SGR, Radiology, and New Payment Models

Dispatches from the June RFS Journal Club



June 2015
Papers discussed:

Solving The Sustainable Growth Rate Formula Conundrum Continues Steps Toward Cost Savings And Care Improvements presented by Ashley Lotfipour, MD
Medicare Physician Payment Reform: Securing the Connection Between Value and Payment presented by Travis Fuchs, MD

The Sustainable Growth Rate (SGR) was enacted by Congress in 1997 as a mechanism to control the cost of Medicaid. This formula based physician payment in the Medicare fee-for-service (FFS) system on changes in the national economy in an attempt to control health care spending. Initially, implementation of the SGR resulted in a modest increase in physician payments as Medicare expenditures matched targets predicted by the formula. However, a mismatch between targets predicted by the SGR and actual Medicare expenditures in 2002 resulted in a physician fee decrease. Outcry from the health care community led Congress to introduce a patch preventing the pay cut, but the patch only lasted for the next fiscal year. Since 2002, lobbying to block the fee decrease mandated by the SGR via a patch was an annual rite of passage for the physician community.

In April 2015, Congress enacted legislation that repealed the SGR just hours before a 21 percent pay cut in Medicare physician fees would go into effect. But the Medicare Access And CHIP Reauthorization Act (MACRA) does more than repeal the SGR. MACRA mandates a five percent increase to fee-for-service payments annually for the next five years. It also creates two new payment pathways with incentives to move away from FFS — a system based on volume — to a merit-based incentive payment system (MIPS) and Alternative Payment Models (APMs) systems based on value.

The merit-based incentive payment system (MIPS) is a modifier to the fee-for-service system that will take effective in 2019. The three current incentive programs — meaningful use, quality reporting incentive programs, and the value-based payment modifier — will be replaced by MIPS. Physicians will receive a score based on such metrics as cost, quality, meaningful use participation, and practice improvement. Scores will be compared to peers. Physicians reporting scores higher than their peers will receive a payment increase while those scoring the same as their peers receiving no payment change. Physicians scoring lower will receive a payment decrease. Payments from Medicare could be modified by more or less 4 percent in starting in 2019 increasing to more or less 9 percent in 2022 and beyond based on a MIPS score.

The second payment pathway focuses on alternative payment models (APMs). CMS has presented of a payment taxonomy framework with four categories based on how a provider receives payment:

• Category 1—fee-for-service with no link of payment to quality

• Category 2—fee-for-service with a link of payment to quality
• Category 3—alternative payment models built on fee-for-service architecture
• Category 4—population-based payment

Hospital value-based purchasing is considered category 2. Accountable Care Organizations (ACOs) are considered category 3. To promote adoption of APMs, the bill provides “a 5 percent bonus to providers who receive a significant portion of their revenue from an APM or patient centered medical home.” Furthermore, HHS has established goals for APM adoption (categories 3 and 4 in the CMS payment taxonomy framework) with 30 percent of Medicare payments made to providers in APMs by the end of 2016 and 50 percent by the end of 2018. The new models are focused on “value and quality,” although how “value and quality” are defined is currently a matter of debate. Regardless of the specific APM, future Medicare payments will focus more on value and less on volume.

MACRA is a significant first step, but there are potential issues are outlined by McClellan, et al from the Brookings Institute. The authors suggest modifications in three major areas including: “encourage the movement to effective alternative payment models, improve Medicare’s physician FFS payment system, and improve and simplify the quality measures used in MIPS and APMs.” These authors recommend simplifying reporting; accelerating the process to moving to population- and condition-based outcomes; and creation of core measures by independent multi-stakeholder process.

MACRA significantly changes how reimbursements will occur, and many questions remain about how to transition to APMs. But FFS will transition to value-based reimbursement. In the short term, ACR leadership recommends focusing on FFS with MIPS modifiers while working to develop metrics that can be used in fee-for-value payment models.

Additional Resources:

FAQ: Congress Passes A Bill To Fix Medicare’s Doctor Payments. What’s In It?

Doctors 'Disgruntled ' And Frustrated by Looming Medicare Cuts

Repealing and Replacing the Sustainable Growth Rate

With SGR Repeal, Now We Can Proceed with Medicare Payment Reform

With SGR Repealed, Replacement Policy Creates New Priorities

by Colin Segovis, MD, PhD (@colinsegovis)

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