Why the SGR Fix Won’t Work and Could Actually Make Things Worse

Why the SGR Fix Won’t Work and Could Actually Make Things Worse

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Partisan gridlock in Washington regarding health policy has been so pervasive and bitter that any bipartisan co-operation on any important health issue should be applauded by a frustrated public.

That is why the emerging bipartisan compromise regarding the fifteen-year long policy embarrassment known as the Sustainable Growth Rate (SGR) problem needs to be taken seriously.

Remarkably similar solutions — a new hybrid physician “value-based” payment methodology — have emerged from three of the four key committees in Congress, and seemingly the only stumbling block is finding the $115-120 billion to pay for it.

Moreover, key physician interest groups, including the American Medical Association, appear to have signed off on this approach.

This makes it all the more troubling that the approach taken is unsound health policy that will damage practicing physicians in diverse settings: private practice, medical school practice plans, and hospital employment.

This is because the proposed legislation casts in concrete an almost laughably complex and expensive clinical record-keeping regime, while preserving the very volume-enhancing features of fee-for-service payment that caused the SGR problem in the first place. The cure is actually worse, and potentially more expensive, that the disease we have now.

The SGR fix would basically freeze or severely limit future physician fee updates for Medicare Part B (a serious problem for primary care), while permitting physicians to earn modest “value-based” bonuses if they can document quality measure attainment, cost reductions, participation in alternative payment schemes, practice enhancement activities, or meaningful use of EHRs.

Physicians who meet all these standards could expect to supplement their existing Part B fee by about 4 percent in 2016, going to 10 percent in 2020, with the aggregate bonuses subtracted from the pool of total Part B physician payments to preserve budget neutrality.  Non-compliant physicians would see corresponding reductions in their updates.

There are sensible opt-outs for physicians who can report in groups, virtual or real, as well as for physicians who participate in as yet unspecified “advanced payment models” (APMs).

Slogans Over Evidence

Building on failed models. With this legislation, Congress is preparing yet again to enshrine in statute another payment strategy that is both unproven and highly controversial. A prototype of the controversial Medicare Shared Savings program was failing a CMS demonstration test — the Physician Group Practice demonstration — at the very time the ACA wrote it into law.

The SGR reform legislation is yet another triumph of slogans over evidence.  It builds upon a modified version of the current Physician Quality Reporting System (PQRS) system.  Critics have commented on the heavy reliance of the current PQRS and other federal value-based initiatives on process measures that are poor surrogates for actual patient risk reduction.

The Congressional plan actually ups the ante over the current PQRS and value-based modifier (VBM) programs by basing as much as 10 percent of an individual physician’s compensation on it. The legislation mandates that GAO evaluate the new Value Based Payment System in 2018, two years after it is implemented.  Is it too much to ask that we actually validate that a payment approach actually delivers claimed societal benefits before we enshrine it in legislation?

The value-based approach may work as a slogan (“fee for value’, etc.) but falls apart quickly when applied to individual physician practices. The pillar on which this approach rests — that we can meaningfully differentiate physician performance and quality at the individual physician level based upon claims data and self-reported clinical indicators — is not load bearing.

Usurping consumer and provider autonomy. For people who believe the purpose of transparency is to help consumers make better choices, an individually determined physician payment level is objectionable policy, because it relies upon a federally mandated variable unit payment to determine which physicians make more. Why should a paternal, all-knowing federal government decide that cardiologist A is worth more than cardiologist B?   Why shouldn’t consumers decide who earns more by using relevant criteria to select their own physicians, leaving increased physician income to come from increased patient panels, not a variable unit price?

But it’s the core modus operandi of “fee for value” — the idea that it is appropriate policy to use micro-incentives to manage physician behavior to foster quality improvement — that is most offensive. The emerging legislation imposes an elaborate, multivariate Skinnerian “operant conditioning schedule” on physicians. There’s a big difference between requiring, say, an airline’s pilots to USE a preflight checklist vs. giving them the federally approved checklist and paying them $10 a box for each box they check off, which is essentially what the SGR legislation does.

