Don't Freeze Medicare Rates, Docs Tell Congress

November 18, 2013

Organized medicine applauds the new bipartisan plan to repeal Medicare's sustainable growth rate (SGR) formula for physician compensation and phase out fee-for-service (FFS) in favor of pay-for-performance.

But while FFS is still around, the American Medical Association (AMA) and other medical societies want lawmakers to give physicians a rate increase, which they say is long overdue.

The plan crafted by the Senate Finance Committee and the House Ways and Means Committee would avert a 24.4% reduction in Medicare FFS rates on January 1 that is mandated by the SGR formula. Instead, Medicare rates would be frozen at their current levels for 10 years.

The plan gives physicians a chance to boost their revenue, however, in a new Value-Based Performance (VBP) Payment Program that combines 3 Medicare incentive programs, including meaningful use of electronic health record (EHR) systems. Good VBP scores earn physicians a bonus, while bad scores mean a penalty. Physicians can exempt themselves from the otherwise mandatory VBP program by participating in "alternative payment models" such as medical homes and accountable care organizations (ACOs), which come with their own financial upsides and downsides.

This proposal to overhaul Medicare reimbursement has yet to take the form of legislation, and it is unlikely to become a stand-alone bill, according to medical society lobbyists. Instead, they expect lawmakers to incorporate the plan into a jumbo deficit-reduction bill, like the kind that a bipartisan budget conference committee is trying to write. That committee was established by the Congressional legislation that ended a partial government shutdown last month, funding operations until January 15. The legislation also avoided a government default on its debts by lifting the federal debt ceiling through February 7.

Organized medicine hopes that the budget conference committee can cut a deal that includes an SGR repeal before year's end.

AAFP, ACP Support Freeze as Long as Primary Care Pay Improves

Medical societies have a bone to pick with the proposed infrastructure for pay-for-performance in the new SGR repeal plan. However, the Medicare rate freeze tops their gripe list.

AMA Executive Vice President James Madara, MD, urged lawmakers in a letter to raise FFS rates — such hikes are called positive updates — so that they keep pace with rising practice costs, which include EHR systems and quality reporting programs that the government requires. The raise also will help physicians retool their practices for a pay-for-performance future.

"Average annual updates have been close to zero since 2003," said Dr. Madara. "Freezing rates for another 10 years will mean that real [inflation adjusted] physician payment rates will have decreased by 37% by the time the payments are next updated in 2024."

The Medical Group Management Association (MGMA) made a similar, but more specific, pitch. In her letter to lawmakers, MGMA President and Chief Executive Officer Susan Turney, MD, said Congress must enact positive updates for at least 5 years. "This payment stability will allow physicians to continue to see Medicare patients and begin testing new alternative and value-based payment models," Dr. Turney wrote.

The 2 big primary care societies told Congress that they would accept the 10-year freeze as long as Medicare reimbursement improves for their members. Jeffrey Cain, MD, board chairman of the American Academy of Family Physicians (AAFP), laid out these conditions to lawmakers:

  • Rewrite the equation for Medicare rates by increasing the so-called conversion factor — the dollar amount assigned to a relative value unit — by 2% for primary care services.

  • Extend a 10% Medicare bonus for primary care that was written into the Affordable Care Act (ACA) beyond its current expiration date of December 31, 2015.

  • Likewise, extend an ACA provision that raises Medicaid rates for evaluation and management (E/M) services and vaccine administration to Medicare levels beyond its expiration date of December 31, 2014.

Molly Cooke, MD, president of the American College of Physicians (ACP), limited her reimbursement wish list to preserving the 10% Medicare bonus for primary care. "We cannot be supportive of a freeze on updates if the...bonus program is allowed to sunset," Dr. Cooke wrote.

Cut Some Slack on EHR Meaningful Use, Say Physician Leaders

Medical societies aren't campaigning to preserve Medicare FFS reimbursement forever. That said, they have offered numerous suggestions for softening the impact of the pay-for-performance plan proposed by the Senate Finance Committee and the House Ways and Means Committee.

The plan would sunset Medicare penalties under EHR meaningful use, the Physician Quality Reporting System, and the Value-Based Payment Modifier in 2016 because these programs would merge into the new VBP program. In 2017, physicians in Medicare would begin receiving either VBP bonuses or penalties based on their performance in a previous period. Physicians would be graded in 4 categories: Quality, resource use, clinical-practice improvement activities such as same-day appointments, and EHR meaningful use. The AMA's Dr. Madara encouraged lawmakers in his letter not to make 2015 the first year to evaluate physicians because they probably will need more time to get ready for VBP requirements.

Dr. Madara also voiced the fear that maximum VBP penalties eventually could approach 10%, which could drive many physicians out of Medicare. The AMA president recommended capping the penalty at 4%.

The plan excludes physicians from the VBP program if they treat very few Medicare patients or receive a significant chunk of their revenue from an advanced alternative payment model (APM) such as an ACO. The AMA proposed extending the exemption to physicians who plan on retiring by December 31, 2019. The ACP's Dr. Cooke and the AAFP's Dr. Cain also lobbied for an exemption for physicians at the end of their careers.

Physicians in the VBP program would still need to satisfy EHR meaningful-use requirements. Dr. Cooke and Dr. Madara both pressed lawmakers to cut physicians some slack here. How about giving them partial credit for fulfilling some of the meaningful-use requirements, they asked, instead of continuing to make compliance an all-or-nothing proposition?

The latest SGR repeal plan would spend $50 million from 2014 through 2018 to help physicians not only master the VBP program, but also form ACOs, medical homes, and other APM organizations that would be alternatives to VBP participation. This coaching assistance is earmarked for practices with 10 or fewer eligible clinicians in Health Professional Shortage Areas or rural America. That's not enough help, according to organized medicine. The AAFP's Dr. Cain asked lawmakers to up the ante from $50 million over 5 years to $500 million and offer assistance to all solo and small practices. The AMA and ACP made similar requests.

Organized medicine took issue with lawmakers' intention to trim Medicare FFS spending by 1% each year in 2016, 2017, and 2018 by revaluing physician services deemed "misvalued" — think overpaid. If the government can achieve that goal, the money saved would be redistributed to physicians within the Medicare fee schedule. If the 1% goal isn't achieved, Medicare would reduce reimbursement by the difference between the target amount and the amount actually saved.

The AMA wants this provision deleted, wrote Dr. Madara. Otherwise, the savings target for misvalued services should be 0.5% per year rather than 1%, and any reductions in reimbursement for overpaid services should be offset in a budget-neutral fashion by increases for other services. The ACP and AAFP said that if correcting misvalued services fails to produce the desired savings, payment for E/M services so central to primary care should be protected.

A summary of the Congressional plan is available on the Web site of the House Ways and Means Committee.

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