Tuesday, February 25, 2014

The Flawed SGR Formula: A Final Fix in Store but at What Price?

SGR Formula
[Reposted with permission from Woodcock & Associates]

After years of general agreement about the problems associated with the formula used to reimburse physicians for services provided to Medicare patients, a permanent fix is finally on the horizon. While experts – and even casual observers – have agreed that the underpinnings of the formula were flawed from its beginning, debate has raged for years about its replacement.

Last summer, three key Congressional committees agreed on a fix, but the budget debate steered their efforts to the sidelines for the remainder of the 2013 session. The determination to replace the much-maligned formula took a big step toward actual reform with passage of the Pathway for SGR Reform Act of 2013 in late December. Congress gave itself three months to fix or replace the sustainable growth formula (SGR). The “patch” provides physicians with a 0.5% increase in reimbursement through March 31, 2014, preventing a massive payment reduction that had been scheduled for January 1.

Earlier this month, Senate and House of Representatives leaders revealed the SGR Repeal and Medicare Provider Payment Modernization Act of 2014, a bicameral, bipartisan agreement to fix the Medicare payment formula. It features the elimination of the SGR, widely agreed to be the root of the reimbursement problems, and replaces it with an across-the-board increase of 0.5% each year for five years. While this agreement may bring to an end the annual dramas of last-minute patches and reversals of egregious payment cuts, the proposed legislation doesn’t guarantee smooth sailing ahead for physicians who treat Medicare patients.

In fact, the proposed legislation combines the government’s existing quality bonus initiatives into a consolidated Merit-based Incentive Payment System (MIPS), promising to develop and assign a “composite score” for physicians based on quality, resource use, clinical practice improvement activities and meaningful use. The downside is significant, with a proposed 9% payment adjustment for those physicians with “low” composite scores.

Only time will tell whether MIPS will usher in simplicity and consistency – or be just another program with more requirements for reporting, deadlines and penalties. Sadly, in reading the legislation, my take on it is that we’re in for a bumpy ride; here’s just one of many examples: “In the case that, with respect to a year, the application of clause (i) results in a scaling factor equal to the maximum scaling factor specified in clause (i), such scaling factor shall apply and the budget neutrality requirement of clause (ii) shall not apply for such year.” Really?!? MIPS is not the only focus of the new legislation, which addresses a wide range of topics from restricting imaging to EHR interoperability.

While the legislation provides a 0.5% increase for five years, the short-term boost gives way to a mandated zero percent update for the subsequent five years (2019 to 2023). An additional cloud over the reimbursement landscape comes thanks to an extension included in the 2013 Murray/Ryan budget deal: the sequestration cuts of 2% will remain in place through 2023 – effectively negating the five-year boost provided by this new legislation.

Most ominously, this payment reform seems poised to increase the regulation regarding reimbursement. If passed, the SGR Repeal and Medicare Provider Payment Modernization Act moves us closer to outcomes-based Medicare reimbursement. You may be required to provide proof of whatever indicators the government decides to use in measuring and monitoring performance by way of its new MIPS program.

As an industry, we said we wanted a fix. Congress heard our message by offering up the SGR Repeal and Medicare Provider Payment Modernization Act but I fear that the legislators also sense that our industry’s desperation to eliminate the SGR might well lead us to accept almost anything in exchange.

With bipartisan support, the legislation seems destined to be enacted into law by the end of March. However, it must overcome both Houses of Congress, as well as the President, first. If it doesn’t, your payments are set to fall by 24 percent on April 1. With that scenario in mind, how many of us will look at more regulation as the lesser of two evils?

[Reposted with permission from Woodcock & Associates.]

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