The Big Fix. Medicare Doc Pay Enters a New Era

Screen Shot 2015-03-23 at 8.02.41 AMIt’s done.  Congress on April 14 passed and the president signed into law a bill that terminates one of the most egregious and silliest examples of dysfunctional government in recent years—the so-called “sustainable growth rate” (SGR) formula for doctors’ fees under Medicare.

A previous blog explained the background and protracted lead-up to this moment.

Now what?

First, a round of applause for bipartisan agreement—however obvious it was that had to happen in this case.   The vote in the house was 392-37.  In the Senate, it was 92-8.

Praise is also in order for enacting two more years of funding for the Children’s Health Insurance Program and $7.2 billion in new funding over two years for community health centers, a program that was expanded under the Affordable Care Act and serves low-income families.  There’s also welcome help for low-income Medicare beneficiaries and rural hospitals.

But the main thrust of the law is to kill one (failed) program that adjusted doctors’ fees under Medicare and create a new and hopefully better one.

The new payment scheme was hammered out over the past two years with input from a range of stakeholders, including a host of physician groups.  As such, it represents a sort of compromise, both political and policy-wise.  It threads the needle between physician groups whose main interest was making sure doctors get paid enough and reformers whose interest was in controlling federal health spending and putting payment for physician services on a totally new footing.

There were also political compromises on how the law gets paid for, with a 10-year $70 billion hit split roughly equally between providers (hospitals, nursing homes and home care agencies) and higher income Medicare beneficiaries.  The balance of the cost, around $140 billion, will be added to the federal budget deficit.

But the real challenge is whether the new payment scheme will work where SGR failed.   The goalposts have shifted.  SGR, enacted into law in 1997, was devised to limit the growth of physician expenses under Medicare by preventing doctors from pumping up the volume of services they deliver to compensate for slowly rising fee updates.   The new payment plan has a bolder goal for the era we live in now: it seeks not just to limit the growth of Medicare spending but to do so by:

  • improving the overall quality and safety of care

  • enhancing physician accountability

  • rewarding doctors financially for high quality care and good results and penalizing them for poor results

  • removing incentives to provide excessive care and

  • incentivizing doctors to become part of care networks (such as ACOs) that, over time, will no longer receive most of their revenue from fee-for-service payments.

The law offers doctors choices on this new path.  But notably, it does not specify all the moving parts.  That will be left to a CMS-run implementation process that will unquestionably be the stuff of much frustration, rancor, road-testing, and trial and error over many years.   Why? Because, although we arguably are in a much better position today to maximize efficiencies in how we pay doctors and get the best out of them, there is still much to be learned and some big obstacles.  (See below.)

The good new for docs?  You have some time.  The new payment program replacing SGR doesn’t start until 2019.  The ok-but-not-great news: from July 2015 to July 2019, you’ll get a 0.5% per year fee increase in your Medicare fees.  Better than nothing!  The bad news (from many doctor’s perspective):  the federal government is going to be pushing you to do stuff that will be hard.

The new payment system

Here’s the basic structure of what replaces SGR:

By 2019 doctors who treat Medicare beneficiaries (and that’s the vast majority of doctors) must choose between two options: enroll in a program called the Merit-based Incentive Payment System (MIPS; you thought we were going to escape acronyms?), or  sign up to be part of an Alternative Payment Model (Yes, an APM).

MIPS will adapt and meld into one three existing incentive pay and quality improvement initiatives—the Physician Quality Reporting System (PQRS), the Electronic Health Record-Meaningful Use (MU) program, and the Value-Based Payment Modifier (VBM).

That’s a very good thing because these programs, however well intended and meritorious, created confusing, overlapping and sometimes conflicting burdens on doctors.   Front line physicians hated them, for the most part, although the vast majority of doctors are now participating.  Over 400,000 clinicians have received money under the EHR-MU incentive program, for example.

Doctors opting for MIPS must report quality-of-care measures to CMS.  How is to-be-determined but will likely use an upgraded and improved PQRS system, and start with an a la carte choice of quality measures from a menu.

Physicians will be scored—potentially with one composite number. Again, how is TBD.   If their scores are good, they will get a bonus from a pool of funds that will be set aside each year (as VBM works now).  If their scores are low, they’ll be subject to a penalty taken out of their fees.

