On April 1, President Obama officially halted the 24% Medicare physician pay cut when he signed into law a bill that provides a 12-month pay patch.

The legislation (H.R. 4302) replaces the scheduled fee cut with a 0.5% pay increase through the end of 2014. It then freezes payment levels for the first 3 months of 2015, giving Congress another year to figure out if it can pass legislation to permanently repeal Medicare’s Sustainable Growth Rate (SGR) formula.

The good news, said Dr. Reid Blackwelder, president of the American Academy of Family Physicians (AAFP), is that lawmakers have already made a lot of progress toward a permanent repeal of the SGR. But the 1-year patch may give Congress only a few months to work out its disagreements, he said, because the midterm elections are likely to disrupt the process and bring in new faces unfamiliar with the work that’s already been done.

"There are likely to be changes in the Congress itself, which creates some worry," he said. "What we don’t want to see happen is to start over."

But the 45-page bill did a lot more than just put a Band-Aid on the problem of the SGR.

The biggest policy change is the 1-year delay of the implementation of the ICD-10 coding sets, which had been scheduled to go into effect on Oct. 1, 2014. Under the recently passed law, the Department of Health & Human Services (HHS) is barred from implementing the new coding sets until at least Oct. 1, 2015.

The delay was greeted with relief from most physician groups, which had already warned the government that many physicians, especially those in small practices, weren’t ready to make the switch. But a coalition that includes health information technology companies, health plans, and the American Hospital Association decried the delay. The industry has already invested time and money in the switch, and a delay will only cause disruption, according to the Coalition for ICD-10.

The SGR legislation also further delays the full implementation of the two-midnight rule governing when Medicare patients should be admitted to the hospital versus placed under observation. Enforcement of the controversial policy by Recovery Audit Contractors (RACs) had already been delayed until Oct. 1, 2014. Under H.R. 4302, most postpayment claims audits by RACs are now delayed until March 31, 2015. However, RACs are allowed to perform audits in cases where there is evidence of systematic gaming, fraud, abuse, or delays in delivering care, according to the legislation.

The enforcement delay is a relief for hospitalists, who continue to be confused about how to implement the new policy, said Bradley Flansbaum, D.O., a hospitalist in New York City and a member of the Society of Hospital Medicine’s public policy committee. But it will be critical for the Centers for Medicare & Medicaid Services to spend the extra time improving and simplifying the rule, he said.

The bill also includes a provision to target more aggressively potentially misvalued codes. For instance, it directs HHS to examine codes that:

• have experienced the fastest growth,

• have undergone substantial changes in practice expenses,

• describe new technologies,

• account for the majority of spending under the Physician Fee Schedule, and

• have high-cost supplies, among others.

The bill sets a target for reducing misvalued services from 2017 through 2020 (0.5% of the estimated amount of the fee schedule spending). If the target is met, the savings are redistributed to other services in the fee schedule. However, if the target is not met, payments are reduced. Cuts of 20% or more in a year will be phased in over a 2-year period, according to the legislation.

While primary care groups have been urging the government to shift payments toward cognitive services and away from procedural work for years, they said the bill’s misvalued code provision is likely bad news for physicians.

The problem, said Norman E. Vinn, D.O., president of the American Osteopathic Association, is that it doesn’t just redirect payments from one area to another but instead appears to cut payments to physicians across the board.

"We agree with the goal, but not the method," said Dr. Blackwelder of the AAFP.

But physicians praised the bill’s increased funding for mental health services. The bill funds a 2-year pilot project aimed at improving community mental health services and a grant program for assisted outpatient treatment for people with serious mental illness.

In the pilot project, which will include eight states, community behavior health clinics will certify that they have met certain standards, including offering 24-hour crisis management; screening assessments and diagnosis services; outpatient mental health and substance abuse services; outpatient primary care screening; and peer counseling. In exchange, they can qualify for higher federal matching funds through Medicaid.

Under the 4-year grant program, HHS will award up to $1 million each to no more than 50 institutions providing outpatient care to individuals with serious mental illness who have been ordered by a court to seek treatment.

mschneider@frontlinemedcom.com

On Twitter @maryellenny

President signs SGR patch; bill has fine print for docs