House Hears SGR Alternatives, Vows Action


WASHINGTON – A plan to finally replace Medicare's much maligned Sustainable Growth Rate payment formula could be unveiled by this summer, federal lawmakers predicted at a committee hearing.

“Here's the bottom line: If we get to December and we're doing an extension, that's a failure on our part,” Rep. Michael Burgess (R-Tex.) said at the hearing. “We need a permanent solution that's predictable, updatable, and reasonable for this year – and nothing else will do.”

“Whatever virtues the SGR had when it was created 14 years ago, … it's clear that they have vanished,” noted Rep. Henry A. Waxman (D-Calif.). He added that in the past 2 years, Congress has had to pass legislation six times, blocking fee cuts of up to 21% or more.

About 30 medical associations responded to the House subcommittee's request for suggestions and proposals in developing a new system. Speaking with a five-person panel of experts from medical associations and health policy organizations, House subcommittee members considered alternatives to the current SGR formula.

One Size Won't Fit All

While the details of the plans vary, they do show a consensus on several fronts: repealing the SGR, moving away from the traditional fee-for-services payment model, and providing a 4- to 5-year transition period in which providers can experiment with a variety of payment systems.

The expert panel also stressed the importance of avoiding a “one size fits all” solution.

“I think we should also have a realization that what will work in one part of the country will not work in another part of the country, and that's why we have continued to talk about a variety of options,” said Dr. Cecil Wilson, president of the American Medical Association.

Dr. Wilson pointed to the provisions in the Affordable Care Act that allow for a variety of models of accountable care organizations, embodying the concept of options in the medical system. In that spirit, he said that the AMA has formed a physician leadership group to evaluate the effectiveness of alternative payment methods.

To strengthen primary care's role in Medicare, the American Academy of Family Physicians backs payment reforms that would boost primary care reimbursement and support the concept of the patient-centered medical home (PCMH). AAFP President Roland A. Goertz noted in written testimony to the committee that the proposal would create a blended reimbursement system for primary care delivered within a PCMH: fee-for-service payments and pay for performance, plus care management fees for PCMH-related activities that don't involve direct patient care.

Dr. David Hoyt, executive director of the American College of Surgeons, said the college is analyzing the use of bundled payments for surgery. Dr. M. Todd Williamson, of the Coalition of State Medical and National Specialty Societies, introduced the option of private contracting, in which patients would be free to apply their benefits to a doctor of their choice, who would be free to opt out on a per-patient basis.

Harold Miller, executive director of the Center for Healthcare Quality and Payment Reform, suggested an episode-of-care payment plan through which hospitals and physicians jointly charge one price for all services included in a hospitalization. The model would also include a warranty stating that any infections or complications would be treated at no additional cost. Also, a physician practice would receive one payment for all patient needs associated with chronic diseases or other conditions.

Rep. Burgess, who is also a doctor, said organizations should focus on ways to address patients with chronic conditions, adding that 80% of Medicare funding is spent by 20% of beneficiaries with chronic illnesses.

Is IPAB the New SGR?

Rep. Fred Upton (R-Mich.) raised concerns about the Independent Payment Advisory Board (IPAB), created by the Affordable Care Act. The board sets expenditure targets, on which it bases spending cuts. In 2018, targets will be based on the gross domestic product. “Sounds a lot like SGR, which we're trying to get rid of,” Mr. Upton said. “Since hospitals are exempt from IPAB cuts through the rest of the decade, it seems that the IPAB has the potential to undermine any serious efforts at physician payment reform.” Some panelists agreed.

“It's not impossible that [the IPAB] could serve a function,” Dr. Wilson said, “but as presently constituted, we see it [as] basically another target for physicians to meet – potential double jeopardy, with an SGR as well as the pronouncements from this body.”

The panelists also asserted their belief that whatever plan chosen should be physician led, with financial support of the government. “It would be helpful if physicians could get better financial support in their own payment system to enable them to lead all of those efforts,” said Dr. Mark B. McClellan, director of the Engelberg Center for Health care Reform and former administrator of the Centers for Medicare and Medicaid Services.


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