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Commission on doc pay urges shift from fee-for-service, end to SGR


By Jessica Zigmond
Posted: March 4, 2013 - 12:01 am ET
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Starting with the premise that physician salary and expenses account for 20% of healthcare spending but the decisions doctors make influence another 60% of that spending, the National Commission on Physician Payment Reform has released a dozen recommendations to ultimately change how physicians are paid by public and private payers.

A year ago this month, the Society of General Internal Medicine convened the commission to suggest new ways to pay the nation's physicians that could improve patient outcomes and lower healthcare costs. In a report released Monday (PDF), the commission concluded that the problems of physician payment are based on systemic issues, such as the traditional fee-for-service payment model, and problems pertaining specifically to Medicare, including the sustainable growth-rate formula to pay physicians and the operation of the Relative Value Scale Update Committee (RUC), which makes recommendations to the CMS.

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The commission's first recommendation urges payers over time to eliminate stand-alone, fee-for-service payment to medical practices. Then it suggests shifting to a system based on quality and value by testing new payment models over a five-year period, with the goal of adopting those models by the end of the decade.

“Because fee-for-service will remain an important mode of payment into the future, even as the nation shifts toward fixed-payment models, it will be necessary to continue recalibrating fee-for-service payments to encourage behavior that improves quality and cost-effectiveness and penalize behavior that misuses or overuses care,” the report acknowledged.

The commission also suggested that the SGR be repealed, and that the cost of the repeal should be paid for with cost reductions from the Medicare program as a whole, which means the cuts would come from both physician payments and reductions in inappropriate use of Medicare services.

It also recommended eliminating higher payments for facility-based services that could be performed in lower-cost settings. As an example, the study noted that Medicare pays $450 for an echocardiogram performed in a hospital, while it pays $180 for the same procedure performed in a physician's office.

The Medicare Payment Advisory Commission made a similar recommendation in its March 2012 report, suggesting that Congress direct HHS to reduce payments for evaluation and management office visits in hospital outpatient departments so that payment rates are equal whether they occur in those settings or in a doctor's office. MedPAC concluded this change could reduce Medicare spending by between $1 billion and $5 billion over five years, but the American Hospital Association contends that the reduction would compromise routine services that are integral to the service mission of hospitals.

Meanwhile, the commission suggested ways to improve the Relative Value Scale Update Committee. Managed by the American Medical Association, the RUC makes suggestions to the CMS about updates to the relative value scale on which physician payments are based. The report suggests that the RUC “should continue to make changes to become more representative of the medical profession as a whole and to make its decisionmaking more transparent.”

The next step is for the commission to make its recommendations to the Society of General Internal Medicine. Funded partly by the Robert Wood Johnson Foundation and the California Healthcare Foundation, the commission is led by Chairman Dr. Steven Schroeder, a professor of health and healthcare at the University of California, San Francisco. Former Senate Majority Leader Bill Frist (R-Tenn.), a physician, serves as the group's honorary chairman.


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