There also has been in the emerging regime of micro-accountability a heedlessness of the cost in professional time of providing all this “quality” information.  Talk to practicing physicians about how they spend their days, and they will tell you that they spend almost as much time coding and documentingtheir encounters with patients as they do actually practicing medicine.

We are actually helping creating a clinician shortage by commandeering scarce professional time, not merely that of physicians, but advanced practice nurses and the entire clinical support team, to comply with record keeping requirements.  As we’ve seen with the “meaningful use” incentives, the 10 percent upside for compliant physicians is probably going to be outweighed by the clinician time and support cost of compliance.  We need clinicians to do more caring and less typing.

A Better Approach

Measure quality at more aggregated levels. What is a viable alternative to the approach taken in the SGR legislation?   If you want to differentiate physician payment based on quality measurement, as Pronovost, Krumholz and Berenson suggested, do it at the level of larger aggregations of practices.  This should not be an “opt-out” but the core approach. Why not aggregate physician quality measures at the level of hospitals (which must privilege them), a group practice (which must decide to employ them) or an IPA (which must credential them to accept them as members)?

Gather and publish specialty-specific clinical outcomes (severity-adjusted mortality and complication rates, infection rates, etc.) for these diverse organizations, as well as financial information (case-mix adjusted cost) for key procedures and services, and pay all the specialists (including independent practitioners) in the highest performing collectivities at a higher rate.

Then give Medicare beneficiaries incentives in the form of forgiven deductibles or Part B premium rebates for selecting the highest value providers.  This will foster competition both to reduce avoidable errors and attract the highest performing specialists.

Clinical excellence is most reliably found in physician-directed enterprises large and small; that it is leadership, strong professional values, and an excellent supporting cast, that produces higher quality.

If we really want to improve healthcare in the US, we need more Johns Hopkins and Penn Medicines, more Geisinger and Virginia Mason Clinics, more Kaisers and Hill Physicians and Atrius Healths, more HealthCare Partners and CareMores and a lot more high-quality smaller physician groups.

Replace fee for service, don’t build on it. And if we’re really committed to getting rid of fee-for-service, then let’s actually get rid of it. The new advanced payment models being tested by the CMS Innovation Center layer complex shadow systems on top of the current fee-for-service system.  This approach creates yet more costs and record-keeping challenges, while preserving fee-for-service’s underlying volume-based incentives.

What is needed is to replace fee-based models with simpler and more consolidated payment schemes — medical homes paid for by a monthly subscription payment; bundled payments with a single, severity-adjusted lump sum, accountable care as a fixed capitation payment — shifting the burden of process and quality control to the accountable entity.

If we’re not sure new advanced payment schemes actually work, if we haven’t actually gotten them right, then we have no business compelling or incenting 680 thousand practicing physicians to use them. We’re not going to get clinical practice where we want it to go with an elaborate, individualized operant conditioning schedule with four domains and sixty eight “core measures”, and billions more spent on the IT systems and clerical support to document them.

We need to reward teamwork, not box-checking.

A Legislative Hippocratic Oath

Senators and Representatives, before you vote on an SGR fix that could actually make things worse, visit your own physicians in person and ask them three questions:

  1. How Much of Your Practice Week Do You Actually Spend Seeing Patients?
  2. What Are You Doing the Rest of the Time?
  3. Will You Please Show Me My Electronic Health Record?

Then, try to explain to them in English what you intend to vote for — how you want to pay them — and ask them what you should do.   Base your vote on that conversation. It isn’t just physicians that should be guided by Hippocrates’ maxim, “First Do No Harm,” but our policymakers as well.

Jeff Goldsmith is president of Health Futures Inc, which specializes in corporate strategic planning and forecasting future health care trends.

Goldsmith, Jeff. Primum Non Nocere: Congress’s Inadequate Medicare Physician Payment Fix, Health Affairs Blog, 24 January 2014. Copyright ©2014 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

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57 Comments on "Why the SGR Fix Won’t Work and Could Actually Make Things Worse"


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Barry Carol
Feb 11, 2014

Thanks Retired MD and legacyflyer. That’s the best discussion of defensive medicine I’ve ever seen.

