Come Jan. 1, the Medicare physician payment system is likely to have had a major overhaul, perhaps permanently changing the way physicians are paid under the system. Three months out, however, exactly what and when is going to happen is still up in the air.
Under the current Medicare physician payment system, physician reimbursement will be cut by 4.3 percent on Jan. 1. In addition, reimbursement will be cut by an additional 5 percent each year until 2011, reducing reimbursements by close to 30 percent over the next six years. The problem is that the current system, called the sustainable growth rate formula, or SGR, places an overall cap on the amount the government will spend each year on Medicare Part B physician spending. In the last four years, the government has spent more than the cap because the volume of services has increased significantly. The system now must make up the cost overruns incurred in the past several years and also bring the current year’s spending back under the target. Obviously, if there is a set limit on the total amount paid and the number of services has increased, the only way to meet the target is to reduce the amount paid per service. That is exactly what the SGR formula will do over the next six years — reduce the amount paid per service in order to account for the recent unplanned increase in volume.
| Policymakers want the SGR system’s replacement to be a pay-for-performance system. |
Who Will Fund SGR Replacement?
While most policymakers agree that the physician payment cuts need to be prevented, there is a huge barrier in the way: money. Repealing the SGR and replacing it with another system based on medical inflation will cost between $154 billion and $185 billion over 10 years.
The money problem is further compounded by a debate between the U.S. Congress and the Bush administration over who should fund the changes to the formula. If Congress takes action to repeal or alter the SGR formula, it must pay the bill; if the administration takes action, for example, by removing the costs of outpatient physician-administered drugs from the costs counted against physicians, it must pay the bill. Despite more than a year of letters between Congress and the administration on the topic, it still has not been decided who is going to do what, and the administration claims it still is not sure it has the legal authority to do anything.
Enter: Pay for Performance
Policymakers do agree that they neither want to “throw money” at the problem nor repeal the SGR until a replacement system is ready to be implemented. They also are sure about what they want that replacement system to be: pay for performance, P4P, also known as value-based purchasing. Under such a system, a portion of a physician’s Medicare reimbursement would be tied to whether certain quality and efficiency measures were met. Data on a provider’s ability to meet these measures would also be available to the general public. The Centers for Medicare and Medicaid Services already has demonstration projects underway at 10 sites.
“From the beginning, neurosurgery’s position on pay for performance has been ‘no way,'” said Troy Tippett, MD, chair of the AANS/CNS Washington Committee. “However, policymakers view P4P as the great redeemer of the Medicare program, and we have not been able to dissuade them despite dozens of meetings and letters.
“Unfortunately, other medical groups have agreed to sign on to the concept, and Congress and the CMS are moving forward,” he said. “At this point, the only thing worse than pay for performance is a pay-for-performance system that is designed without our input, with some bureaucrat in Washington, D.C., setting neurosurgery’s quality measures.”
Legislation Moves Forward
Two pay-for-performance bills have been introduced in Congress so far: in the Senate, S. 1356, the Medicare Value-Purchasing Act of 2005, and in the House, H.R. 3617, the Medicare Value-Based Purchasing for Physicians’ Services Act.
The Senate bill, sponsored by Charles Grassley, chair of the Senate Finance Committee, and Max Baucus, the committee’s ranking Democrat, would implement pay-for-performance systems for most Medicare providers, including physicians. The bill would not address the impending physician payment cuts, although both senators have stated that they expect the bill to be brought to the floor in concert with separate legislation focused on the payment cuts. Under the bill, the CMS will be required to begin collecting “utilization” information on physicians in 2006. In 2007, physicians will be required to report quality data to the CMS and those who do not will have reimbursements cut by 2 percent. Pay for performance will begin in 2008. Those physicians who do not participate will receive a 2 percent payment reduction. Physicians who choose to participate will either be rewarded with “bonus” payments of 1 percent to 2 percent if certain quality measures are met, or they will be penalized with cuts of 1 percent to 2 percent if quality measures are not met. The CMS will have significant control over the quality measures.
The House bill, sponsored by Rep. Nancy Johnson, would apply only to physicians and would address the pending Medicare payment cuts. This bill specifically will repeal the SGR formula and replace it with the Medicare economic index rate. (The rate traditionally is between 2 percent and 3 percent, meaning that physicians will see a 2 percent to 3 percent increase in Medicare physician payment rates each year.) In 2007-2008, physicians who begin reporting quality measures will receive the full inflationary payment update; those who do not participate will receive 1 percent less. In 2009 and thereafter, physicians who meet the quality measures will receive the inflationary update, and those who do not will receive 1 percent less. The bill also specifically states that physician specialty societies, like the AANS and CNS, should develop appropriate quality measures for their specialty, although they will have to go through a national vetting and approval process. Lastly, the bill establishes a system whereby physicians will be rated against their peers. Beginning in 2009, the ratings will be available to the public, as is currently the case with hospitals participating in the Medicare quality program.
| Initially, neurosurgery has endorsed a set of quality measures designed by the Surgical Care Improvement Program. |
The Senate and House bills will be debated throughout the fall. Neurosurgery will be working to ensure that the payment cuts and SGR repeal are part of any pay-for-performance legislation; public reporting is eliminated, minimized or at least delayed; the implementation of pay for performance is delayed until quality measures can be developed and pilot-tested across a variety of practice settings; and appropriate risk adjustments to any measures can be developed, tested and included.
QIW Develops Neurosurgery’s Quality Measures
While the primary care specialties already have developed and approved a “starter set” of quality measures, organized surgery is a bit behind the eight ball. In an effort to ensure that neurosurgeons are able to participate in such P4P programs, the AANS and CNS, through the Washington Committee, have established the Quality Improvement Workgroup. The QIW is in the process of developing quality measures. Initially, neurosurgery has endorsed a set of quality measures designed by the Surgical Care Improvement Program, of which the American College of Surgeons is a principal participant. These measures include:
- reducing surgical site infections by the timely administration and proper duration of antibiotics, glucose control and proper hair removal;
- preventing adverse cardiac events by appropriately administering beta-blockers to reduce perioperative ischemia;
- preventing deep vein thrombosis and pulmonary embolism with appropriate prophylactic treatment; and
- preventing postoperative pneumonia by employing appropriate medical intervention.
Recognizing that measuring surgical outcomes is the gold standard of quality improvement, the QIW also is launching an initial outcomes pilot project related to lumbar spinal stenosis. The goal is to test the feasibility of developing a robust outcomes database (similar to the program instituted by the Society of Thoracic Surgeons) for a variety of common neurosurgical procedures. Ultimately, the QIW hopes that such a program will not only help neurosurgeons participate in pay-for-performance programs, but will fit in nicely with the American Board of Neurological Surgery’s Maintenance of Certification requirements as well.
“In the beginning, these general, process-type measures likely will be used,” said Robert Harbaugh, MD, chair of the QIW. “However, procedure-specific outcomes measures will be demanded as the programs evolve; these measures take years to develop, which is why we are starting now.”
Barbara Peck, JD, is senior Washington associate in the AANS/CNS Washington office.