SGR Repair Bill Failure Could Cool Physician Support for Healthcare Reform

November 12, 2009

November 12, 2009 — Now that the US House of Representatives has passed a healthcare reform bill, organized medicine nervously anticipates another vote — possibly next week — on a second bill that would rewrite Medicare's controversial sustainable growth rate (SGR) formula for physician reimbursement. If passed, the bill would avert a 21.2% Medicare pay cut scheduled for 2010.

Perhaps reformed-minded lawmakers should be nervous too. Leaders of organized medicine have more than hinted that without a permanent fix of the SGR problem, they might withdraw their support for reform legislation as it continues to wind its way through Congress.

"We've made it clear, as have other societies and the [American Medical Association (AMA)], that the SGR is our number 1 priority, and it would be very difficult for us to continue to support reform legislation as it's currently crafted without an SGR fix," said William Jessee, MD, president and CEO of the Medical Group Management Association (MGMA), in an interview with Medscape Medical News.

A less direct warning comes from Joseph Stubbs, MD, president of the American College of Physicians (ACP). "We'd be extremely disappointed if the SGR bill didn't pass," Dr. Stubbs told Medscape Medical News. "We're not prepared to say we wouldn't support reform, but if [Congress] failed to do this, we'd have to study the reform legislation very carefully."

Despite Dissidents, AMA House of Delegates Affirms Support of Reform, SGR Bills

Most of organized medicine had supported an earlier reform bill in the House — H.R. 3200 — largely because it included an overhaul of the SGR formula. However, with a price tag of $1.04 trillion, the bill was roundly criticized for swelling the federal deficit.

For the sake of winning enough votes, Democrat-sponsored legislation is now designed to keep the cost of healthcare reform at $900 billion or less and to reduce the deficit. To hit their numbers, Democrats in both chambers have omitted the SGR fix and its $200 billion-plus price tag from their reform legislation and addressed the Medicare payment problem instead in separate bills — H.R. 3961 in the House and S. 1776 in the Senate.

Some state medical associations and specialty societies have urged the AMA to withdraw its support for the latest House reform bill, which narrowly passed on November 7, in part because it does not address the SGR issue. The lack of major medical liability reform and the presence of a government-sponsored health plan have also provoked their ire over H.R. 3962. However, during its interim meeting last weekend in Houston, the AMA House of Delegates rejected a motion to rescind the group's backing of the House reform bill in a 350 to 167 vote, as reported by the Associated Press. The AMA continues to stand behind H.R. 3961 as well, stating that both bills must be passed together.

Dr. Jessee acknowledges that by supporting H.R. 3962, his group and the AMA have put themselves at odds with many of their members. "We've stuck our neck out on H.R. 3962," said Dr. Jessee. "Now we're waiting for H.R. 3961. We're waiting for the other shoe to drop."

The prospect of the House passing H.R. 3961 isn't bright, given that the Senate last month decisively squelched its own SGR legislation in a procedural vote. A big reason was the bill's price tag — $247 billion, according to the Congressional Budget Office. Because the bill did not provide for offsetting taxes or spending cuts, the $247 billion would have represented deficit spending.

H.R. 3961 would add just $210 billion to the deficit, but that still might be too much red ink, said Alfred Bove, MD, PhD, president of the American College of Cardiology (ACC).

"I have a feeling the bill won't pass," said Dr. Bove. "There are legislators who are concerned that we're passing the cost onto the next generation."

Every Year We've had This Guillotine Hanging Over our Heads

Experts all around predict that if the SGR legislation fizzles, Congress will enact a 1-year "patch" to avert the 21.2% pay cut scheduled for 2010, a cut that could persuade physicians to stop seeing new and even existing Medicare patients.

Curbing Medicare outlays, of course, was the original purpose of the SGR. It sets annual targets for Medicare expenditures on physician services based on changes in the gross domestic product (GDP). If actual spending exceeds the target, which has happened every year since 2002, Medicare is supposed to reduce physician reimbursement the next year to make up the difference. Organized medicine has argued that reliance on the GDP has set artificially low and easily topped targets, because physician charges reflect the cost of running a medical practice, which has grown at a faster rate than GDP.