MIPS scores would have to take four factors into account: quality (30 percent); resource use (30 percent); meaningful use of EHRs (25 percent); and practice improvement activities (15 percent).  The percentages would be adjustable, however—how is TBD.

Maximum bonuses and penalties would be 4 percent in 2019; 5 percent in 2020; 7 percent in 2021; and 9 percent in 2022 and beyond.   An additional $500 million per year would be set aside for bonuses to doctors (or group practices) who deliver “exceptional” performances.  How will that be assessed?  TBD in the regulations.

Doc groups are mostly happy with MIPS, having had a big hand in designing it.  In the words of the AMA, MIPS is designed to have “more fairness, flexibility, and new opportunities to earn significant bonuses” and “be a more accurate scorecard of each practice’s actual quality of care.”

The APM path

Doctors choosing the APM path would have to be part of an integrated health system, join an ACO or an approved patient centered medical home.  They’d be required to receive a “significant” portion of their revenue/income through mechanisms that base payment on performance and that involve financial risk.  Significant revenue is defined as 25% of total Medicare revenue in 2018, increasing to 75% in 2022.  Physicians participating in medical homes would not be required to bear downside risk.

Smartly, Congress appears to want to push doctors into APMs.  For  doctors that join in and qualify, there’s a tidy annual 5% bonus from 2019 to 2024.   There’s solid momentum on ACOs already.  Some 400 of them serve about 6 million Medicare beneficiaries.

The law authorizes $20 million a year from 2016 to 2020 to help doctors in group practices participate in MIPS or transition to an APM.  Regulations could well bend that to APM transition assistance.

The potential problems

OK, so what are the problems and pitfalls?

(1) The biggest is that the field of physician performance measurement has not evolved as quickly as hoped, despite a decade of work.  There are lots of technical and methodological reasons for that.  Suffice it to say here that it’s not an easy thing to do.  However, grading docs on quality and performance is also something that doctor’s groups have stalled and sometimes disrupted, arguing that the science is just not there.

Even so, the new law puts the physician community in the cat bird seat to develop and test new measures.  Not exactly the fox guarding the chicken coop, but akin.  Summarizing the input I got from everyone I spoke to or exchanged emails with for this blog:  We are in desperate need of better measures and quicker ways of developing them.   (I will write a follow-up blog on this soon.)

CMS also needs to find a new path to involve other stakeholders more prominently in measure policy and assessment, such as the Consumer-Purchaser Alliance.      The agency also needs to figure out how to make more effective use of an organization called the National Quality Forum, whose main job it is to endorse performance measures using a multi-stakeholder process.

Wisely, the law authorizes $75 million from 2015 to 2020 to upgrade measure development.  It also includes a fairly strong statement on the importance of developing measures that assess the actual outcomes of care rather than clinical processes that are too-often weak proxies for the results patients get.  And the law specifies that patients’ own assessment of their care and outcomes be factored into performance scores.

Quite simply, unless measure development and use can be improved over the next few years, MIPS and the APM path won’t work well.

Related, quality measurement will increasingly rely on extraction of data from EHRs, as it must.  As regular THCB readers know well, not all EHRs are created equal and the mechanics of extraction has lagged.  The new law sets a goal of achieving interoperability of EHR systems by December 31, 2018.  If not achieved, the HHS Secretary can decertify EHRs.  That’s good.  A study is also ordered up to lay out better ways of assisting physicians in comparing and selecting among certified EHRs.

Needless to say, the best ones that allow for easy extraction should rise to the top.

(2) The second potential problem is that MIPS preserves and builds on the current Medicare fee-for-service (FFS) system.  That is, in the words of a recent piece by Sarah Kliff on Vox, “it layers some bonuses (and some penalties) on top of a system that still pays doctors a set amount for each medical service.”

In fairness, that may not have been unavoidable at this juncture.   But it’s not ideal going forward for the simple reason that FFS inherently incentivizes doctors to deliver more care (volume in the parlance of healthcare economics) than necessary, especially if their fees are not keeping up with inflation.  The trouble is no one quite knows how or when we are going to be able to kill FFS completely.   A debate for another day.

