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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