As the Obama administration begins its second term, a great deal of attention is being paid to the advance of its healthcare reform agenda. Long overdue for reform is the sustainable growth rate (SGR) formula—an ill-fated attempt to provide predictable control for federal spending on Medicare by providing yearly updates (i.e. reductions) to Medicare’s physician reimbursement rates.
By adjusting the payment rates, the SGR was supposed to help control the cost of healthcare by linking it more closely with national growth and changes in the Medicare-eligible population. With each passing year, however, bipartisan consensus has grown stronger, the message being that a straight, fee-for-service system that is updated annually based on an expenditure target cannot substitute for fundamental delivery system reforms.
Congress has acted to override the SGR’s implementation every year since 2003, with the latest round being a potential 27% gutting of Medicare reimbursement rates. This cycle is not only tiresome, but threatens a massive disruption to physician practices and to seniors’ access to the Medicare program.
“The SGR, while well-intentioned, is flawed, and Congress can provide its temporary override for only so long, while Medicare spending continues to grow,” says Ryan Genzink, PA-C, an SHM Public Policy Committee member and a physician assistant with IPC: The Hospitalist Co. in Grand Rapids, Mich.
Repeal and Reform
Although various SGR repeal bills have been introduced over the years, only one—the Medicare Physician Payment Innovation Act of 2012 (H.R. 5707)—supplements repeal with a realistic plan to move away from the current fee-for-service payment system (and its inherent inefficiencies) toward more cost-effective reimbursement models that are designed to promote quality and value through coordinated patient care.
This bipartisan bill, introduced by U.S. Reps. Allyson Schwartz (D-Pa.) and Joe Heck, DO (R-Nev.), would repeal the SGR, stabilize payments at current rates for 2013, replace scheduled reductions with positive and predictable updates from 2014 to 2017, and set an aggressive timetable for testing and evaluating new payment systems focused on improving quality and reducing costs (see “Specific Components of the Schwartz-Heck Proposal,” left). The bill is expected to be reintroduced in 2013.
“SHM agrees that it is time finally to eliminate the SGR and move away from the prevailing fee-for-service payment system, which rewards physicians for simply providing more services, to one that provides incentives to deliver higher-quality, cost-effective care to our nation’s seniors,” wrote SHM President Shaun Frost, MD, SFHM, in a letter of support last year to Schwartz and Heck, commending them for introducing their bill.
“By providing a menu of options for physician participation, including an alternative, value-driven fee-for-service system for physicians who are not able to participate in one of the new payment and delivery models, the legislation does not force all providers into a ‘one size fits all’ solution, allowing for broader support, innovation, and flexibility,” Dr. Frost said.
Advancing New Reimbursement Models
The Schwartz-Heck bill “gives a timeline for CMS to test and adopt different reimbursement models, which presents advantageous options for hospitalists,” says Lauren Doctoroff, MD, an SHM Public Policy Committee member, hospitalist, and medical director of the post-discharge clinic at Beth Israel Deaconess Medical Center in Boston. “Hospitalists already focus on providing higher-quality, lower-cost care to hospitalized patients in their daily practice. We build effective care transitions to the outpatient and extended care settings. Our strengths are perfectly aligned to help these new, value-based payment models succeed.”
In fact, Dr. Doctoroff notes, Beth Israel is a participant in CMS’ Medicare Pioneer Accountable Care Organization project as well as Massachusetts Blue Cross Blue Shield’s Alternative Quality Contract, both of which use a risk-sharing global payment model in which the hospital and its physician network agree to provide for the healthcare needs of a defined population for a pre-arranged reimbursement amount.
