December 5th, 2013
Recently, bipartisan leaders of two Congressional committees—Finance in the Senate and Means and Ways in the House—released a proposed solution for the longstanding “doc fix” dilemma. Thus far, this debate has seen lawmakers annually defer the deep Medicare physician pay cuts mandated by the (ironically named) “Sustainable Growth Rate” (SGR) mechanism—postponed cuts that have today ballooned to nearly 25 percent. As such, in the aggregate, this draft proposal should be lauded for what it is: a wonky, bipartisan triumph against a thorny policy challenge amidst record-high Congressional gridlock. Because the current SGR system not only fails to provide incentives for physicians to rein in the volume of services they provide, but also cannot differentiate between increases in the volume of physicians’ services that are desirable (e.g. preventive care) and those that are not, the proposal’s call for replacing the SGR entirely is, well, entirely logical.
However, this appraisal comes with great caveat, for many of the solutions proffered by lawmakers in the draft document are also acutely incomplete. In capitalizing on the window of opportunity afforded by the historically low CBO-scored cost of an SGR repeal, the drafters of the proposal have rushed in stitching together the reform, and it shows. With visible seams, the proposal at times merely feels like a fix for the sake of nominally having one. How does this doc fix still need fixing? Let me count the ways.
1) Largely retains fee-for-service care. A cornerstone of the SGR repeal proposal lies in supplanting fee-for-service (FFS) Medicare payments with value-based reimbursement schemes, and rightly so—the broken incentives of FFS in increasing overall care utilization are well-documented. To this end, the document charts out a plan for consolidating the quality-based payments outlined within the Affordable Care Act (ACA) into a single, metric-driven value-based performance (VBP) system.
However, by leveraging the largely toothless value-based modifier system set by CMS under ACA guidelines, in which payment modifications lie on the order of 1 percent or less, the proposal fundamentally leaves intact the incentives for service providers to continue administering high-volume care. For example, a 2012 Health Affairs study by Werner and Dudley found that VBP would likely have little to no influence on overall hospital care. Even at the higher percentages set by the proposal, the payment modifications are arguably too trivial to realign incentives for providers. This stands in stark contrast to an analogous—albeit far more effective—policy set under the National Health Service in the United Kingdom, which ties as much as 30 percent of payments to quality metrics.
2) Leans heavily on yet-nascent pilot efforts. Recognizing the value in alternative payment models (APMs) in addition to VBP reform in realigning provider incentives toward improved quality, the proposal puts forth financial incentives for physicians to join these models. Specifically, it outlines 5 percent annual payment bonuses through 2021 for those that receive a substantial share of revenues from APMs. Furthermore, physicians joining APMs are stated to be exempt entirely from VBP assessments.
On paper, this is all good and well: as stated above, marginal VBP adjustments alone are not enough to mend Medicare’s broken incentives; only through wholesale reforms in APMs can such a paradigm shift in physician payments take place. The problem, however, is one of timing—APMs are by most measures simply not yet ready for the spotlight. For one, countless APM pilot studies spurred on by the ACA remain ongoing, and there is unlikely to be consensus in the literature around successful successors to traditional FFS systems before 2016, when the SGR repeal is phased in. Moreover, a litany of recent evidence on the cost-curbing potential of existing APMs (including a 2012 Congressional Budget Office report) has proven, in a word, underwhelming. Heavy-handed incentives to flood additional clinicians onto these pilots put further strain on the experimentation while arguably doing little to improve care.
3) Glosses over clinical realities. In addition to the above measures, the draft proposal establishes a variety of carrots and sticks to promote improvements in clinical practice activities, ranging from implementation of coordinated care to health IT systems. However, the proposal glosses over the fact that clinical practice improvements are not merely binary in nature; the level of efficacy matters immensely. For instance, defining truly meaningful use of electronic health records (EHR) has turned out to be deceptively challenging; recent evidence on the reform potential of EHR indicates that how a health system implements EHR is at least as important as whether it does so at all.
In parallel, the penalties imposed on “poor performing” professionals that lack the wherewithal to institute clinical activity changes leaves these providers even less equipped to improve their services. This has the potential to create a “Matthew Effect” for health care where less effective providers continue to slide in quality. Though the proposal does set aside $10 million each year from 2014 to 2018 to provide such technical assistance, this is a relatively paltry sum against the costs required to implement such systemic transformations as care coordination.
All in all, though the bicameral, bipartisan proposal presents a significant advance in the doc fix debate, it yet lacks the substance necessary for a truly fundamental shift in the incentive scaffolding established by Medicare. Rather than nominally leaping to wholesale reform, Congress should instead take measured steps that align with policy research and clinical realities.
First, APMs should be formally introduced into Medicare only upon the completion of the ACA’s pilot payment reform projects in 2018. At this time, APMs can be phased in with a fuller, evidence-based understanding of strengths, limitations, and best practices. Moreover, rather than sequestering APMs from the VBP system entirely, these payments should continue being adjusted by the value-based modifiers to ensure a smooth transition.
In the meantime, to wean providers off of volume-incentivizing FFS payments, higher value-based modifiers should be employed to bring the adjustments in line with the effective UK precedent. Expanding, in parallel, the pool of funding available for technical assistance with improvements in clinical practice activities will help under-resourced providers keep pace with rising quality standards. Ultimately, tying these improvements to performance-based outcomes (e.g., reduction in coding errors), as opposed to merely binary process measures (e.g., EHR implementation), can ensure a more guided implementation process.
Rectifying these issues will require patience—a “wait and see” mentality that may not score immediate political points. However, the result may just be a Medicare fix that is truly sustainable.Email This Post Print This Post
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