Analyzing the bipartisan plan to repeal the SGR

Recently, the chairs and ranking members of the Senate Finance and House Ways and Means committees released a bipartisan, bicameral plan to repeal the Medicare SGR and reform physician payments.  And this time, it looks like the effort could actually succeed: never before has there been agreement between the House and Senate, Republicans and Democrats, on a plan to repeal the SGR, never mind on what they would replace it with.  Their goal is to get the bill enacted and signed into law before the end of this year, and before the scheduled SGR cut of almost 25% would go into effect on January 1.

There are still a lot of details to be worked out and questions to be answered — including the toughest one, which is how they propose to pay for it — but physicians should start thinking now, about how the proposal will change the way that they are paid, and the changes that they will need to make to be ready.  Because this proposal creates a very ambitious timetable and powerful incentives that will link escalating amounts of Medicare payments to physicians’ performance on quality, efficiency and effectiveness measures — starting with their performance in calendar year 2016.  It also creates strong incentives for physicians to convert their practices into patient-centered medical homes, and even bigger incentives to enter into risk-sharing practice arrangements such as accountable care organizations.

Will they be ready?  Will you be ready?

But before physicians have another  “why are they doing this to us” reaction of exasperation, keep in mind that there are many good things in this proposal — a lot of them, and it is not just that it gets rid of the SGR.  So many good things that ACP issued a very positive statement about it yesterday, even as we will work to improve it.

Here are the top things you need to know about it:

1.  It repeals the SGR, permanently, and with it, prevents the almost 25% scheduled cut on January 1.

2.  Although annual baseline annual FFS updates for the next ten years would be flat (zero percent), there will be opportunities for physicians to earn substantially greater payments for (a) participating in a new budget neutral incentive payment program (described below) or (b) participating in an alternative payment model that has financial risk.  In addition, as described below, Medicare would begin paying for complex chronic care management services in PCMHs or PCMH-neighborhood (specialty) practices.

3.  Starting in 2017, it replaces the existing Medicare PQRS, value-based modifier, and meaningful use reporting and incentive programs with a single budget neutral incentive payment program.  The existing penalties for the current reporting programs would be sunsetted, which would restore $10 billion to the physician payment pool over ten years.  (These are the existing penalties that it gets rid of: 2 percent reduction for failure to successfully report on PQRS; budget neutral adjustment based on quality and resource use (VBM), and failure to demonstrate meaningful use — 3 percent penalty in 2016 that can increase up to five percent in 2019).

4.  The new value based payment program (VBP) that replaces these programs would assess eligible professionals’ performance in the following categories: quality, resource use, clinical performance improvement activities, and EHR meaningful use. Professionals would be assessed and receive payment adjustments based on a composite score that encompasses all of the applicable composite categories and measures.

A.  The clinical practice improvement activities category creates strong incentives for PCMHs: “Because many of [the listed] criteria are components of medical homes, a primary care or specialist physician practicing in a certified medical home would receive the highest possible score for this category.  A professional participating in any Medicare alternative payment model would automatically receive half of the highest possible score and could achieve the higher possible score by engaging in other clinical performance activities.”

B.  The VBP incentive program is budget neutral, meaning that the incentive payments to physicians who receive higher composite scores would be offset by lower payments to those with lower composite scores.  However, the proposal would allocate increasing amounts of money to the VBP incentive payments; in 2017, the funding would be equal to 8 percent of the total estimated spending for eligible professionals (the amount tied to current reporting incentive programs); funding would increase to 9 percent in 2018, 10 percent in 2019, and starting in 2020, the Secretary would have the authority to increase, but not lower, the funding pool.  What this means is that each year, from 2017 to 2019, an increasing portion of Medicare FFS payments to physicians will be linked to performance in the new incentive program, but the available total amount of incentive payments to physicians and other health professionals will also increase.

5.  Physicians that participate in “advanced” alternative payment models that involve financial risk and a quality measurement component would receive a 5 percent bonus payment each year from 2016-21.

6.  The proposal establishes payment for complex chronic care management services, beginning in 2015, for eligible professionals in patient-centered medical home or comparable specialty practice certified by an organization recognized by the Secretary.

7.  The proposal mandates a GAO study of the RUC, allows HHS to survey physician directly to improve the accuracy of relative values, and sets an annual target to reduce misvalued RVUs of one percent of the estimated amount of expenditures in the physician fee schedule in 2016, 2017 and 2018.  If the target is met, the amount would be redistributed back within the physician Medicare fee schedule (as ACP urged).  If it is not met, the fee schedule payments would be reduced by the difference between the target and the amount of misvalued services identified that year, which allows approximately $3 billion in reduced expenditures to remain in the physician payment system.