Every year since 2002, physicians have persuaded Congress to cancel scheduled reductions by arguing that they'll stop seeing Medicare patients otherwise. But the pay cuts are never actually cancelled, just delayed, because the SGR deficit — that gap between targeted spending and actual spending — continues to grow. And as the deficit increases, so does the magnitude of the next pay cut.

Physicians want to end the annual drama of lobbying for last-minute reprieves. "Every year we've had this guillotine hanging over our heads," said Dr. Stubbs of the ACP. Some physicians, he noted, have already have decided to turn away new Medicare patients until the SGR formula is permanently overhauled.

Uncertainty about Medicare rates produces other fallout, added Dr. Bove of the ACC. "It's hard for physicians to plan their budgets if they can't project what they'll receive from Medicare."

H.R. 3961 attempts to provide the certainty that physicians seek. It wipes out accumulated SGR debt, which ends the threat of the 21.2% rate reduction next year. Instead, it gives physicians a 1.2% raise in 2010 by pegging reimbursement to the Medicare Economic Index, a gauge of inflation in physician-practice costs, as opposed to the GDP. In 2011, the formula returns to a GDP footing, but one that's more generous. There are 2 separate spending targets for services rendered by physicians. One target, for evaluation and management (E & M) services and preventive care, is based on GDP plus 2%. The other target, covering all other services, is based on GDP plus 1%. The formulas clearly favor primary-care physicians, whose bread and butter is E & M and preventive services.

SGR Bill Faulted for Not Linking Pay to Quality

Although a number of medical associations support the House SGR fix, they see room for improvement. Dr. Stubbs of the ACP, for example, said that his group would have preferred to use the Medicare Economic Index, as opposed to the GDP, in the pay formula after 2010, even though the conversion factors for different physician services sweeten the deal. Dr. Stubbs said he worries that primary-care physicians could be penalized for surpassing GDP plus 2% on E & M services even though patients receiving more primary care tend to be hospitalized less.

"We wouldn't want to restrict an increase in E & M codes if it meant an overall decrease in expenses," he said.

Dr. Jessee of the MGMA said the new pay formula, despite its GDP basis, should prove adequate for physicians who earn Medicare bonuses for prescribing electronically, implementing electronic health records, and participating in the Physician Quality Reporting Initiative. "It's clear Congress wants to minimize the importance of automatic upward adjustments and spend more money for performance and value," he said.

By itself, H.R. 3961 does little to base physician compensation on performance and value. To be sure, the bill gives a break to accountable care organizations (ACOs), which are teams of primary-care physicians, specialists, and one or more hospitals that are financially rewarded for low-cost, high-quality care. ACOs, now in the pilot stage, would not be subject to the usual expenditure targets. Dr. Stubbs said the ACP wanted to see more quality-oriented provisions like this in the bill. So did health-policy analyst Dennis Smith from the Heritage Foundation, a conservative think-tank.

"H.R. 3961 represents the status quo in physician compensation," said Mr. Smith, who headed the Medicaid program during the George W. Bush administration. "You're still paying the same amount to the worst doctor as you do the best.

"Democrats talked about paying physicians based on performance, but none of that is in here," Mr. Smith pointed out. "What the American people were promised and what they're getting are 2 different things. H.R. 3961 is a warning sign about what would happen in a government-run health plan."

There's a Lot of Football Left to be Played

Neither H.R. 3961 nor H.R. 3962 is the final word on healthcare reform legislation. H.R. 3962 must be reconciled to whatever reform legislation emerges from the Senate (a blend of 2 Senate committee bills could come to the floor for debate next week). Likewise, if the House passes its SGR bill, the Senate would have to vote on the matter again.

With so much in flux, leaders of organized medicine like Dr. Jessee are careful not to write their own legislative positions in stone. Hence the absence of flat-out statements insisting on a quid pro quo — we'll do this for you, provided you do that for us.

"Nobody wants to lock themselves in a hard and fast position," said Dr. Jessee. "There's a lot of football left to be played."

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