SGR Replacement Has Potential Pitfalls as Well

Marcia Frellick

September 24, 2015

Replacing the Sustainable Growth Rate Formula in April of this year ended some deep flaws in the Medicare payment system for physicians, but other concerns remain, according to two papers published in the September 24 issue of the New England Journal of Medicine.

The replacement, called the Medicare Access and CHIP Reauthorization Act, works this way: Between 2016 and 2019, Medicare's payment will increase by 0.5% a year, with no rate changes between 2020 and 2025. Starting in 2019, Medicare payments will vary according to whether a physician chooses the Merit-Based Incentive Payment System (MIPS) or chooses to join an Alternative Payment Model, which includes accountable care organizations and medical homes.

Physicians who choose an Alternative Payment Model will receive 5% annual increases in Medicare payments through 2024. Physicians who choose the MIPS will be adjusted upward or downward (by 4% in 2019, increasing to 9% by 2022).

In their perspective article, Jonathan Oberlander, PhD, from the University of North Carolina, Chapel Hill, and Miriam Laugesen, PhD, from Columbia University in New York City, point out that this system relies on new payment and delivery models for cost control and quality improvement. However, the evidence of the models' effectiveness is "thin, mixed and preliminary," they write.

"Medicare, in other words, is set to pay physicians more to embrace innovations whose effectiveness is highly uncertain — a remarkable leap of faith."

They also note that Medicare's MIPS will rely on development of a composite performance score, a third of which will depend on physicians' quality. But they are skeptical physician quality can be measured accurately and meaningfully and calculated into a score.

And although physicians will see bonuses and extra payments through 2024, after they expire, updates may not keep pace with increases in medical expenses, the authors write.

In another paper published in the same issue of the journal, Meredith B. Rosenthal, PhD, from the Harvard T.H. Chan School of Public Health, Boston, Massachusetts, says if the measures used to determine the physician quality portion of the MIPS score include factors outside physicians' control that affect their performance in unpredictable ways, then "the program will amount to allocating a share of physician pay by lottery." That would make incentives impotent and cause great physician dissatisfaction, she contends.

Those factors could also encourage physicians to be more selective with patients.

"[I]f the measures are systematically influenced by patient factors and these factors are not accounted for (e.g., through risk adjustment) in benchmarking physicians' performance, then the MIPS will be unfair and will create incentives for physicians to avoid patients who would negatively affect their performance scores," she writes.

Dr Rosenthal adds that giving physicians the option of choosing an APM may result in a tipping point for voluntary uptake of those models and "could potentially have a larger effect on value-based purchasing than the MIPS itself."

Dr. Oberlander reports personal fees from the AHIP, the Reinsurance Association of America, the Hospital Association of Southern California, the American Hospital Association, the North Carolina Hospital Association, the American Association of Diabetes Educators, Riverside Health System, the Ohio State Comprehensive Cancer Center, and the Richmond (NC) County Foundation outside the submitted work. Dr Laugesen and Dr Rosenthal have disclosed no relevant financial relationships.

N Engl J Med. 2015;373;1185-1189. Oberlander and Laugesen full text, Rosenthal preview

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