that would replace the sustainable growth rate formula with a payment system that includes a small rate increase for doctors.
Sen. Max Baucus, (D-MT)
After a decade of squabbling and annual renewals, the federal Medicare guidelines for physician reimbursement known as the Sustainable Growth Rate appear destined for repeal and replacement.
A bipartisan deal announced Thursday in both houses of Congress includes an annual 0.5 percent reimbursement rate increase for doctors over five years, but the pact does not spell out a mechanism to pay for the new reimbursement system. In a joint statement from the Senate Finance Committee, House Ways and Means Committee, and House Energy and Commerce Committee, lawmakers urged passage of the SGR repeal deal.
"Congress has spent a decade lurching from one 'doc fix' to the next, creating a new, unnecessary threat to seniors' care each time. Enough is enough," said Sen. Max Baucus, (D-MT), chairman of the Senate Finance Committee. "This proposal would bring that cycle to an end and fix the broken system. Our bill makes Medicare's physician payments more modern and efficient, and it will protect seniors' access to their doctors. This bill is the product of years of hard work, and I hope Congress comes together to pass it."
Sen. Orrin Hatch, (R-UT), ranking member of the Senate panel, said replacing SGR is a necessary step in the push to replace the fee-for-service model in U.S. health care to a value-based system.
"For far too long, the doc fix has been annual ritual for Congress. It's time to put that ritual to an end," Hatch said. "I'm proud of this legislation. It not only fully repeals the broken sustainable growth rate formula, but puts in place real reforms that move Medicare away from a fee-for-service model that promotes greater spending to one that encourages better results."
The joint statement from Congress listed the following highlights of the SGR repeal and replacement deal:
Repeal the SGR and end the annual threat to seniors' care, while instituting a 0.5 percent payment update for five years.
Improve the fee-for-service system by streamlining Medicare's existing web of quality programs into one value-based performance program. It increases payment accuracy and encourages physicians to adopt proven practices.
Incentivize movement to alternative payment models to encourage doctors and providers to focus more on coordination and prevention to improve quality and reduce costs.
Make Medicare more transparent by giving patients more access to information and supplying doctors with data they can use to improve care.
'The SGR Problem'
Ardis Dee Hoven, MD, president of the American Medical Association, praised the deal in a prepared statement Thursday:
"The American Medical Association congratulates House and Senate negotiators for taking this critical step toward reforming the nation's Medicare program," Dee Hoven said. "Now Congress is closer than it has ever been to enacting fiscally-prudent legislation that would repeal Medicare's fatally flawed sustainable growth rate (SGR) formula."
Ardis Dee Hoven, MD, President of the American Medical Association
Hoven said reaching a long-term solution for Medicare reimbursement for doctors is critically important for providers and their patients. "Congress has been debating the shortcoming of the SGR policy for more than decade. Continuing the cycle of short-term patches by merely addressing the 2014 cut that is imminent on April 1 without solving the underlying problem would be fiscally irresponsible and further undermine the Medicare program," she said. "It is time for action to repeal the SGR and establish a transition to a new more stable Medicare physician payment policy to better serve America's senior citizens."
In a "Summary of the SGR problem," the lawmakers who crafted the deal offered a scathing assessment of the existing system in their joint statement:
"The Sustainable Growth Rate formula—the mechanism that ties physician payment updates to the relationship between overall fee schedule spending and growth in gross domestic product (GDP)—is fundamentally broken. Although originally introduced as a mechanism to contain the growth in spending on physician services, a decade of short-term 'patches' has frustrated providers, threatened access for beneficiaries, and created a budgetary dilemma from which Congress has struggled to emerge. Over the last decade, Congress has spent nearly $150 billion on short-term SGR overrides to prevent pending cuts."
Rep. Allyson Schwartz, (D-PA), a member of the Ways and Means Committee, introduced legislation a year ago that was incorporated into the SGR repeal deal. She urged Congress to approve the pact before SGR's latest extension expires at the end of March. "While we still have to grapple with the challenge of offsets, it is imperative that Congress acts to make sure seniors have access to the care they need," she said in a prepared statement. "Time is running out and Congress cannot afford to let this opportunity slip away."
New Payment System
A document prepared by the three congressional committees dated Feb. 6 provides details of the SGR repeal deal. A key provision of the pact is a set of guidelines for transitioning to the new payment system for physicians and other health care professionals, starting with the 0.5 percent annual pay hikes.
