The good news, and the practice could use some good news, the annual Sustainable Growth Rate (SGR) threatened payment cuts have ended. A quick summary of key issues:
The new law delivers some positive reforms but does not represent a physician panacea. Yes, the Medicare payment formula is replaced but with many new changes, including: a five-year period of stable, annual 0.5% physician fee schedule updates; creation of a new value-based payment environment by both consolidating existing quality reporting programs, and incentivizing physician practices to move into alternative payment models. Yes, stable fees but, also downstream uncertainty on key issues including increasing physician financial risk.
The law will increase costs for Medicare enrollees with changes phased in over a number of years. Key areas include: boosting premiums for high-income seniors; prohibiting Medigap from covering the Part B deductible for new enrollees beginning in 2020, and somewhat higher Part B premiums spread across the Medicare enrollee base. This will impact patient responsibility amounts and collections.
The new formula directs physicians to choose from two models to participate.
Model 1. The new bill appears to move away from the traditional physician fee for service model to one targeting the value of services provided. For example: paying doctors more when their surgery goes well and less if the surgery has complications. Defining value can be subjective and all too often parochial. The practice will need to move forward with defining internal quality metrics and mining the quality data to address payer quality metrics.
Model 2. Medicare is again targeting financial savings. Physicians will no longer be fully reimbursed for each service provided. The medical group will be paid a defined amount to provide care and services and the group will determine how to allocate resources. Physicians will receive a potnetial 5% increase in addition to their other Medicare payments by selecting this model.
Medicare will phase out the current PQRS, MU and VBM penalty/incentive program by the end of 2018 and will replace the program with two alternatives.
- Merit-Based Incentive Payment System (MIPS). This program rolls three other current incentive programs into one larger program and provides a provider quality score. If the scores are good, reimbursement rates increase. As with most things, the devil is in the details, which will be ongoing.
Think of MIPS as “Payment-for-Value Lite”. It will provide both bonuses and penalties in addition to the system that still reimburses a set amount for each medical service; traditional fee for service.
- Alternative Payment Model. This program provide physician’s incentives for delivering high-quality, cost-effective care. The new formula rewards physicians with a 5% bonus if they meet certain government-defined standards for providing high quality, cost-effective care. This model moves physicians away from reimbursement for the volume of services provided. This payment model will offer groups of physicians the opportunity to contract to receive a defined sum of money to care for a defined group of patients (capitation models and beneficiary panels). If the group can provide care for less and hit defined quality metrics, they retain the unused funds. Other models may include disease based lump sum payments or disease management package payments (Medical Homes). The overall driver appears to discourage providing unnecessary care and services and deliver cost savings. The carrot: physicians will have a financial incentive to provide cost effective care and retain money not used on medical care. This sounds like the previous HMO models but with a new twist.
For now, the MIPS program doesn’t provide much detail on the quality metrics or the wieghting of those metrics which will be used in measuring quality of care delivery. Unfortunately, we are inherently limited by what we’re able to effectively measure. The business management adage “If you can measure it, you can manage it” appears to be the CMS mantra but without defined criteria.
We should be concerned regarding the metric-setting process, which requires CMS to use quality indicators yet to be defined. Also, HHS can add their own metrics to the list. Yes, the SGR was repealed, but the future healthcare environment continues with more unanswered questions. Even though the future is somewhat cloudy, there are some directions provided that will allow you to prepare. With any change there is opportunity, and the best practices will not wait to begin preparing for the future.
We will continue to keep you informed going forward.
Larry and Mark
