Divisions between specialists like orthopedic surgeons and primary care physicians were evident in the debate over healthcare reform last year.
The American Medical Association (AMA), representing many primary care physicians, supported reforms with the anticipated increase of payments for some of their members. The specialty societies, including among others, the American Academy of Orthopaedic Surgeons (AAOS) and the North American Spine Society (NASS), opposed reforms of the ACA (Patients Protection and Affordable Care Act), citing a failure to address a broken sustainable growth rate (SGR) formula dictated by the Medicare Physician Fee Schedule (MPFS) and fear that these changes would reduce patient access to care, particularly as provided by members of the specialty societies.
SGR, Fee Schedules and Relative Values
Since 2002, the SGR formula has been the single most important and direct payment policy affecting physicians who receive payments through the Medicare system.
That fee schedule is determined by the resource-based relative-value scale (RBRVS). That scale, in turn, tries to accurately determine the relative costs of providing different physician services. Payment rates are adjusted to account for physician work, practice expenses and malpractice expenses, geography, and there is a factor that converts relative values to dollars.
The Centers for Medicare and Medicaid Services (CMS) is required to update relative work values at least every five years.
Paul Ginsburg, Ph.D.
AAO FoundationHealth economist, Paul B. Ginsburg, Ph.D., writing in the December 8 issue of the New England Journal of Medicine (the Journal), says that during an update implemented in 2002, “approximately 900 Current Procedural Terminology (CPT) codes, that mostly involved surgical procedures, were identified as being improperly valued. Of these, approximately 750 were reviewed by the Relative Value Update Committee of the AMA. This review resulted in recommendations to increase the values of 477 services and reduce the values of 28.”
Ginsburg says that concerns began to surface that the update process, which revolved around those codes proposed by specialty societies for review, was “leading to an undeserved deterioration of the incomes of primary care physicians.”
The services with increases in either physician productivity or facility productivity should have coincided with reductions in relative values. “But those who delivered the services and had the best knowledge of productivity had no incentive to bring them forward. When coupled with severe resource limitations, shortcomings in the update process appeared to result in distortions in the payment structure.”
In other words, no good deed should go unpunished.
New Values and Calculations
By the mid-2000s, Ginsburg says, there was a turning point and an attempt was made to increase the accuracy of the relative value scale and deal with the issue of low payments for primary care physicians.
The Relative Value Update Committee recommended higher work values for evaluation and management services on the basis of increased complexity. CMS accepted these recommendations and increased rates for evaluation and management services by 6.5%.
An important change was made in 2007, as the method for calculating relative values changed from a “top-down” approach to a “bottom-up” approach. This meant, says Ginsberg, that instead of calculating relative values using survey data on aggregate practice expenses in each specialty, the values would be calculated by direct costs of specific procedures based on the inputs of clinical labor, equipment, and supplies that were identified by “clinical-practice panels.”
2010: Physician Practice Information Survey
Then in 2010 even larger changes took place as a new survey of physician practices was incorporated into the calculations of relative values.
Because of a lack of funding to conduct surveys, Congress directed CMS in 1999 to use surveys conducted by specialty societies that met certain standards. As a result, Ginsburg noted that specialty societies that believed that their practice expenses had increased substantially—and which had the resources to do so—contracted for surveys of their members, but others did not, meaning that substantial inconsistencies were introduced into the RBRVS.
Ginsburg says the AMA and many specialty societies jointly sponsored a broad survey of all specialty and nonphysician practitioners in 2007 and 2008. This Physician Practice Information Survey replaced the older survey data for the 2010 MPFS. As a result, says Ginsburg, effects on some specialties were substantial. Cardiology and radiology had considerable payment reductions, whereas primary care specialties gained.
The new healthcare law, according to Ginsburg, will likely increase the speed and scope of such reviews. The ACA includes specific directions concerning codes to review, including those for which there has been the fastest growth in volume, those that have been associated with substantial changes in practice expense, and those recently established for new procedures that had not been reviewed since the implementation of the MPFS.
