Good-bye to the SGR

In politics it has often been said that it is easy to put together a coalition of stakeholders who are unified in their opposition to a particular policy, it is altogether something else to put together a coalition of supporters for what should be the replacement.

Those who think a policy goes too far can be united with those who don’t think the policy goes far enough when it comes to opposing the status quo, even though their vision of the new policy might be vastly at odds.

For many years, this was part of the problem with repealing and replacing the SGR. There was near universal agreement that the SGR was bad policy but getting the provider community to agree on just what should replace the SGR was a challenge.

Last year, a ―unified‖ approach to the replace question emerged leaving policy makers with the final challenge – how to pay for the replacement.

That piece of the SGR repeal/replace effort fell into place earlier this year on April 16 th when President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015.

This legislation not only immediately repealed the SGR – retroactive to April 1, 2015, it set in place a transition from traditional fee-for-service payments by Medicare to a new ―value based‖ or ―quality based‖ payment model that would be fully in place by 2019.

This bill will transition Medicare FFS payments towards a value-based payment system and incentivize the development of new, value-based payment models. The bill also extends funding for the Children’s Health Insurance Program (CHIP) for two years, through September 30, 2017 and extends a number of temporary Medicare provisions colloquially referred to as ―extenders‖ through the end of 2017.

Before fully transitioning to the new payment models, there will be a period of relative stability and predictability to Medicare payments. Later this year (July 1, 2015) Medicare Physician Fee Schedule Conversion Factor (CF) will be automatically adjusted upward by .5%. Then, each January 1st, for the next four years, the CF will be automatically adjusted upward by .5%.

Adjustment to Conversion Factor

Date                                    CF  Automatic Adjustment

July 1, 2015                                    .5%

January 1, 2016                            .5%

January 1, 2017                            .5%

January 1, 2018                           .5%

January 1, 2019                            .5%

These increases are automatic and will not require any additional action by Congress to take effect.

Keep in mind that separate from this automatic update process, CMS will continue to make periodic adjustments to individual CPT code values (RVUs) reflecting changes in work, overhead or malpractice costs. But the specter of annual SGR related cuts or Congressional intervention to prevent these cuts is no longer looming over the physician community.

Between now and 2019, CMS has been directed to work with physicians specialty organizations and other stakeholders to develop Alternative Payment Models (APMs). Broadly, these will be payment models built on the fee-for-service payment architecture but that incorporate the concepts of value and quality into the final payment received by the provider.

CMS and their stakeholder partners will also use this time period to develop more bundled payment opportunities where providers will be paid a pre-determined amount of money based upon the primary diagnosis of the patient and the expected level of patient involvement. The goal here is to pay providers for treating and managing the patient rather than paying the provider for the accumulated value of the services rendered.

Beginning in 2019, the Conversion Factor will be frozen for five years. There will be no automatic updates. Instead, provides will have to ―earn‖ their annual updates either through participation in one of a number of ―to-be-developed‖ Alternative Payment Models or, through participation in a new program called MIPS – Merit-based Incentive Payment System.

MIPS will essentially be combining the existing PQRS, EHR Meaningful Use and Value Based Payment programs into a single new update initiative that will allow providers to obtain increases (or be subject to decreases) depending upon how well a provider scores on these initiatives compared to his/her peers.

Some providers may not want to participate in either MIPS or APM and the law gives the Secretary of Health and Human Services the authority to exempt providers. How easy or extensive that process will be remains to be seen. The operating assumption is, however, that remaining in traditional fee-for-service will be very unattractive financially due to the freeze and so the expectation is that the vast majority of providers will ―voluntarily‖ move to either an APM or MIPS.

The theory behind this shift in payment models is that by incentivizing the providers to better manage the patient, particularly patients with chronic diseases (diabetes, COPD, asthma, etc.), the rate of hospitalization and ER utilization for these patients can be dramatically reduced and Medicare will save money. Of course in 1997, in theory, SGR was supposed to incentivize physicians to modify their practice styles to fit the ―new‖ updating process and we know how that turned out…

While the repeal of the SGR brings to a close a rather tumultuous period in the Medicare program’s history, it also represents the beginning of a new phase for the Medicare program.


Source Article – Healthcare Billing & Management Association