Committee Discusses Permanent Replacements for SGR Formula to Avoid Looming Physician Reimbursement Cuts, Which Threaten Seniors’ Access to Care

July 18, 2012

WASHINGTON, DC – The House Energy and Commerce Subcommittee on Health, chaired by Rep. Joe Pitts (R-PA), today discussed permanent solutions to replace the outdated Medicare physician payment model, the Sustainable Growth Rate (SGR). For the past decade, Congress has repeatedly implemented a temporary “Doc Fix” to prevent substantial Medicare reimbursement cuts, which would result in fewer physicians able to serve Medicare patients. In January, doctors will face at least a 27 percent payment cut. Witnesses representing the insurance industry, provider groups, and academics shared ideas and examples of innovative payment and delivery models being developed in the private sector.

“There is no disagreement that the current Medicare physician reimbursement system, the Sustainable Growth Rate, is broken,” said Pitts. “Time and again, Congress has had to override scheduled cuts in physician reimbursement to avert disaster. There is also no disagreement that the SGR needs to be replaced with something that actually is ‘sustainable’ and reimburses for outcomes and quality, instead of just volume of services. The focus of today’s hearing is not the well-documented deficiencies of the current system, it is about the future.”

“Through feedback from physician groups, a hearing in May of last year, and continued input from a number of stakeholders, we have been able to identify widespread agreement on certain elements that a future payment system will need to incorporate,” said Energy and Commerce Committee Chairman Fred Upton (R-MI). “First, we need to repeal the SGR and put an end to this perpetual cycle of payment instability and threatened access to care. Next, we need to introduce incentives that will encourage physicians and other providers to deliver care that results in better patient outcomes, maintains access to needed medical services for beneficiaries, pays providers adequately and fairly, and reduces the rapid growth in spending in the Medicare program.”

Dr. Kavita Patel, Fellow at the Brookings Institute’s Engelberg Center for Health Reform Studies, highlighted the need for long-term reform and underscored the objectives that need to be achieved. Patel testified, “First, we must achieve a long-term vision for payment reform that will help chart a path towards clinician-driven, evidence-based medicine that preserves the autonomy of physician-patient relationship while moving the profession towards greater accountability. Then, we must look to current innovations, especially those that are clinician-led to help us achieve broader system wise savings.”

Dr. Bruce Nash, Chief Medical Officer of Capital District Physicians’ Health Plan, explained how CDPHP’s not-for-profit, physician-sponsored, network model health plan has developed and deployed a reimbursement model that incentivizes quality over quantity. “This model involves a risk-adjusted global payment for all services that the physician provides, in conjunction with a significant bonus focused upon elements of the Triple Aim,” said Nash. “The combination of these two creates an opportunity for a physician to enhance his or her reimbursement by an average of 40 percent. A fundamental characteristic of the model is that it provides higher rewards specifically for better care of the sicker patients who consume the greatest amount of our health care dollars.”

BlueCross BlueShield Association’s President and CEO Scott Serota shared how Medicare can incorporate lessons learned by the private sector. “First, change payment incentives, by putting in place innovative payment models that move away from fee-for-service – which rewards volume – and link reimbursement to quality and outcomes,” said Serota. “Second, partner with clinicians, by giving them individualized support – such as access to data on patients’ full continuum of care, and help improving the processes by which care is delivered – they need to be successful under new payment and care delivery models. Third, engage patients, by providing consumers with wellness incentives, transparency tools so they understand the quality and costs of services, and information on how to keep healthy and manage chronic conditions.”