(3) Will the MIPS bonuses and penalties be enough?   For some doctors, yes; for others, no.  A quick, very oversimplified example:  A doc bills all payers $300,000.  Half of that is to Medicare.  That’s $150,000.  Capping the penalty at 9% in 2022 means at worst this doc loses $13,500, or 4.5% of income.  It’s not nothing, for sure.  But wouldn’t having more money at stake be better?   I think so and believe the cap should have risen to at least 15% by 2022.

And, remember, as we have seen with the hospital value-based purchasing program, very few providers end up in the worse case scenario; most get penalized relatively minor amounts.  Those can be “written off” as the price of business in the new accountability era.

Like all laws, the impact of this one will flow out for years, keeping government officials, providers, lobbyists, and researchers busy.   It’s good, though, that these days we are more and more focused on assessing the most important affect of a new healthcare law: did it improve the care people get and the health of the population?  This new law, as with the ACA, is very promising on that front.

Steven Findlay is an independent journalist and editor who covers medicine and healthcare policy and technology.


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6 replies »

  1. I think we should be able to measure better before we start going for larger penalties or rewards. I will say as someone who runs a group, hires and fires and pays bills, getting away from the FFS lets me do some things we have always wanted to do. It is taking a lot of time and work, but we are already seeing better outcomes and expect even more improvement. Over 40 years in medicine in some form and this is the first time I remember a focus on both costs and quality at the same time.

    William Palmer- Watch Adam Grant’s You tube on givers and takers. The giving style you describe is prone to burnout, but those who don’t are often the best at what they do. That said, the lone wolf in medicine is mostly gone. That is mostly for the better. Each doc practicing based upon what his gut tells him is the right thing to do should be a thing of the past. We should mostly be doing the same things. We should work collaboratively. Still lots of room for how individual styles vary, but what we actually do shouldn’t be that different. Maybe most of all we need to be able to measure what we do and respond accordingly.


    • Steve–You and we would love the industrialization of medicine. No way. Every patient you think has CHF only has a little elevation in creatinine, a history of a DVT, a CRP that is mildly elevated, a BNP and EF that are strangely normal, and tender proximal interphalyngeal joints on one side. Alas, no silos can be found for him. Sorry.

      • Steve–I’m not trying to be cute, but what you yearn for is like telling a housewife that you can industrialize her housework. She would laugh. Some efforts have too many combinations and permutations.

        Well, you could be harsh and only use evidence-based therapies. All our wealth would then be transferred to the legal profession because community standards are not the same as evidence-based standards. Very little of what we do is evidence-based when you say to yourself ” What does the literature say is the best way to treat a patient who has a usual interstitial fibrosis of the lung but also has diabetes II.” RDBCTs have never been able to solve the problems of co-morbidities. Policy folks should try to attend clinical conferences in hospitals so that they can see what is actually happening.

  2. The best docs in my experience have been the ones who have worried about their patients. They may not have been the most efficient or productive or intelligent or charming. But they get the job done by bringing in their colleagues’ advice at coffee, by researching in the library, by calling the patient at home, by giving the patient their contact numbers and emails, by being available during holidays, by coming to the lab to get the pathologist’s viewpoints, by visiting the bacti department to look at the Petri dishes, by talking to the radiologists, and by talking to the administration about patient complaints and billing, etc.

    How to sum this up? I guess it would be that docs who are the most interested and selfless (kind, altruistic) seem the best.

    Of course, the culture may not have space for this ideal at this time. Or it may not have the money or resources. These types of doctors wear out fast and are abused by the system.

    I haven’t the foggiest idea how you would measure these attributes in order to reward performance. It might be better to try to be less sublime and simply go for produtivity measurements. Take the art out of health care and do your thing. The superior docs can start their own Doc2 profession, where the art can remain and be less rewarded.

  3. “And, remember, as we have seen with the hospital value-based purchasing program, very few providers end up in the worse case scenario; most get penalized relatively minor amounts. Those can be “written off” as the price of business in the new accountability era.”

    Spoken by an academic who 1) has never worked in healthcare; 2) has never run a business; 3) has never had to pay employees; 4) has never had to pay utlities/rent on clinic space.

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