SGR hopes face tough realities

Legislators on both sides of the aisle and on both sides of Capitol Hill are touting their early start on overhauling the Medicare physician payment system. However, those claims of progress will soon run into hard realities: No one has yet come up with a concrete plan to address the biggest obstacles to scrapping the sustainable growth-rate system.

The highest hurdle of course, is money. Congress needs to come up with an estimated $139 billion over the next decade to permanently eliminate the SGR. And then there's the thorny question of what to replace it with.

There were scant signs of progress on those questions during last week's Senate Finance Committee meeting, the first SGR hearing in the upper chamber since 2007. The panel had sent a request for provider feedback on possible payment changes a week earlier.

The House of Representatives, with its large GOP Doctors Caucus, has already held two hearings this year on reforming Medicare's physician payment system. Key committees have also requested physician feedback and are expected this week to start circulating draft legislation.

The flurry of activity is raising hopes among physician lobbyists that the long-standing push to replace the hated SGR formula will finally succeed this year. “Usually we get to the fall and people start wringing their hands and gnashing their teeth, and it's too late to have the kind of discussion we're having now,” said Julius Hobson, a former lobbyist with the American Medical Association who now serves as a senior policy adviser at Polsinelli, a national law firm that also employs lobbyists. The clients of its healthcare lobbyists are primarily health systems. This year's effort “means by the fall we should be able to narrow something down and come up with a package that might work,” Hobson said.

The SGR, created by the 1997 Balanced Budget Act, links physician fees and costs to the U.S. gross domestic product. It includes a “clawback” mechanism that reduces Medicare fees if overall spending exceeds a formula-driven target.

When that provision produced a 4.8% pay cut to physicians in 2002, the outcry from providers led Congress to suspend the cut. The government has done the same every year since, producing the need for an ever-larger reduction that next year could result in a 24.4% cut in Medicare physician payments on Jan. 1, 2014.

Among the early details that appear to be part of the House legislation is a five-year transition to any new payment system. Rep. Phil Roe

(R-Tenn.), a leader in the GOP Doctors Caucus, said that group has joined many physician advocacy groups in opposing efforts for a quick transition to a replacement system because “that's just not enough time to implement something as big as how you pay all of the physicians.”

But such early common ground has left unresolved major sticking points, including the fact that the two chambers are looking at different approaches to move away from the current system. The Senate effort appears focused on short-term changes that gradually wean physicians from the fee-for-service payment model, while the House has focused on long-term replacement models.

Senate and House leaders questioned last week by Modern Healthcare said they remain focused on their own proposals instead of the details of the opposite chamber's SGR replacement plans. But physician advocates are hopeful that the efforts ultimately will combine in some manner. “I'm optimistic that they are going to come together in the next few months,” said one physician advocate, speaking on condition of anonymity.

Broad agreement has emerged on the need for a replacement system that ties much more of future physician payments to the quality of care they deliver. The tiny percentages of physician pay currently at stake in programs such as the Physician Quality Reporting System are seen as insufficient to drive the desired changes in care.

But the devil is in the details. The GOP-led House is unlikely to give additional power to CMS regulators to make the final decisions on physician pay.

Since the Patient Protection and Affordable Care Act became law three years ago, House Republicans have railed against CMS rules implementing its myriad provisions. “They may be more inclined to be more prescriptive,” said another physician advocate, who noted that the legislative outlines of future payment systems issued so far by House leaders have been fairly general.

Noting the various pilot projects now underway that are testing alternatives to fee-for-service medicine, other analysts said the crucial details in a permanent repeal bill will have to take into account the success or failure of those experiments. Republicans still haven't agreed “how many of the details will be legislated by Congress and how much will they have to defer to a future regulatory process that takes into account the fact that we're still testing all of these models,” said Anders Gilberg, senior vice president of government affairs for the MGMA. Gilberg and others noted that there is little data available to assess whether accountable care organizations and bundled-payment models can deliver on their promises of improved care and lower costs.

The biggest unresolved question in the SGR repeal effort, though, and the one that has stymied previous efforts, is funding. The cost of tossing the SGR and its hated cuts dropped significantly this year, down 43% from $245 billion to $139 billion, according to estimates issued last week by the Congressional Budget Office.

That reduction may have helped, but the two parties remain far apart on an appropriate way to cover the cost. Both sides agreed that finding a funding source will wait until late summer or the fall, when Congress is expected to debate raising the debt ceiling.

The main sticking point “with regard to SGR is always money—how do you offset it,” said Sen. Orrin Hatch (R-Utah)

Follow Rich Daly on Twitter: @MHrdaly