Physicians Praise End to SGR in Draft But Worry About Freeze to Reimbursements

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By Mindy Yochelson  

Nov. 13 --Physician groups commenting on a bipartisan congressional draft that would revamp the Medicare physician (Part B) payment system said they were pleased it would end Medicare's sustainable growth rate (SGR) formula but worried about a proposed freeze on annual physician payment updates for 10 years.

“Medicare physician payments have already trailed inflation for nearly 10 years and extending this freeze for another decade will result in a cumulative gap between Medicare payments and the cost of treating patients of nearly 45 percent,” the Alliance of Specialty Medicine said.

The heart of the draft, which was issued for comment by the chairmen of the House Ways and Means and Senate Finance committees Oct. 31 would replace the SGR with a pay-for-value system focused on medical outcomes rather than procedures .

Comments on the draft were due to the committees by Nov. 12.

Looming Cut Under SGR

The proposal would permanently repeal the SGR update mechanism but provide no updates--that is, increases in pay-- through 2023.

The SGR is the formula that ties physician payment updates to the relationship between overall fee schedule spending and growth in gross domestic product. It has resulted in payment cuts that lawmakers have stopped annually at the last minute.

Medicare reimbursement will be cut by 24.4 percent on Jan. 1, 2014, unless Congress institutes another patch or a permanent fix.

The Medical Group Management Association (MGMA) said that instead of a freeze, “a new Medicare physician payment system should adequately reimburse physician group practices for annual increases in the basic costs of providing patient care.” Doing so “will provide a solid transitional foundation to implement new value-based payment mechanisms.”

The American Osteopathic Association (AOA) called predictable positive annual updates a necessity. However, if that isn't possible due to fiscal constraints, AOA suggested that the Department of Health and Human Services “be charged with monitoring inflation, patient access, and participation rates of physicians in Medicare.” If beneficiary access to physicians declines, then “changes to the baseline payment rate can be adjusted.”

Value-Based Performance

The new proposed pay system, called the Value-Based Performance (VBP) Payment Program, would allow individual physicians and other Part B providers to earn performance-based incentive payments through a compulsory budget-neutral program.

The draft would adjust physician payments by combining the current quality incentive programs--the Physician Quality Reporting System, the Value-Based Modifier and the Electronic Health Record Meaningful Use program--into one comprehensive program.

The committees say the one incentive payment program would represent a more streamlined approach than maintaining the three distinct programs. In addition, under the draft, penalties that would have been assessed under the three current quality programs would sunset at the end of 2016.

The AOA applauded the alignment and harmonization of the current quality reporting programs and said the administrative burden on physicians would be reduced.

However, the AOA cautioned that “an immediate transition away from the programs would undermine the investments that have already been made in these important programs, such as the costly purchases” of electronic health records systems.


The VBP program would apply to physicians beginning with payment year 2017; to physician assistants, nurse practitioners and clinical nurse specialists beginning with payment year 2018; and to all others beginning with payment year 2019.

The Alliance of Specialty Medicine disagreed that the VBP program should apply to all physicians beginning with payment year 2017.

“Reforms that hold physicians accountable for value need appropriate time for proper implementation,” according to the Alliance, which represents about a dozen specialty groups.

“This proposal includes no mechanisms to ensure careful and incremental implementation, nor does it differentiate between practices that are better equipped with resources and experience to fulfill performance-based reporting mandates versus those that are not,” it said.

Eligibility for Therapists

The American Physical Therapy Association said that the legislation should ensure that physical therapists will be eligible to participate in the quality program.

In addition, the APTA said all providers should be transitioned into the VBP program at the same time, rather than phased in over several years, to drive providers toward quality in the near term. “There should not be a delay in beginning quality reporting and all providers, including physical therapists, should be eligible for payment beginning in 2017.”

A coalition of 15 Medicare beneficiary advocacy groups, including the Medicare Rights Center and the Center for Medicare Advocacy Inc., said they were pleased with the proposed VBP program but urged that the congressional committees include clear criteria for individual measures, “including documentation of clinical importance, evidence base, transparency, reliability, validity, feasibility, ability to act on results and rigorous auditing, in subsequent SGR policy drafts.”

The American Academy of Family Physicians said it was concerned that the VBP program's budget-neutrality provision would cause practices not to be “measured by their results in improving quality and controlling costs against themselves, but rather against the performance of all other physicians.”

Under such a “hypercompetitive environment,” the AAFP said, a practice might make “significant strides in clinical practices, quality improvement, resource management, and meaningful use” of electronic health records but then get little or no financial reward because of “similar or greater improvements among peer physicians.”