Over the past year, ACP worked diligently to ensure that any plan to repeal the SGR also results in new payment system that also crea1tes opportunities to better recognize the value of care provided by internal medicine specialists.  This new proposal goes a long way to achieving those objectives: by rewarding internists who in are in patient-centered medical homes with higher pay for performance bonuses and payment for chronic care management; by eliminating the existing penalties and payment reductions from the meaningful use, PQRS and the Medicare value modifier, replacing them with a single and more harmonized reporting and incentive program; by reducing over-priced relative value units and redistributing the savings back to physicians; and by creating very substantial incentive payments for physicians in ACOs and other risk-sharing arrangements.

By doing so, internists who are willing and able to report on the quality and effectiveness of care they provide, and/or are willing and able to become a PCMH, ACO, or other alternative model, will have multiple pathways and opportunities to earn higher pay that is aligned with the value of care that they provide.

But will they be ready? Will you be ready?

Bob Doherty is senior vice-president, governmental affairs and public policy, American College of Physicians and blogs at The ACP Advocate Blog.

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  • southerndoc1

    Of course, just paying internists more for their cognitive work would be way too simple. By supporting this Rube Goldberg-like scheme for “payment reform,” the ACP can further their goal of permanently killing off solo and small practices.
    Everyone who thinks the way we pay physicians for their work is just too straightforward and uncomplicated, go stand with Mr. Doherty.

    • Margalit Gur-Arie

      Exactly! And it seems that Mr. Doherty left out a couple other points that may be pertinent, such as real time surveillance of physician orders and denial of payment if they don’t “consult” CDS before ordering, and the simple fact that this is a zero sum game, which means that in order to get rewards, you not only need to be “good”, but others need to fail.
      More here

      • Dr. Drake Ramoray

        Excellent link. It made me sick to my stomach. I for one did not sign up for the described surveillance and mandatory treatment guidelines. Guess who will take it in the wallet when when something is missed while following these guidelines. The doc of course. This doesn’t even begin to touch what a huge hit this will be to rural medicine and the poor as docs jockey for the nice suburb affluent areas and healthy patients.

        I’m on the five year plan to have half my revenue come from clinical research. At that point I can just ignore any of the penalties as Medicare/Medicaid will make up very little of my practice. I imagine at some point the private payers will adopt a similar system at which point I will have to continue expanding my research, move to a tertiary center to teach, or find something else to do. By then my kids will be old enough that my wife will be planning on going back to work.

        It will be interesting to see how many physicians retire early. Interesting in a sad sort of way. Add me to the list of docs that discourages their children from going into medicine.

        And before anyone says so, it’s not about the money. I refuse to work for some faceless buerecrat who makes rules on what I can do and why and then grades on how well my patients do when doing what Im told.

        • Margalit Gur-Arie

          Thanks, Dr. Joey. Today for the first time in my liberal life, I actually considered finding a local direct pay practice for my family. As I searched on the Internet I found very few here, but one of those completely blew me off, because it seems that this tiny concierge practice is owned by the very large local academic center. So if these guys are starting to test the waters, I won’t be surprised to see hundreds of these sprouting up, alongside the factory ones, in the next couple of years.

    • Mike

      I think the only solo and small practices that are going to survive are those where the physicians refuse to deal with Medicare or Medicaid at all.

      • Dr. Drake Ramoray

        Correct. Practices will continue to limit Medicare/Medicaid or as the population ages and Obamacare expands Medicaid they will stop seeing them altogether. Of course once a critical mass of patients are on Medicare/Medicaid then the government will work with the states (perhaps by withholding Medicaid funding) to make it a requirement to see Medicare/Medicaid patients as a condition of licensure.

        • Mike

          I have already seen proposals to force physicians to take on Medicare/Medicaid patients in Virginia. What a disaster. If seeing a patient barely covers your electricity bill and malpractice payments, how many well-educated professionals are going to put up with that?

          State-imposed price controls have never led to anything but a shortage of the given commodity, ever. And to think that many of us laughed at Venezuela’s chronic toilet paper shortage thanks to no-one willing to produce & sell it for the low price the State has set for it.

    • James_04

      The down side to wanting government money is that the government gets to set the rules for giving you that money. The only way out is to stop taking government money. Obviously, Medicare and Medicaid are lucrative enough that most doctors and medical facilities don’t want to give up that income stream, so they’re pretty much beholden to jump through whatever hoops the government wants to make them jump through to keep getting it.

  • karen3

    As a patient, I stopped where the chronic care coordination got done by the primary. Any fool knows that if you have a serious chronic illness, the coordination gets done by the specialist responsible for the highest problem level dx. My primary has not a clue and no basis for a clue in making management decisions on my illness. It is rare and he doesn’t have 3-400 hours to study it. And even if he did, he still would behind my specialist. Whom is 300 miles away from my home – because its a rare disease. It sure would be nice if someone asked the patients about what they want. …..

    no doubt the result of this will be my primary dumping me.

  • guest

    You can have a comprehensive understanding of these complex payment schemes, or you can have a comprehensive understanding of the illnesses your patients have, and how to treat them. But not both, especially in a system that still does not pay for the time it takes to do cognitive work.

    Take your pick.

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