The Zero-Sum SGR
And therein lays the heart of the divide between physicians. In a zero-sum budget process where the pie of available healthcare dollars is expanding, everyone gets something. However, as healthcare spending expands faster than the overall federal budget, one physician’s gain must come at the expense of another.
And that’s where the SGR comes in.
The SGR tries to control total Medicare spending by adjusting the conversion factor on the basis of previous trends in the utilization (and relative value) of physician services as compared with a benchmark. However, since the SGR sets changes in payment rates for all physicians, regardless of whether their use or mix of services has increased or decreased, it does not change incentives for individual physicians.
The SGR resulted in positive annual updates to the fee schedule until 2002, when a 4.8% reduction occurred. Since then Congress has repeatedly blocked subsequent sharp rate reductions.
Add in an increase of newer and more expensive procedures with requirements to recalculate the relative value of various physician services and you have a recipe for a big political food fight between physician groups.
Payment Reform Strategies
Under the ACA, two distinct strategies call for broadening the unit of payment beyond fee for service and incorporating quality into the payment system.
One strategy expands existing initiatives for Medicare value-based purchasing. The second strategy authorizes extensive experimentation with initiatives—such as bundled payments and accountable care organizations—that would broaden the unit of payment.
The Physician Quality Reporting Initiative was extended through 2014 and becomes mandatory in 2015. Payment rates for physicians who do not report will be reduced by 1.5% in 2015 and by 2.0% in subsequent years.
The physician-feedback program will be strengthened, in part through the development of a transparent episode grouper (i.e., a publicly accessible algorithm that sorts claims into those connected with an episode of care and those that are unrelated). Beginning in 2012, physician feedback will be based on episodes of care and will include adjustments for patient demographic characteristics and health status. Only aggregate reports on physicians will be made available to the public.
Value-Based Modifier Adjustment: Quality/Costs
Ginsberg said Medicare will implement a value-based modifier—a payment adjustment based on how quality compares with costs. Using data developed for the physician-feedback program, CMS will establish a composite of risk-based measures of quality that reflect health outcomes and the health status of beneficiaries.
A parallel composite of appropriate measures of costs will be developed, including the episode-based measures. The value-based modifiers are to be applied to specific physicians or groups selected by the program beginning in 2015 and to all physicians and groups beginning in 2017.
This approach, noted Ginsberg, has some resemblance to high-performance network approaches implemented by some health insurers. The Medicare approach appears to address many of the problems that physicians have had with private-insurer approaches through greater emphasis on transparency of methods, involvement of physicians in the development of these methods, and risk adjustment of both quality and cost measures.
Better Value – Higher Payments
However, says Ginsberg, the reward for better value in Medicare will be higher payment rates, rather than steering patients to physicians with better value. Medicare’s efforts will probably have profound effects on how private insurers measure value, if only because of greater provider acceptance; this could influence both pay-for-performance initiatives and network strategies.
Beyond updating the RBRVS, Congress also included a five-year incentive program to increase access for primary care services and general surgery services. For five years, beginning in 2011, primary care practitioners (both physicians and nonphysician practitioners) will receive a 10% increase in payment for primary care services. General surgeons practicing in Health Professional Shortage Areas will receive a 10% increase in payment rates for major surgical procedures.
Payment Reforms Uncertain
Ginsberg says many policy experts believe that the reform of payment methods for physicians and other providers is the most promising method of improving the quality of care and controlling costs.
“The ACA may launch an era of large-scale development of payment methods that incorporate quality and broaden incentives to episodes of care and all services required by patients over a period of time. The outcomes of these efforts are uncertain, but, finally, much stronger initiatives will be pursued. Nevertheless, Congress has still not addressed the prospect of sudden sharp reductions in payment rates due to the SGR. To some people, fixing the SGR would seem easier than reforms of payment methods. But in the political world it is not, ” concluded Ginsberg.
