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Major Medicare Payment Overhaul on Horizon

Physicians and policymakers generally agreed during a healthcare seminar that permanent reform of the Medicare physician payment system and a shift to alternative payment models is necessary for the health of the nation.

Services vs. Quality of Care

“Doctors are angry with the way they have been treated by the federal government” and its bureaucracy, said Rep. Michael Burgess (R-TX), a doctor and the vice chairman of the House Energy and Commerce Health Subcommittee, at a Brookings Institution seminar “Medicare Physician Payment Reform: Next Steps.”

The Medicare Sustainable Growth Rate, commonly referred to as SGR, was borne of the 1997 Balanced Budget Act as a formula to keep payment rates for Medicare physicians in line with economic growth, but after about five years it became too restrictive.

Applying the formula today calls for about a 25 percent cut to payment to Medicare physicians, and to prevent that Congress for years has been passing short-term patches so that physicians won’t be subject to it.

There are a few bills currently floating around Congress that would abolish the SGR but allow some flexibility in allowing physicians to continue with the old-school fee-for-service model where a doctor performs a service and Medicare pays the doctor. 

Critics say that model encourages volume of service over quality of care, spurring the move to offer alternative ways of payment.

“The whole idea that the system will collapse if you move away from fee for service is complete bunk,” said Mark Wagar, president of Heritage Medical Systems, who also cautioned that unless incentives are provided for physicians to move toward other models, “you won’t get the change you want.”

Burgess argued that flexibility is needed because if you tell some doctors they can’t bill the way they have always done, they will leave the medical field further exacerbating the shortage of physicians.

Darshak Sanghavi of the Brookings Institution said doctors want to “do the right thing, they just don’t know how to get there.”

Devising Alternative Solutions

To that end, the think tank is embarking on several initiatives to better educate clinicians, pharmacists, nurses and doctors about health policy issues. It has partnered with the Khan Academy to develop an online health policy curriculum scheduled to launch in January.

Brookings also plans to produce case studies for clinicians on problems such as heart failure and fertility issues in an effort to offer comprehensible situations and solutions to clinicians.

Heart failure is a leading cause of hospitalization today, Sanghavi said, and under the fee-for-services model, the more those patients with heart ailments come into the office, the more the doctors get paid. That might not be the best model, he said. “Do we set up care plans for when they go home?” he asked.

President and CEO Harold Miller with the Center for Healthcare Quality and Payment Reform said the fee-for-service system is “standing in the way… Fee for service doesn’t pay for a lot of the things that physicians need to do that are better for patients. …It imposes penalties on quality and efficiency.”

Some alternative payment models are based on accountability and pay reviewing the condition of a patient, not procedure.

John Sprandio of Consultants in Medical Oncology and Hematology said he doesn’t fear the different contractual models and “would embrace them.”

Several speakers reiterated that the smallest practices should be able to expand to alternative payment models, but need some assistance and incentives.

Anshu Choudhri, the director of strategic priorities at BlueCross BlueShield Association, said an alternative model program at BCBS in Massachusetts was started as optional but today 80% of the providers there are in alternative models.

Meanwhile, lawmakers are closer than ever to permanently repealing the SGR with several key committees enjoying bipartisan support on the issue and having a common goal of offering legislation on it before the end of the year.

They are fueled by a newish Congressional Budget Office report that puts a $140 billion price tag on axing the SGR – the lowest cost predicted in recent years.

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