Many have prognosticated that physicians will not fully engage in the volume-to-value transition until they see a significant portion of their income tied to their performance on quality and efficiency indicators. Newly proposed changes to the formula for calculating payments under the Medicare Physician Fee Schedule (“MPFS”) could be that tipping point.
Background. Due to the sustainable growth rate formula cap (“SGR”) – the statutory formula used to calculate MPFS payments on an annual basis – those payments will be slashed by almost 25 percent on January 1, 2014, unless Congress intervenes. Since the SGR’s enactment in 1997, Congress has passed a series of fourteen short-term fixes to avoid similar reductions. The most recent fixes have been paid for by cuts in hospital reimbursement – rob Peter to pay Paul, so to speak.
Until now, there has been no serious attempt to establish a new method for calculating MFPS payments, as the price tag on the SGR fix has been too high. In 2012, the Congressional Budget Office (“CBO”) estimated a long-term fix to the SGR problem would cost $243.7 billion. But earlier this year, the CBO released a revised report estimating the cost of the SGR fix at $138 billion due to lower physician spending. With the price tag of the SGR fix reduced by more than $100 billion, Congressional leaders suddenly sprang into action.
Proposal #1. Back in July, the House Energy and Commerce Committee unanimously approved H.R. 2810, the Medicare Patient Access and Quality Improvement Act. The legislation would repeal the SGR and establish a new Update Incentive Program (UIP) based on quality measures and clinical practice improvement activities. High performing providers would earn a one percent bonus while low performers would see a one percent reduction in payments.
We previously discussed the Energy & Commerce in greater detail. The full House has not taken action on H.R. 2810.
Proposal #2. On October 30, the Chairmen and Ranking Members of the Senate Finance Committee and the House Ways and Means Committee released a discussion draft of a somewhat similar SGR fix. This latest proposal, however, offers a more comprehensive approach to MPFS payment reform. Here’s a brief summary of key provisions:
Payment Freeze. MPFS payments would remain at current levels through 2023. After that, physicians participating in advanced alternative payment models would receive two percent annual updates, while all other physicians would receive annual updates of one percent.
Termination of Payment Penalty Programs. The following current incentive payment programs would sunset at the end of 2016: the two percent penalty for failure to report PQRS measures; the budget-neutral value-based purchasing modifier based on quality and resource use; and the three- to five-percent EHR meaningful use penalties.
New Value-Based Performance (VBP) Program. The proposed VBP Program should catch most physicians’ attention. Starting in 2017, physicians would receive bonuses or penalties based on their composite performance scores. (The program would expand to mid-level practitioners in 2018.) The scores would be calculated based on quality measures (30 percent of composite score), resource use (30 percent), clinical practice improvement activities (15 percent), and EHR meaningful use (25 percent).
The VBP Program would be budget neutral. In 2017, 8 percent of total payments would be reallocated based on composite scores. That number would increase to 9 percent in 2018 and 10 percent in 2019 and thereafter (unless the Secretary elected to increase that percentage).
To promote transparency, the Medicare Physician Compare website would post individual physician quality and resource use information, as well as utilization and payment data. A beneficiary would be able search this information by name, specialty, and services types.
The VBP Program should take most physicians back to medical school, where they anxiously waited for grades to be posted, knowing that that grades could make all the difference in their career path. But now those grades – the composite performance scores – will be posted for patients, payers, and peers to see.
Alternative Payment Model (APM) Participation. Physicians who receive a significant percentage of their revenue through a risk-sharing APM with a quality measurement component (such as an accountable care organization) would not participate in the VBP Program. Instead, they would receive a five percent bonus on their Medicare payments each year between 2016 and 2021.
Complex Chronic Care Management.Beginning in 2015, Medicare would pay physicians for care management services furnished to beneficiaries with certain chronic conditions. To be eligible for these payments, a physician would have to practice in a certified patient-centered medical home or comparable specialty practice.
Appropriate Use Criteria Physicians ordering advanced imaging or electrocardiogram services would be required to consult with appropriate use criteria to be developed in consultation with professional societies. Medicare would not pay for services for which no consultation occurred. Those physicians identified as outliers (as compared to their peers) would be subject to prior authorization requirements.
Valuation of Services Between 2016 and 2018, the Centers for Medicare and Medicaid Services (“CMS”) would systematically identify and revalue mis-valued services. If CMS fails to meet certain annual targets, MPFS payments would be reduced by the difference between the target and the actual amount of mis-valued services identified. CMS would solicit information from selected physicians to support its valuation activities. Physicians who submit the requested information would be compensated, while those who do not would face significant payment penalties.
What next? These days, bipartisan and bicameral proposals are a rare breed. It seems a permanent SGR fix – as opposed to another short-term fix – may become a reality as part of the now-in-the-works budget deal. While physicians would welcome the end to the SGR rollercoaster ride, they should prepare and position for payments based on composite performance scores.
Martie Ross is a Consulting Principal with PYA.