House Democratic leaders last week quietly compromised away the Medicare provisions in their State Children’s Health Insurance Program (SCHIP) reauthorization bill as they hunkered down for a veto fight. Prudently set aside for the moment is the Dems’ aggressive attack on Medicare Advantage (MA) insurance subsidies. Gone also is an intriguing and widely overlooked package of physician payment changes included in the original House Children’s Health and Medicare Protection Act (CHAMP) that would replace the troubled sustainable growth rate (SGR) formula and reinvigorate long-languishing efforts to beef up Medicare’s primary care payment levels. 

Who noticed Title III of CHAMP? Instead of a single annual update factor for Part B’s resource-based relative value scale (RBRVS) system, CHAMP would have reclassified physician services into six new categories, with separate update factors and procedures for each. And here is the stunning heart of the matter, in the words of the committee summary referenced and linked above: 

Primary Care and Preventive Services Category annual allowed growth would equal growth in the gross domestic product (GDP) plus 3 percent; annual allowed growth for other service categories would equal the GDP growth. Future fee schedule updates would take into consideration the prior “overhang” of accumulated excess expenditures under the SGR system, but would not incorporate growth of expenditures for clinical diagnostic laboratory tests or drugs.

Earlier this year, the Medicare Payment Advisory Commission (MedPAC) produced a characteristically thorough and precise 216-page analysis of the SGR problem and a menu of solution alternatives, out of which the Ways & Means and Energy & Commerce committees appear to have carved CHAMP’s silent bombshell. Given the priority that the Democratic leadership attached to the issue of Medicare Advantage subsidies, it seems unlikely that the MA provisions abandoned last week in the heat of the battle over SCHIP will be forgotten for long. But is primary care on their priority list, too? Surely the second coming is at hand… 

Slouching Toward Bethlehem 

For those who imagine that reform will have to start with reshaping a fragmented and anarchic delivery system, shoring up primary care is a good place to start. The rest of this scenario, as these dreamers know, involves a reorientation of providers to more “continuous, coordinated, and comprehensive care,” in the words of the original House-passed CHAMP bill. This journal has published some discouraging news about the current state of provider relations in the fee-for-service wilderness. A decade ago, overly optimistic efforts to predicate reform on formation of fully integrated care organizations in every market probably precipitated a retreat into hyper-fragmented fee-for-service markets that was more severe than it had to be. But the possibility of building more collaborative provider relations and more coordinated patient care continues to animate local efforts to create a better system from the ground up. 

In a fascinating discussion at MedPAC’s September meeting, commission staff reported on rippling waves of collaborative effort between hospitals and physicians. In one survey, 86 percent of hospitals were actively recruiting physicians to become staff or community network partners. Out of the ashes of the failed physician-hospital organizations (PHOs) of the 1990s, the flowers of coordinated care may be blooming again, in a rich variety of sizes and shapes. But MedPAC member Nick Wolter responded to the staff report with a sober warning. 

Although I think many hospitals now are trying to look at clinical integration and have very lofty goals about how they might tackle some of our current issues with physicians, there is no question that many of the joint venture arrangements they go into with physicians are to drive volume. That is the strategy. 

Wolter might have added that lofty goals still survive in some physician groups, where organizational culture and shared values drive behavior as much as an eye for the marginal dollar. But in the current environment, no one could be blamed for thinking that financial incentives are all that really matters. And there is room for doubt that the social goals of quality and good patient outcomes can be translated into financial incentives. It would be a pity if it turns out that the pathway to integration has finally been discovered only when it is too late to do any good.