Guest
Tom Leith
Feb 10, 2014

I’d say he SGR formula failed because it is a bad idea that I suspect Congress never really wanted to implement — it was window dressing. So in a way it hasn’t “failed” — it was never expected to “succeed”. But it continues to pay dividends in political theater.

RetiredMD I think has it right — I hope he and some other retired MDs (and still-working) can start the next revolution in American Medicine. Physician leadership is desperately needed. And as I say (over and over) if physicians don’t do it, someone else will.

legacyflyer: have you seen cases where it was alleged that unnecessary tests were not done? 😉

Guest
platon20
Feb 17, 2014

“if physicians don’t do it, someone else will.”

And that will make healthcare costs go up, not down because that “someone else” is going to extract their filthy lucre from the system without providing any true value to the system.

There’s a famous graph out there showing the number of doctors vs the number of administrators in healthcare. Number of doctors are basically flat, number of administrators and so-called healthcare “experts” growing exponentially.

How is that working out for us so far?

Guest
John Booke
Feb 10, 2014

Has the SGR formula failed because congress refuses to enforce it or for some other reason or reasons?

Guest
Retired MD
Feb 10, 2014

Whether you want to call organizations of the future ACO’s or not is not material. What you need are organizations with 2 basic silos for payment. One capitated payment goes to the hospital and the physician employees, and the other goes to the non employed physicians. The two groups will need to talk to each other to determine local criteria for quality, safety, cost, etc., since insurance companies and Medicare have different rules for different localities. One of the many difficulties will be how to deal with physicians not amenable to education on costs and quality. It will be difficult to remove them from a panel, just look at the issues in Connecticut now with United Healthcare.
There should also be a national organization to more broadly define quality and safety, and it should be funded by the physicians and the hospitals, and can use funds from the government channeled through the capitated payments. There are already some organizations like the U.S. Preventive Services Task Force, and AHRQ (but make them non governmental) in existence, but unfortunately too many other groups are based on self interest who will want part of the say and pay. In the next few years you will have a number of academic and clinical physicians to get this started, and that would be all of the physicians who will retire soon. Many of them have had solo or small practices, and have had to deal with all of the changes in healthcare by themselves. They would be paid separately, and there should not be any conflict with practicing physicians who think they will take their jobs away. I know this is a stretch, but if one could start such an organization with sufficient infrastructure backing, and funds supplied by the physicians and hospitals, it might help. It would get the government and insurers out of the business of having to rate physicians from afar, and have local individuals who know the physicians deal with the ratings.
There will always be outliers within the physician and patient populations and that could be a self pay fee for service for the patients that select that kind of care. The other pipe dream is a Medical Court for malpractice and other such issues to help reduce the costs of defensive medicine, which is higher than most non physicians understand, particularly in emergency rooms.
Then, of course, there is the money issue.

Guest
Granpappy Yokum
Feb 11, 2014

“One of the many difficulties will be how to deal with physicians not amenable to education on costs and quality”

I look forward to the local hospitals educating me on the economics of facility fees, $300 throat cultures, and fountains in the lobby.

Guest
Barry Carol
Feb 10, 2014

Retired MD,

I’m interested in your estimate of how much of U.S. healthcare costs are attributable to defensive medicine. I recognize that the concept is impossible to quantify precisely because some decisions to order tests, refer to specialists, etc. may be partly money driven and partly an attempt to satisfy patients as well. Patient satisfaction often comes into play with imaging because it’s not invasive or painful and can rule out serious conditions even when it’s extremely unlikely that the condition is present. Besides, someone else is usually paying and it’s profitable business. I’ve seen estimates of the cost of defensive medicine that range from less than 2% to more than 15% of healthcare costs.

In ER’s, the docs often don’t know the patient and have no immediate access to prior tests and procedures the patient may have had. The hospital also wants to generate revenue, at least under the fee for service payment model, and there is pressure to treat patients quickly and send them home if appropriate – treat ‘em and street ‘em.

