Early Signs of Progress on A Permanent Fix for Physician Fee Schedule [02-06-13]

Filed under: Industry Updates — Editor @ 1:52 pm

House Speaker Boehner Presides Over Opening Session Of CongressThe very early days of the 113th Congress have witnessed several developments which may augur that Congress will finally make a concerted effort to enact a permanent solution to the nearly decade-long problems created by the Sustainable Growth Rate (“SGR”) formula for the physician fee schedule. Under current law, providers reimbursed under the fee schedule face a nearly 30 percent reduction in payments on January 1, 2014 unless Congress takes action to prevent it. The recent developments of significance are described below.

The CBO Has Reduced the Cost of Repealing the SGR
For many years, efforts to fix the physician fee schedule have been stymied by the very substantial costs associated with repealing the SGR. When Congress passed the American Taxpayers Relief Act at the beginning of January, it was operating with an estimate by the Congressional Budget Office (“CBO”) that a permanent fix for the SGR would cost $245 billion over ten years. This means that Congress would have to find $245 billion in savings and/or new revenues to “pay for” the cost of repealing the provision. In the current budget atmospherics, securing such a “pay for” would be nearly impossible.

On February 4, 2013, the CBO released its Budget and Economic Outlook 2013-2023 in which it provided a dramatically reduced estimate of the cost of permanently repealing the SGR from $245 billion to $138 billion over the next decade. CBO explained the basis for this enormous revision as follows: “The estimated cost of holding payment rates constant is much lower relative to this baseline than was the case under previous CBO baselines, primarily because of lower spending for physicians’ services in recent years. Under the sustainable growth rate, future payment updates depend on the difference between spending in prior years and spending targets established in law. Actual spending has been lower than projected—and lower than the spending targets inherent in the sustainable growth rate—for the past three years. Because actual spending has been lower than spending targets, CBO now estimates that payment rates will increase beginning in 2015. Those higher payment rates narrow the difference between growth under current law and a freeze at current levels, thereby reducing the estimated cost of restricting the payment rates.”

Make no mistake that it will still be very difficult for Congress to find $138 billion in spending reductions and/or revenue increases to pay for the SGR fix, especially when Medicare seems to be in the crosshairs for additional reductions to reduce the federal deficit. It is, however, far easier to achieve $138 billion in “pay fors” than $245 billion.

House Ways and Means Republicans Float SGR Fix Proposal
On January 15th, Rep. Kevin Brady (R-TX), the new Chairman of the Health Subcommittee of the House Ways and Means Committee issued a statement stating his intention to draft legislation which would repeal the SGR. To this end, the Republicans on the House Ways and Means Committee have begun circulating an outline of a proposal to permanently repeal the SGR and replace it with a performance based payment system. The reform proposal envisions three phases:

PHASE 1: The plan calls for an unspecified number of years of stable payment amounts and updates under the fee schedule to provide “physicians time to transition to, and play a prominent role in, reforming the Medicare physician payment system”.

PHASE 2: According to the outline, “after a period of stability, physician fee schedule payment updates would be based on performance on meaningful, physician-endorsed measures of care quality and participation in clinical improvement activities (e.g. reporting clinical data to a registry or employing shared-decision making tools).”

PHASE 3: The proposal further provides that “after several years of quality-based payments, physicians who perform well on quality measurement would be afforded the opportunity to earn additional payments based on the efficiency of the care they deliver”. In addition, “physicians who are participating in alternative reimbursement models under Medicare may opt out of this modified FFS payment system”. Congressional staff acknowledge that the proposal lacks many key details and that it does not explain how it will be paid for. Nevertheless, it is a starting point and the Committee is looking for feedback and recommendations on the outline. The Subcommittee on Health will likely hold hearings on the proposal relatively soon.

Introduction of the “Medicare Physician Payment Innovation Act of 2013”
On February 6th, Rep. Allyson Schwartz (D-PA) and Rep. Joe Heck (R-PA) will introduce the “Medicare Physician Payment Innovation Act of 2013”. This bill “fully repeals the SGR, stabilizes current payment rates to ensure beneficiary access in the near-term, eliminates scheduled SGR cuts, creates positive incentives for undervalued primary, preventive and coordinated care services, and sets out a clear path toward comprehensive payment reform.” Key elements of the legislation include the following:

* The bill would repeal the Sustainable Growth Rate methodology permanently;
* 2013 payment levels would be maintained through December 31, 2014 “in order to avert cuts to physician reimbursements scheduled for January 1, 2014”. Thereafter, a 5-year transition period would replace the scheduled cuts “with positive and predictable updates to all physicians, while gradually modifying the current physician payment formula, before new payment systems are fully implemented in 2019”.
* The proposal would implement temporary, four year differential updates to payments for physician services. For years 2015 to 2018, “the bill provides an annual increase of 2.5 percent for primary care, preventive and care coordination services provided by clinicians for whom 60 percent of their Medicare allowable charges are for those same services.”
* The legislation would provide positive annual updates of .5 percent for all other physician services for each year of the four years.
* The MPPIA would require CMS to aggressively test and evaluate new payment and delivery models. The Government Accountability Office would also be directed to conduct a meta-analysis of CMS’ evaluations and report to Congress by April 1, 2017.
* The bill provides that by October 1, 2017, CMS “must issue a menu of health care delivery and payment model options based on an analysis of its relevant evaluations and input from the provider community.”
* CMS must also provide a modified fee-for service option for physicians who don’t participate in one of approaches described above.
* In order to minimize disruption in the transition to new delivery models in 2019, fee-for-service payments will be continued at 2018 levels for one year.
* Beginning January 1, 2019, physicians practicing within a CMS-approved health care delivery model will continue to receive stable reimbursements consistent with their specified payment system, with opportunities to earn higher payments for achieving gains in quality, effectiveness and cost of patient-centered care.
* Beginning in 2024, CMS is to update payments under coordinated care models between one percent and the Medicare Economic Index annually “based on beneficiary access to health care services, provider participation in CMMI models and the overall rate of growth in spending in the Medicare program—to include both Part A and B combined.” Payments in the straight fee ­for-service model “will be permanently frozen at 2023 levels.”

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