House Committees Advance Medicare Physician Payment Reform Effort

Published Thursday, April 4, 2013


On April 3, leaders of the House Energy and Commerce Committee and the House Ways and Means Committee outlined details of a proposal to repeal the current Sustainable Growth Rate (SGR) system and replace it with a fair and stable system of physician payment in the Medicare program.

Energy and Commerce Committee Chairman Fred Upton (R-Michigan), Ways and Means Committee Chairman Dave Camp (R-Michigan), Energy and Commerce Committee Chairman Joe Pitts (R-Pennsylvania) and Ways and Means Health Subcommittee Chairman Kevin Brady (R-Texas) stated that, “Fixing the flawed SGR physician payment system is a top priority for the Committees on Energy and Commerce and Ways and Means. We recognize that the uncertainty over potentially devastating reimbursement cuts makes it difficult for practices to plan for the future. This uncertainty affects decisions to hire necessary staff and make investments in practice improvement.”

They added, “We envision a system where providers have the flexibility to participate in the payment and delivery model that best fits their practice. The overarching goal is to reward providers for delivering high-quality, efficient health care, whether in a fee for service system or in an alternative payment model program.”

The multi-phased proposal, which would eliminate the 24.4 percent across-the-board cut slated for January 2014 and any future SGR cuts, specifies a process to reward providers for high-quality and efficient care in the fee for service program. In addition, the proposal includes processes to determine quality and efficiency measures that focus on evidence while being flexible and specialty-specific; recognizes the role that specialty-specific registries play in facilitating quality improvement while minimizing provider participation burden; and addresses the need for timely performance feedback to allow providers to identify improvement opportunities and optimize incentive payments. 

Some details of the proposal are as follows:

  • Phase I is designed to provide stable, predictable updates: SGR will be repealed so that it will not determine the payment update in any future year. Providers will receive stable, predictable fee schedule updates that are set in statute for a specified period of time. These updates will apply to all providers. This will allow providers the time to develop quality and efficiency measures as well as clinical improvement activities that are key to Phase II and Phase III of the proposal. This will also afford providers time to assess the applicability of private sector and Medicare alternative payment models.
  • Phase II: A portion of payments will be based on quality through an Update Incentive Program. Provider payment rates will be based, in part, on the quality of care provided to beneficiaries. A provider’s payment rate will consist of a base rate and a variable rate tied to performance. Providers will have three ways to receive credit that will determine their variable, performance-based rate: score on quality measures relative to their peers; significant improvement in their own quality score from the previous year; and executing clinical improvement activities. Quality measures are to be risk-adjusted as to the severity of illness so that providers are not penalized for treating sicker or more complicated patients. Providers can choose whether the assessment of their quality occurs at the individual or group practice level.
  • Phase III: In Phase III, provider payment rates will continue to be based, in part, on risk-adjusted measures of the quality of care delivered. Providers who meet a minimum quality score threshold will also have an opportunity to earn additional incentive payments based on efficient use of health care resources. Provider efficiency will be assessed using a risk-adjusted relative ranking system that also takes geographic differences into account. The Secretary of the Department of Health and Human Services (HHS) will consider both episode-based and per capita measurements for provider costs of care. Providers can choose whether the assessment of their performance—on quality and efficiency—occurs at the individual or group practice level. During Phase II, the Secretary of HHS will solicit physician organization input on how to assess efficiency in Phase III. The Secretary will continue to consult physician organizations on the efficiency measures on an on-going basis.
  • Providers can choose to participate in an Alternate Payment Model (APM) at any time. Services that are provided in a payment model that has been assessed and approved by the Secretary of HHS will be exempt from the Update Incentive Program and will be reimbursed according to the payment arrangements of the model.
  • Periodically, the Secretary of HHS, the Comptroller General of the United States, and the Medicare Payment Advisory Commission shall submit to Congress a report analyzing the extent to which the Update Incentive Program is successfully satisfying performance objectives and the status of Alternate Payment Model development.

This proposal is currently being reviewed and revised and has not been introduced as a bill. It is possible that the House Energy and Commerce Committee will begin to consider it in late April or May.

AAGP remains committed to continuing to work with other medical organizations and consumer organizations to reform the Medicare payment system on a permanent basis. There needs to be a permanent solution to this problem in order to preserve Medicare beneficiaries’ access to care and provide for fair reimbursement for all practitioners under the Medicare system.