Guest
legacyflyer
Feb 10, 2014

Here is my estimate of the % of imaging studies that are “unnecessary” = 50%. And I make my living interpreting them.

Reasons:
1) Fear of malpractice:
I have reviewed many malpractice cases over the course of the last 25 years. I have NEVER seen a case that alleges that an unnecessary test was done. I have seen many that allege a necessary test was NOT done.

2) Treat em and Street ’em.
It is much more time efficient to order all test that you might need up front. Seeing the patient, then ordering the test slows down turnaround time. Most ER docs are rated by the hospital on turnaround time. Enough said.

3) Patient satisfaction:
A) “Sir/Mam, you are a very special person and I am going to do everything possible to evaluate all the possibilities that could cause your complex symptom pattern – because you are so special and I care so much.”
B) “You probably don’t have anything. Take some Tylenol, go home and follow up in a couple of days if you don’t feel better.”

Guest
Retired MD
Feb 10, 2014

Here is a reference to a poll of physicians. http://www.jacksonhealthcare.com/media/8968/defensivemedicine_ebook_final.pdf. The numbers are 26-50% of health care dollars spent. A major area is the unnecessary quarterly follow up by specialists for stable conditions with unnecessary tests that the patient has been taught are necessary. Most of this could be handled by competent primary care physicians on a less aggressive schedule. It is not necessarily seen as defensive care, but if anything happens, even if cared for properly, the primary physician will be blamed. I think a lot of this started in the 1990’s with the advent of primary care physicians as gatekeepers, and the specialists responded with “if only you had been sent to me earlier.” It is part of a turf battle that the specialists have won.
In the ER as many as 20% or more of the patients have a CT scan, many of which are unnecessary. Better coordination with the primary care physician for follow up could eliminate a lot of this.
Patient education and malpractice reform could help.

Guest
Barry Carol
Feb 9, 2014

Tom,

What is Ascension Health doing on the ACO front? They’re a huge hospital system with presumably significant resources and expertise at their disposal. No?

Guest
Tom Leith
Feb 10, 2014

I really haven’t been paying attention to them lately but I have a long string of rejection letters from them, back to 2006 I think. One thing I do know they’re trying to do is act as a sort of angel investor and first customer to startup device makers. That’s interesting. But I don’t know about them and the ACO idea. MG here knows way more than I do.

Guest
MG
Feb 10, 2014

Barry – Don’t have a comprehensive corporate strategy regarding ACOs. They already formed a number of commerical and Medicare ACOs but it has varied considerably depending upon the market. Some of their IDNs such as Seton Healthcare Family in Austin have mutliple ACOs including ones with commerical payers (UHG) and an Medicare MSSP ACO.

The numbers I have seen/run basically state the most aggressive organizations have multiple commerical ACOs (usually with a Blues plan and a national carrier such as Aetna, Cigna, and UHG) and a Medicare ACO (usually an MSSP). Unfortunately, there isn’t any reliable data available on what percentages of an organization’s revenues are ‘at-risk’ and how this will affect hospital cap-ex spending and net patient revenue.

Guest
Retired MD
Feb 8, 2014

Tom Leith almost got it right with nonparticipating vs non participating fees in Medicare. A good explanation can be found at http://www.aafp.org/practice-management/regulatory/medicare.html. Simply, you can opt in or out of Medicare. Then if you opt in, you can participate and accept assignment and get 80% of the Medicare fees from Medicare, and 20% from a secondary insurer or the patient. If you do not participate, your fee schedule is really 5% lower than for a participating physician, so the 115% you can charge is really only 9.25% higher than what the participating physician gets, not 15%. The physician must still file the claim, and the patient will get the money directly, but only at the 80% nonparticipating fee level from Medicare. The physician still can accept assignment if he is nonparticipating, but then he will only get the 80% Medicare part of the non participating fee, which is 5% less that what the participating physician would get, or 76% of the participating fee, but it comes to him directly. The physician then has to get the rest from the secondary insurer or the patient. This is helpful with patients with payment problems who might not be able to afford the bill. So much for doing a good deed. If the nonparticipating physician charges the limiting charge, which is 115% of the nonparticipating fee, and 109.25% of the participating fee, the physician risks getting nothing since the patient gets the money and may decide not to pay the bill, just like in the old days. This is just one of the reasons I am retired.

