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Obama Signs SGR Repeal, Heralding New Era in Medicare Reimbursement

Tony Hagen @oncobiz
Published: Thursday, Apr 16, 2015

Dr. Blase N Polite

Blase N. Polite, MD, MPP

With the flourish of a pen, President Obama put an end to a yearly nightmare of congressional budget wrangling when he signed the Medical Access and CHIP Reauthorization Act of 2015 (MACRA), otherwise known as the Sustainable Growth Rate (SGR) formula repeal.

The move eliminates an unwieldy formula for determining physician Medicare payments and brings doctors a big step closer to what the Department of Health and Human Services has envisioned as a value-based care environment.

MACRA, which passed overwhelmingly in both houses of the Legislature, contains a vastly improved set of incentives for doctors to meet performance measures, which are designed to end the practice of relying on volume of care to build up revenues, Blase N. Polite, MD, MPP, chair of the Government Relations Committee for the ASCO, told OncLive in an interview.

“I think this will really up the stakes for us, and I hope this will bring us to the stage in 2019 where we have much more flexibility to innovate with ideas that are coming from the ground up,” Polite, a medical oncologist with the University of Chicago Medicine & Biological Sciences, said.

Polite is optimistic that the level of involvement physicians had in helping to design MACRA and the changes that were incorporated into the $200 billion-plus spending measure means that the Centers for Medicare & Medicaid Services (CMS) will be more receptive to physician input in the future as the incentive plan is refined.

The SGR, designed to keep physician payments in line with inflation and GDP, was blasted for its reliance on huge congressional spending adjustments each year to avoid wild swings in physician compensation. This year, a threatened 21.2% SGR cut in spending helped to prompt movement on the repeal measure.

The replacement package involves $175.4 billion in additional spending over 10 years to keep physician payments stable and to incentivize improvements in coordination, efficiency, and quality of care delivered. The bill also would temporarily extend the Children’s Health Insurance Program (CHIP) and a number of other expiring provisions related to Medicare, Medicaid, and certain grant programs.

An analysis by the Congressional Budget Office has predicted that through 2025 MACRA will increase direct spending by about $145 billion and revenues by about $4 billion, causing a net increase in federal budget deficits of $141 billion.

The program will lead to modest improvements in physician pay over the next several years, with much higher increases and also bonuses to kick in later, based on measures of performance and whether physicians participate in alternative payment models (APMs), which CMS believes will be key to cost-efficient high quality care.

Some of the pay adjustments that may result could reduce CMS compensation for physician services by up to 9%, but Polite notes that there are opportunities for physicians to receive fairly substantial pay increases and bonuses. “Those at the top end could receive as high as a 27% bump,” he says. Those who enter the APMs may eventually qualify for 5% bonuses that are based on their Medicare payments over the previous year.

“The drafters of this would like to see a lot of providers go into programs like this,” Polite said.

Participation in APMs, such as medical homes, accountable care organizations, and bundled care, can help physicians sidestep the penalties that may result from failure to meet performance standards in the Merit-Based Incentive Payment Systems (MIPS) that are a hallmark of CMS changes.

Initial annual pay increases amount to just 0.5% a year under the program but MACRA also provides for annual $500 million payments from 2019-2024, which help to support some of the incentives.

In a review of the legislation, CMS indicated that certain factors such as an unsteady economy or inflationary pressure could still necessitate the congressional “patches” that were common to the SGR-based payment formula. However, CMS expressed confidence otherwise that MACRA represents a balanced replacement for SGR.

“The physician payment rates would be problematic under [MACRA] in years with high inflation, in 2025 when the 5% APM bonus and the $500 million additional pool for MIPS are scheduled to expire, or at the point when the cumulative effects of payment updates not keeping up with physician costs become too large,” CMS wrote.

Key to the optimism expressed by Polite was a shift in performance measures that graduated the penalties and rewards under the program, rather than having broad cutoffs based on certain achievement scores that would have made a single point the difference between getting a bonus, larger fees, nothing at all, or even seeing your payments reduced, Polite said.

“We were always concerned about threshold payment systems,” he said. “It creates winners and losers and disincentives people from working together.”




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