Is the SGR Replacement Almost Here?

Kenneth J. Terry, MA


March 14, 2014

In This Article

Why Alternative Payment Models Are Attractive

Both the society presidents and health policy experts say that the bill provisions offering bonuses to doctors who join APMs and exempting them from the MIPS requirements would be attractive to many. If the measure passes, they say, some physicians would probably consider participating in an ACO, where the potential rewards under risk contracts are higher than they are in the MIPS. Of course, the potential downside is also greater, so physicians must be prepared to manage risk.

Physicians account directly for only a fraction of healthcare costs, notes Jonathan Weiner, a professor of health policy and management at Johns Hopkins University. "The real savings are in the big picture [of healthcare], and the only way that docs can profit in the big picture is by going at risk for the total payment [for patient care]," he says. "So potentially that's where there's more savings and more benefit. Those who are ready for that will gravitate in that direction. Those who aren't and don't have the infrastructure will stay with the simpler method of reimbursement."

Alyna Chien, MD, an Assistant Professor at Harvard Medical School, believes that passage of the SGR bill would accelerate the movement of physicians from small practices to larger organizations. Even if a doctor stays in the MIPS, she notes, it's difficult to improve quality without a certain level of infrastructure. "Having to transform your practice in the absence of that infrastructure is a pretty tall order."

Although the bill is designed to change physician behavior in ways that would improve quality and lower costs, it's unclear that the incentives are sufficient to push most doctors in that direction, Chien says. The rule of thumb is that for an incentive program to be effective, it must put at least 10% of a physician's revenue at stake, she says. Not only do the MIPS incentives (except for top performers) max out at 9%, but Medicare revenue forms only a portion of most doctors' income, she notes.

Weiner agrees that the incentives are a little "light." But as ACOs and other APMs generate an increasingly large percentage of revenues, he adds, more physicians will participate in them. Moreover, with hospitals employing roughly one half of all doctors, many of them will have no choice, he notes.

For physicians who remain in the MIPS and must deal with the value-based modifier, there will be some major challenges not addressed in the bill. In a recent New England Journal of Medicine article about the current value-based modifier program, Chien and Meredith Rosenthal observe that there is no way for physicians to know whether their performance will exceed the threshold to get a bonus in a particular year.[6] In addition, they note, the program relies heavily on primary care-oriented quality measures that aren't well suited to subspecialties. Neither of those problems is solved by the SGR legislation, Chien says.

The Devil Is in the Details

Observers agree that if the SGR replacement bill passes, it could prove to be a milestone in our halting progress toward a sustainable, cost-effective healthcare system. But the devil, as always, lurks in the details.

For example, the AAFP is concerned about Medicare ending its bonus for primary care physicians in 2015 and its increased Medicaid payments to generalists at the end of this year, notes Blackwelder.[7] Losing those 2 programs -- which the SGR bill doesn't address -- will be "huge hits to primary care physicians, who need to be the foundation of this system," he says.

It also remains to be seen, he observes, whether the consolidation of the 3 CMS incentive programs would lower the administrative burden on physicians. Moreover, he adds, the bill's provisions would require a lot of negotiations in the regulation-writing process.

"You could pass this bill, and changes could be made that would be absolutely terrible for individual physicians or patients," he says. "Or it could be the basis for moving us forward to a new model of care."

Cooke likes the provision of the bill that allows physicians to form virtual groups. That would be especially beneficial, she says, in rural areas where there are a lot of small practices with little capability to improve care on their own. "There have to be ways for these doctors to organize virtually the clinical teams that patients need. Perhaps they can achieve some economies of scale and a bit more clout in the market by banding together and functioning as ACOs with virtual connections."

Cooke recognizes that some doctors strongly oppose the idea of redistributing income on the basis of performance. But she sees no alternative to taking this route, because the government has no more money to pay physicians.

"We think it's unrealistic to expect annual Medicare updates that are comparable to rises in the cost of living from here on out," she states. "That's what this annual sequester crisis has been about. Congress has desperately been trying to put a brake on Medicare spending. And experts have identified a lot of waste in healthcare. We all need to get much more serious about squeezing the waste out of the system so we can bend the cost curve."


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