Guest
Tom Leith
Feb 8, 2014

Ah, very good, thanks RetiredMD. The doc I was working with had >90% Medicare beneficiaries (and a lot of dual-eligibles around 10% — I really do admire the guy’s commitment to the elderly poor) and he/we toyed (briefly) with this idea — that’s where I learned about it. It was a long time ago. Also looked at locating in an underserved county. He went with the guarantee fifteen miles closer to home.

How `bout this: Amend the law to let a doc charge whatever he wants to. The government decides what level of insurance Medicare Beneficiaries get for whatever premium they pay. The doc can decide to TWIP if he likes but the patient has to pre-pay or the doc extends credit and the patient forwards the sum (as in the old days — the patient is insured, not the doc). If the doc thinks someone is trying to take advantage, he can always drop him.

SGR problem solved or not?

Are docs better off or worse off under an old-fashioned indemnity arrangement?

Guest
Retired MD
Feb 9, 2014

There is a form of payment called direct payment that is like the old indemnity plan. In general the fees are lower, and they are clearly posted for the patient to see. It is catching on a little. Patients, however, are now used to their $20 or $30 copays, and have little understanding or desire to pay a deductible. Going back for most will not be possible. There also needs to be a degree of oversight of medical care, and the best way might be for all physicians to be salaried, and then to get bonuses based on quality, etc. However, these payments would be from the organization they belong to, and not the insurer. Sort of like an ACO with budgets. The physician needs to take more of a role in running these organizations, because the hospitals will keep as much as they can if they are in charge. The doctors would need to be the ones determining the requirements for incentive payments, and not have them imposed by others for this system to work, but few physicians are interested in taking the time and effort, since in most cases they do not get paid extra for these services. Can’t solve this on a website.

Guest
Barry Carol
Feb 9, 2014

I like the concept of doctors being paid on a salary + bonus / incentive basis. I also like the idea of doctors playing a key role in determining the metrics and the evaluation process that would drive their bonus compensation. However, if the healthcare system moves toward ACO’s that control the entire continuum of care, it seems that hospitals would be most likely to have the management infrastructure to carve up the bundled payment in a fair and acceptable way including to any non-hospital owned / controlled providers with whom it may have to contract for services that the ACO can’t provide in house. If the ACO is paid on a capitated basis, the incentives would shift to providing less care vs. more care under the fee for service model.

The biggest challenge, I think, will be in defining healthcare quality in a way that’s acceptable to both doctors and patients. I think quality should encompass following evidence based guidelines and protocols (process), outcomes with appropriate risk adjustment, minimizing hospital acquired infections, preventable readmissions and the like (safety) and patient satisfaction. All four factors would have to be appropriately weighed.

To the extent that doctors may be reluctant to spend the time to help develop appropriate metrics, perhaps their resistance could be overcome if the time needed to serve on the relevant committees were spent during the normal workday which means their expected patient load would be reduced from what it would otherwise be while their salary and potential bonus compensation would not be.

Guest
platon20
Feb 17, 2014

Patient satisfaction = giving them narcotics and antibiotics on demand.

How is that working out for us so far?

Guest
Tom Leith
Feb 9, 2014

> The doctors would need to be the ones determining the requirements
> for incentive payments, and not have them imposed by others for this
> system to work

Certainly for it to work well. I have been for about a decade more or less begging docs to do this work — if they won’t then guys like me will do it, and not nearly so well as they would. Search THCB with my name and the word “Guild”. But no, it can’t be solved on a website.

I live in St. Louis, and there is one big physician group (not owned by a hospital) that seems to be positioning itself to be an ACO. This is my own doc’s group — I hope they’re successful and manage to be a sort of model for other docs, especially for primary care. But I’m pessimistic about it…

Thanks for your comments.

