WASHINGTON — Congress should fix Medicare's payment formula before taking on any new reforms to pay physicians on the basis of quality, medical organizations testified at a hearing of the House Ways and Means health subcommittee.
If impending cuts to the fee schedule go into effect, “physicians will be hard pressed to undertake quality initiatives such as information technology,” testified Nancy H. Nielsen, M.D., trustee to the American Medical Association.
President Bush's budget request for fiscal year 2006 includes a scheduled 5.2% payment cut for physician services under Medicare. Actuaries estimate that physician payments could decline by over 30% through 2012, unless modifications are made to the sustainable growth rate (SGR), a component in the pay formula that determines each year's update.
Although the AMA has engaged in its own evidence-based, quality improvement measures, “it is critical to replace the flawed physician payment formula to allow quality initiatives to flourish,” Dr. Nielsen said.
Going ahead with pay-for-performance initiatives but not changing the formula to stave off the 5.2% cut “is unacceptable,” Jerome B. Connolly, senior government relations representative with the American Academy of Family Physicians, told this newspaper.
At the hearing, pay-for-performance proposals were heavily touted as a viable payment alternative by witnesses and panel members alike. “We fundamentally have to rethink how we pay our doctors,” said Subcommittee Chair Nancy L. Johnson (R-Conn.).
Some physicians perform better than others in the quality of care they deliver, Glenn M. Hackbarth, chairman of the Medicare Payment Advisory Commission (MedPAC), testified.
The SGR system “fails to create appropriate incentives to improve performance,” he said. MedPAC in its March report to Congress recommended a quality incentive payment system for physicians under Medicare, using various types of information technology to manage patients.
Such an approach would establish exclusive performance standards and award physicians accordingly, while establishing standards to improve quality, he said.
Rep. Pete Stark (D-Calif.), the panel's ranking member, countered that he was “reluctant to get into the quality issue.” As far as reforming payments, “I think it's up to the doctors to regulate themselves.”
Any type of payment system that rewards providers by improving patient care and outcomes must not be punitive or used as a control for physician volume, said William F. Gee, M.D., a urologist from Lexington, Ky., who testified on behalf of the Alliance for Specialty Medicine, adding that measures should also be specialty specific.
In addition, the reporting of quality or efficiency indicators and health outcomes data could be administratively prohibitive to many physicians, especially those in small practices that don't have electronic health records, Dr. Gee testified.
There is some evidence that pay for performance can work, at least in the private sector. Since the implementation of three major pay-for-performance contracts with Partners Healthcare System in Boston, “we have steadily improved in targeted areas,” such as diabetes care, Thomas H. Lee, M.D., network president for the health care system, testified. The rate of rise in pharmacy spending under these contracts averaged about 5% in 2004, lower than the national average of 9%.
In addition, Partners has developed decision support to help guide physicians to more appropriate ordering of costly imaging tests. Early information indicates that the rate of rise for imaging is less than the national trend of 15%-18%, he said.
The contracts cover care of more than 500,000 primary care patients, and a number of referral patients to specialists.
Even With Large Pay Cuts, Physicians Did Not Abandon Medicare in 2002
Physicians did not run away from Medicare in 2002, despite a 5.4% cut to their payments, the Government Accountability Office reported.
In analyzing all Medicare physician claims for services provided from April 2000 to April 2002, the GAO found that the percentage of beneficiaries getting treatment actually increased—and that access increased in almost every part of the country.
For example, the percentage of beneficiaries receiving physician services during the month of April rose from 42% in 2000 to 46% in 2002.
Findings also suggest Medicare beneficiaries were less likely to be exposed to balanced billing over time, from 1.7% of claims in 2000 to 1.3% in 2002.
Since 2002, Congress has provided some temporary fixes to prevent further cuts to the fee schedule, although a 5.2% cut is expected in 2006, unless permanent measures are taken.
Several such permanent changes have been proposed, all of which are costly.
GAO has estimated that removing prescription drugs from the SGR this year—an option favored by some medical organizations—would fall short of providing the immediate fix that physicians want. Fees would continue to decline by about 5% per year from 2006 through 2010, before rendering a positive update in 2011.