The deal "provides stable updates for five years and ensures no changes are made to the current payment system for four years," the Feb. 6 document states. "In 2018, it establishes a streamlined and improved incentive payment program that will focus the fee-for-service system on providing value and quality."
After the annual 0.5 percent rate increases from 2014 to 2018, "the rates in 2018 will be maintained through 2023, while providing professionals with the opportunity to receive additional payment adjustments," the Feb. 6 document states.
Under the deal, physicians who embrace alternative pay models would receive higher compensation when the new Medicare payment system is fully implemented. "In 2024 and subsequent years, professionals participating in [alternative payment models] that meet certain criteria would receive annual updates of one percent, while all other professionals would receive annual updates of 0.5 percent."
Alex Hunter, managing director of Chicago-based Navigant Consulting's healthcare practice, said the SGR repeal deal could be a long-term solution to the doc fix dilemma. "This will avert what was viewed by physician organizations as a 'fiscal cliff' for professional reimbursement—given that prior to the repeal of SGR, physicians were facing a possible reduction by 28 percent. Also, the proposed deal will provide a more certain financial environment in which physicians can function and plan for the future," Hunter said.
He said the new Medicare payment system could serve as an engine of change and serve the interests of patients.
"The legislation is viewed by Congress as transitional in nature, with the end game being to develop an approach that integrates value-based programs into the Medicare physician payment system," Hunter said. "During this transition period, physicians will likely continue to seek increased collaboration and coordination among themselves and local health systems. For Medicare patients, this is also good news, as physicians will likely continue to provide access to care without concern for whether their physician can afford to provide services to them."
Federal regulators overseeing public health insurance exchanges are taking a fresh look at adequacy standards for so-called narrow networks, which insurers say are an essential tool for controlling healthcare costs.
In proposed guidelines released Tuesday, CMS is seeking to pry open narrow networks with stricter standards for network adequacy and inclusion of more providers who serve low-income and medically underserved patients.
"CMS is working to strengthen the network adequacy requirements that took effect for this year for the first time under the Affordable Care Act," a CMS spokesperson told HealthLeaders Media on Wednesday. "These are important provisions and include requirements that insurers have adequate provider networks for consumers, including access to essential community providers that serve low-income, medically underserved individuals."
Part of the CMS guidelines released Tuesday call for a more stringent review of applications to offer health insurance policies on the public exchanges: "CMS will review the collected provider list to evaluate provider networks using a 'reasonable access' standard, and will identify networks that fail to provide access without unreasonable delay as required. … To determine whether an issuer meets the 'reasonable access' standard, CMS will focus most closely on those areas which have historically raised network adequacy concerns."
The focus points for the proposed 2015 network adequacy review process include hospital systems, mental health providers, oncology providers and primary care physicians.
The proposed guidelines also seek to increase the percentage of essential community providers in an exchange network's service area from 20 percent to 30 percent.
Insurers say they need to craft narrow networks to contain costs and offer health plans that public exchange policy holders can afford. Anthem Blue Cross Blue Shield of NH officials have said they designed a narrow network for the Granite State's federally administered exchange because they faced premium increases forecast as high as 40 percent.
"It is important to ensure patients can continue to benefit from the high-value provider networks health plans have established, which are helping to improve quality and mitigate cost increases for consumers as the new health care reforms are taking effect," said Robert Zirkelbach, vice president of strategic communications for America's Health Insurance Plans.
But providers who have been frozen out of narrow networks say the proposed new guidelines are necessary to avoid certifying networks that are at odds with the spirit of PPACA-driven health care reforms.
"That's exactly what I have been talking about," says Peter Wright, president and CEO of Valley Regional Hospital in Claremont, NH. "There's the narrow network that excludes a whole community, and I have a problem with that."
Anthem's network in New Hampshire's exchange excludes 10 of the state's 26 acute-care hospitals, including VRH. The hospital serves Sullivan County, which has no public transportation, an economically disadvantaged population, and poor healthcare outcomes compared to other counties in the Granite State. "How can you not look at that as classism?" Wright said.
Many of VRH's patients face not only changing primary care doctors but also drives as long as 90 miles for services. "The narrow network that was implemented here excluded Sullivan County and I want to see that changed," Wright said.
Wright says another change he would like to see is adoption of an "any willing provider" feature in the public exchanges similar to a proposal before lawmakers in the NH Statehouse. "Anybody who is willing to accept the fee schedule can be a part of that network," he said.