Guest
Legacy Flyer
Feb 7, 2014

P.S. I don’t belong to the AMA although they are always trying to get me to join.

Guest
Legacy Flyer
Feb 7, 2014

A little insight into PQRS –

In my specialty, we had to do 3 of about 10 things to get our PQRS money. So we chose the 3 easiest to do.

One was to make sure that we stated in the report how much fluoro time (= amount of radiation) was used. The other was to state in our interventional reports that we had cleaned off the skin in a particular way before each interventional procedure. Don’t remember what the 3rd thing was. So, not wanting to stop the march of medical progress we complied.

PLEASE NOTE: WE DID NOT CHANGE ANYTHING THAT WE ACTUALLY DID. We were already using best practices in prepping for procedures and we try to use minimal fluoro time anyway. We just added another line or paragraph to the report to satisfy the government.

Now some bureaucrat in DC can pat themselves on the back about all the progress being made in reducing radiation exposure and cutting procedure related infections

To paraphrase what the Wizard (more or less)said to the Strawman

Wizard: “I can’t give you a brain, but I can give you a diploma.”
Feds: “We have no idea how to measure the quality of what you do but, we can make you document more things in order to get paid.”

It is so rewarding to be documenting more things for the Feds – which make absolutely no difference to patients – that it makes it all worthwhile. 😉

Guest
Perry
Feb 7, 2014

That pretty much says it all, legacy. I say “if it didn’t happen, at least it’s documented that it did”. That’s the upshot of all this mess.

Guest
Feb 7, 2014

PQRS is a POS.

Guest
tcoyote
Jan 27, 2014

If you clean out the medical students and residents, AMA has about 90 thousand dues paying members. That’s about equal to the combined dues paying membership of the Texas and California Medical Societies. It’s not clear who the 90k dues paying members are, exactly, but that isn’t even 20% of the practicing physicians in the US.

The above posting says, basically, AMA supports all the record keeping requirements of the three committee bills. AMA just don’t want them tying all that box checking to individual physician comp.

Which is a terrible solution because practicing physicians bear all the costs of value-based purchasing/meaningful use, etc. and get their fees frozen. . . and maybe, somehow, get to make more money. It’s like ten years probation and tens of millions of hours community service a year (checking boxes).

Congress ought to be embarrassed after ACA about their lack of understanding of the health system and . . . . there they go again.

Guest

The failed sustainable growth rate (SGR) formula must be eliminated now and replaced with policies that promote both better quality and lower costs in Medicare. Bills approved by Senate and House committees to repeal the flawed SGR formula also include important financial and administrative proposals that represent short-term improvements over current law governing quality reporting and pay for performance programs, which include value-based payment methodologies.

The AMA has repeatedly argued that the value-based modifier is a flawed concept that cannot be equitably applied across the board to all physicians. The AMA will continue efforts to repeal the value-based modifier initiative, while also seeking to move toward a positive incentive structure and eliminate the two-year lag time between quality assessments and payment adjustments.

As the AMA President has previously noted, nothing is set in stone in the current legislative process. While the recent advance of bipartisan bills out of three congressional committees is a huge step in the right direction, much work remains. The AMA is working with lawmakers to move past the annual SGR crisis and toward a Medicare program that ensures access to high-quality and efficient health care for patients and a stable and professionally rewarding practice environment for physicians.

Guest
Dr. Mike
Jan 27, 2014

If the AMA is really working in the interest of physicians, why are less than 20% of practicing physicians members? And with so few members, where does all that money come from with which you lobby? Your reliance on your monopoly CPT income has clouded your vision so severely that you are becoming less and less relevant. You are not the voice of America’s physicians. Anything you supposedly do for physicians should be viewed with great skepticism.
If you had let the SGR cuts go through years ago we wouldn’t be having this recurrent boondoggle. But you milk it year after year with your bandaid fixes. If only CMS would abandon the CPT code set…