Unpacking the Doc Fix

If you blinked on Thursday, you might’ve missed the House passing the latest Medicare’doc fix’ (see here for its 30-seconds of deliberation).

After posting the bill in the wee hours of Wednesday morning, House leaders faced opposition over its stop-gap approach and some of the cuts employed to offset the cost of the bill. With some arm-twisting, they managed to suppress objections for the handful of seconds necessary to hammer the gavel and call it done.

The Senate is due to take the bill up Monday evening, and it is highly likely to pass (this time it should actually get a vote). Since it is about to become the law of the land, let’s take a look at what’s inside. There’s a little slice of fun in here for everyone.

First and, theoretically, foremost, the bill blocks the pending cuts to doctors under the long-broken Sustainable Growth Rate (SGR)  formula. It would maintain existing physician pay rates for another twelve months, through March 31, 2015.

Not coincidentally, a vote to raise the debt limit will likely come due again at about that time.

Second, the bill continues, for a comparable period, the package of so-called Medicare extenders: a hodge podge of policies that boost payments in rural areas, suspend caps on certain benefits and other otherwise sunsetting policies that each have their niche constituencies. Many of these items have been reauthorized by Congress for over 15 years.

Third, the bill includes some new policies that put out fires of their own, or effectuate high priority programs for well-placed Members of Congress. These include:

  • An additional six month extension of the Two Midnights Rule, which drew a bright line distinction between presumptive inpatient and outpatient hospital stays but has created significant confusion and objections among many hospitals;
  • A one-year delay of ICD-10 implementation, to October 1, 2015 (this is the second time Congress has acted to delay ICD-10);
  • Elimination of the ACA cap on deductibles for employer-sponsored health plans; and
  • Two provisions aiming to improve mental health services, including the Excellence in Mental Health Act that, among other things, improves funding for community mental health centers.

Woah, some of you are saying. Dial back to that 2nd bullet. While the transition to ICD-10 has been controversial since it was first proposed in 2005, just last month CMS Administrator Tavenner said there would be no more delays (last year, the Administration voluntarily delayed the program from 2013 to 2014).

Healthcare providers have been battening down the hatches and preparing for this colossal transition from ICD-9 and its 14,000 codes to ICD-10 and its 69,000. Word on the street is that the provision was included primarily to earn cred with specialty physician groups, whose support for the bill was in question for concern about other provisions (see the bullet re: misvalued – aka overvalued – codes below).

Turns out, the specialty doc associations by and large opposed the bill anyway, and the healthcare sector is now left grappling with this unexpected turn.

Moving on. Last, but certainly not least, the doc fix includes pay-fors that fund the ~$20 billion cost of the package. While no one likes to get cut, it’s fair to say that most of these items have attracted at least some support from the sectors they impact, easing their pathway to passage:

  • Value-based purchasing for skilled nursing facilities, with  savings equating to 0.6% of payments ‘locked in’ to the program;
  • Cuts to clinical laboratory payments to more closely align them with commercial rates, which have historically trailed Medicare reimbursement considerably;
  • Delay of the inclusion of oral drugs in the bundled payment system for dialysis providers, with some additional cuts to providers that are offset by relief from rebasing policies included in the ATRA;
  • Cuts to physicians and hospitals that use older CT equipment and appropriate use criteria for advanced diagnostic imaging services;
  • Expanded authority and new requirements for CMS to cut overvalued codes under the physician fee schedule;
  • Extension of the ACA Medicaid DSH policy into 2024 (this one will likely be used into perpetuity as the budget window rolls into each new year); and
  • Rejiggering of the Medicare sequester to create more savings in 2024, while redeeming some ‘banked’ savings from the last sequester extension.

So there you have it. My previous posts have cataloged the slow, painful demise of the permanent SGR repeal and reform effort. Suffice it to say that, at least, Congress has made considerable progress in designing a new system to replace the old. It will now sit on a shelf until there is ever the will to agree on the substantial cuts necessary to pay for it.

Billy Wynne is the Founder and CEO of Healthcare Lighthouse, a one-stop shop for comprehensive policy information for healthcare organizations and businesses. He is also a Partner at the Washington policy and lobbying firm Thorn Run Partners. Previously, he served as Health Policy Counsel to the Senate Finance Committee.

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PerryJoe Flower@BobbyGvegasVik KhannaBilly Wynne Recent comment authors
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That’s nice to hear, Bobby. I wish we could convince the politicians.


I feel the need to defend the beleagured family physician at this point ( I am boarded in FP but practice Occupational Medicine). First, most family docs don’t make money on tests ordered. They may be ordered for several reasons, actual necessity, to fulfill some protocol, to pacify a patient or to CYA. As Vic mentioned, we do have a public which expects access to the latest technology and diagnostics. Secondly, family docs have been assaulted by CMS with poor reimbursement and myriad mandates such as EHR, PQRS, MU, looming ICD-10, etc, etc. The ones in private practice are struggling… Read more »


You are correct.

I have long argued that competent primary care physicians should be paid far more than they now get. The latest reported average pay for primary care docs is insulting to them, particularly in light of the training and broad/deep skills required.

PQRS. Don’t get me started. A Quadrant 3 waste of time.

Joe Flower

Thanks for the post, Billy. There is plenty to argue about each bullet point. But the overall point of this news is larger: This is both a window into how we got where we are with such a radically over-expensive system, and at the same time a vision of what “single payer” would look like. Here we see Congress, as Vik points out, micromanaging an extraordinarily complex system, and doing it at the behest of interest groups within healthcare. The AMA RUC and CMS together establish the rates for Medicare, which then become the base rates for the whole system.… Read more »

Vik Khanna

Sigh. This post could really be retitled “Unpacking More Deck Chairs,” as in ones to rearrange on the Titanic, which is what our healthcare system has become. This reads almost comically: our Congress, which is incompetent and negiligent (both parties, both ideologies) on its good days, micromanages issues that are far beyond its expertise but not beyond the reach of interest groups looking for succor and a new fiscal teat to suck on or least the opportunity to suck harder and longer on the ones already clenched in their teeth. We maintain pay for doctors, who steward a system that… Read more »


Will have to be quoting you on my blog. 🙂

Billy Wynne

Hi John: The doc fix addresses the ‘conversion factor’ that is the ‘constant’ variable used to set payments for each service code. It’s the part of the equation that is subject to cuts under the SGR. The RVUs establish the relative amount each respective service is worth. RVUs are predominantly set by the AMA RUC, which can change them periodically, but CMS has final say on how they are applied in Medicare. That misvalued codes provision referenced in this note gives CMS broader authority (and some mandate) to change RVUs, regardless of what the RUC has said. So stay tuned… Read more »

John Booke
John Booke

If this bill passes then will “RVUs” for procedures also be frozen?