Alternative Payment Models

The proposal would encourage physicians to participate in alternative payments models (APMs), such as medical homes or accountable care organizations, by exempting them from the VBP program and instead offering them a bonus payment.

Specifically, physicians who obtain a significant share of their revenue through alternative payment models that involve two-sided financial risk (meaning loss and gain) and a quality measurement component would receive a 5 percent bonus payment each year from 2016 through 2021.

The MGMA said it supports the concept but believes there's a need for continued testing and development of these alternative reimbursement and care delivery.

“Moving too quickly toward a payment alternative risks repeating the mistakes of the SGR,” the MGMA said.

“We must be sure to allow sufficient time for the testing and development of alternative payment models and the data they rely on so a viable replacement can be produced which utilizes sound data, provides all physicians with a chance to succeed and results in the delivery of high quality, coordinated care for patients.”

What About Emergency Care?

The American College of Emergency Physicians reminded the committees that not all physicians are able to fit into prescribed models.

“ACEP encourages you to discuss the difficulty the Centers for Medicare & Medicaid Services (CMS) has had to date in developing a sufficient APM model for emergency care,” ACEP said.

The APMs pursued by private insurers and the CMS “lend themselves to physicians whose primary role is care coordination or managing chronic diseases,” ACEP said.

“ACEP urges you to consider these factors and provide exemptions for emergency care from the VBP and APM reimbursement systems, at least for some extended period of time to allow emergency physicians to work with CMS to develop and test models that may be appropriate for the manner in which we provide care to our patients.”

Complex Chronic Needs

Another part of the proposal would encourage care management services for individuals with complex chronic care needs through the development of new payment codes for such services, beginning in 2015.

The Alliance of Specialty Medicine objected to this provision, saying it wasn't within Congress's purview.

“Processes to develop billing and reimbursement codes are well established and already consider input from public and private stakeholders in an open and transparent forum,” according to the Alliance.

Further, the provision “states that codes could be billed by specialty physician practices that meet certain criteria, but it is unlikely many specialty physicians would meet the criteria,” the Alliance said.

However, the American College of Physicians said it was pleased to see that the draft would solidify in statute new codes that the ACP believes are an important step in recognizing the full breadth of primary care.

Similarly, the Marshfield Clinic in Wisconsin said that major chronic diseases that afflict a relatively small percentage of individuals account for most of the expense in health care.

“We support your recommendation to encourage care coordination for individuals with complex chronic care needs, by establishing payment codes for care management services,” Marshfield said. “Relative values for such services would be negligible, but for the want of a service code, many such services are shifted unnecessarily to higher cost settings.”

Imaging, EKG Criteria

The proposal also would require physicians ordering tests for advanced imaging or electrocardiogram services to consult appropriate use criteria, which would be specified by the Department of Health and Human Services in consultation with stakeholders. Payment wouldn't be made if consultation with appropriate use criteria didn't occur.

In addition, prior authorization would apply to “outlier” professionals whose ordering is inconsistent as compared with that of their peers.

The MGMA urged “caution in labeling physicians as outliers without first conducting a thorough assessment of the physician's case mix and other variables that may skew an analysis of his or her ordering patterns.” Physicians should be able to appeal an outlier designation, MGMA recommended.

In addition, prior authorization “is extremely burdensome on practices, who must expend staff time and money in order to facilitate the prior authorization process,” it added.

Further, authorization requirements “can lead to delays in the delivery of care, sometimes for a week or more, which can be particularly difficult for a Medicare patient who may rely on others for transportation to medical appointments.”

If this ends up in final legislation, Congress should “add language requiring that the prior authorization process be transparent, based on evidence-based, physician developed appropriate use criteria and not, as is commonly used in the private sector, 'black box' edits which are not peer reviewed,” the MGMA said.

The Medical Imaging & Technology Alliance (MITA) said it was encouraged that the prior authorization program was restricted to outliers.

“MITA stresses that criteria used in any prior authorization requirement must be based on physician-developed appropriate use criteria and such criteria should be totally transparent and in the public domain,” the group said. “And, the program needs to be structured in such a way that does not increase the bureaucracy of the Medicare program or delay care for Medicare beneficiaries, even those with non-urgent conditions.”


To contact the reporter on this story: Mindy Yochelson in Washington at

To contact the editor responsible for this story: Ward Pimley at

The comments are at (Marshfield Clinic), (Alliance of Specialty Medicine), (groups including Medicare Rights Center), (MITA), (emergency physicians), (MGMA) and (family physicians).

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