Congress has forged a long-awaited deal to push Medicare's payment system for physicians to a value-based model. But lawmakers have only seven weeks to agree on how to pay for it.
Analysts, providers, and Medicare patient advocates are cautiously optimistic that the Sustainable Growth Rate formula repeal deal announced Thursday in Congress is a stride forward in the quest to move U.S. healthcare from a fee-for-service model to value-based payment of doctors.
Figuring out how to pay for it may be a bigger challenge.
Put in place a decade ago, the formula for reducing fee-for-service payments to physicians have never taken effect. Instead, Congress has made postponed it year after year.
If a comprehensive deal or new patch is not adopted by March 31, when the most recent "doc fix" patch Congress passed in December is set to expire, the reimbursement rate for doctors is set to be slashed nearly 25 percent.
The bipartisan SGR repeal and replacement deal announced Thursday calls for a five-year period of stability in the Medicare payment system, with a 0.5 percent annual pay rate hike for doctors. In the last five years of the plan, a series of reforms would be launched to push Medicare physician reimbursement to a value-based model.
"This is a classic case of a system put in place and it didn't work; but every year it was not addressed, it became more expensive," said NH Rep. Tom Sherman, (D-Rye), a gastroenterologist at Exeter Hospital who has been championing healthcare reform in the state Legislature.
"The longer Congress didn't deal with it, the less palatable it became for doctors and other providers. A 25-percent pay cut would put most physicians out of practice, out of business… No business can absorb that kind of pay cut."
Rich Scheinblum, VP of fiscal services at Monadnock Community Hospital in Peterborough, NH, says it's critically important to end the uncertainty linked to the cycle of annual SGR extensions and threats of reimbursement cuts.
"Assuming it goes through, at least it will provide some sense of stability over the next five years as our organization grapples with all the changes in healthcare delivery," Scheinblum said. "Hopefully, both parties will come together on a permanent fix before the legislation expires."
Transition to Value-Based System
In addition to providing a period of provider payment stability, the SGR repeal deal proposes a series of reforms intended to transform Medicare reimbursement to a value-based system.
Advocates for a value-based system say the fee-for-services model gives physicians an incentive to order unnecessary tests and procedures, which drives up costs. "Doctors were encouraged to fit in as many procedures as possible," said a legislative aide to US Rep. Allyson Schwartz, (D-PA), who introduced a bill with Congressman Joe Heck, (R-NV), that helped form the framework of the SGR repeal deal.
Schwartz's aide said the two-phase transition will allow time for innovation among accountable care organizations, and time for the best ACO models to become more apparent. "This gives us a test period to make sure those work," she said.
Assessing an Paying for Quality
Under the SGR repeal deal, the first major value-based reform would take effect in 2018, when a new quality assessment system is slated to start. According to a document detailing the deal, "In 2018, it establishes a streamlined and improved incentive payment program that will focus the fee-for-service system on providing value and quality."
While Sherman applauded streamlining Medicare's quality assessment efforts into one system, he said creating performance standards for doctors will only work if the "markers" are objective.
The NH gastroenterologist said some procedures in his field lend themselves to objective measurement but others will be harder to gauge for value. Sherman said the "withdrawal time" in a colonoscopy, when a doctor is most focused on finding abnormalities such as polyps, has been proven as an objective measure of physician performance. Withdrawal times faster than 6 minutes are considered at risk of compromising accuracy, he said. "If you go too fast, you're going to miss things," Sherman said.
But treatment of gastrointestinal conditions such as irritable bowel syndrome is hard to quantify, he said. "How do you attach objective measures to such a complex set of symptoms?" the NH physician-lawmaker asked.
There appears to be widespread agreement that doctors should play a role in setting the rules for the new quality assessment system and other reforms needed to achieve value-based Medicare reimbursement.
"It brings physicians into developing these quality measures," Schwartz's aide said the SGR repeal deal.
Sherman says, "There needs to be physician leadership in developing that value-based format," he said. "If it's handed down without physician input, it's not going to have physicians on board from the get-go."
"We cannot afford, neither for ourselves or our patients, not to be part of the process," Sherman said of doctors. "I want it to stay an attractive profession."
March 31 Deadline Looms
Lawmakers face a tight deadline to replace SGR before its three-month patch expires, adding that reaching a comprehensive deal will get harder as Election Day nears.
"They need to move or they will face another short-term patch," said Nicholas Manetto, a director and strategic communications specialist at Washington DC-based FaegreBD Consulting. "The more time that goes on, the less likely this is to get done. The next step is to get this expedited, especially the offsets."
The latest estimate from the House committees places the cost of implementing the SGR repeal deal at $128 billion, according to Schwartz's legislative aid. She says that figure does not include so-called extenders, a set of Medicare policies including therapy services and rural hospitals.
With the extenders thrown in the mix, the SGR repeal deal would cost billions more, Manetto said. "I think the hope is they're going to try to get to a $150 billion mark," he said of a comprehensive doc fix deal.
Noting that early government data on certified accountable care organizations shows "some of the ACOs have returned very substantial savings," Alex Hunter, managing director of Chicago-based Navigant Consulting's healthcare practice, is optimistic that lawmakers and the healthcare industry can push the SGR repeal deal into law.
"This is the right time for collaboration," Hunter said. "I'm beginning to hear more and more from healthcare executives and doctors. They believe the opportunities to make an impact are substantial. More and more people are up to the challenge."
Joe Baker, president of the New York City-based Medicare Rights Center, likes the SGR repeal deal, but is more pessimistic about its prospects.
"We are encouraged that Congress appears committed to advancing a Medicare payment system centered on high-value care, as opposed to high-volume care," Baker said Friday in a prepared statement.
"Yet, we cannot evaluate the merits of this agreement in a vacuum. Congress has yet to make critical decisions about extenders policies of critical importance to people with Medicare and about how the SGR package will be paid for."
Christopher Cheney is the CMO editor at HealthLeaders.