The SGR is dead. Long live MIPS and APS.
On April 14, 2015, politicians in Washington finally gave physicians what they’ve been asking for—legislation to permanently repeal the sustainable growth rate (SGR) formula and ensure predictable Medicare payments into the future. But physicians had to pay a price—abiding by, as yet, unknown quality metrics that are recommended by physicians, but controlled by the Secretary of Health and Human Services.
Physicians bet on the devil they don’t know because it was better than the devil they hated.
Agreeing to quality measures in the legislation to get rid of the SGR wasn’t such a big jump for physicians. That train had already left the station earlier this year as Centers for Medicare and Medicaid Services (CMS) announced it would dump the Fee-for-Service payment system for a Pay-for-Performance system before the end of the decade.
The plan represents one of the “biggest steps yet from the government to actively accelerate the transition from the traditional fee-for-service model to value-based care, ” Paul Keckley, managing director at the Navigant Center for Healthcare Research and Policy Analysis, wrote for Hospitals & Health Networks. “It’s not just about replacing an unpopular physician compensation formula. It’s about raising the stakes for clinically integrated networks of physicians, allied health professionals and their business partners to take on payer-sponsored risk.”
With an hour to spare before a 21% cut to Medicare payments to physicians was scheduled to go into effect, the U.S. Senate sent the bipartisan bill to President Obama for his signature. The President signed it the next day in his garden without an official ceremony.
Broken Payment Formula
The 1990s-era SGR formula had been declared broken by every physician society in America. Physicians lobbied Congress for over a decade to repeal the formula which tied physicians Medicare payments to the overall rate of growth in the economy. When the economy slowed, Medicare spending grew and cuts were required.
For 17 years Congress annually overrode the mandatory cuts for fear that physicians would stop taking on new Medicare patients. Grandmas were held hostage on a yearly basis.
MIPS and APS
The SGR is being replaced by Merit-Based Incentive Payment Systems (MIPS) and Alternative Payment Systems (APS), which in theory are supposed to pay better physicians more money, paying for outcomes instead of procedures.
Physicians can choose to join MIPS or APS and receive quality scores. If their scores are good, their reimbursement rates go up.
MIPS are a kind of “Pay-for-Value Lite, ” by layering some bonuses (and some penalties) on top of a system that still pays physicians a set amount for each medical service.
But the real action is in APS, which is why the law offers an immediate 5% carrot bonus on top of all the other Medicare payments to physicians to join up.
Risks and Rewards
APS are typically bundled payments that require a group of physicians to join together and take a lump sum of money to care for a certain group of patients. If they can provide the care for less—and hit certain quality metrics—they get to keep some of the leftover cash. Surgeons will have a financial incentive to spend less than their lump sum amount, but still spend enough to avoid costly revisions or hospital readmissions.
In short, physicians are assuming more risk for a chance to make more money. While the quality measure metrics will be determined by someone else, physicians will have more control over what they can offer patients on a case-by-case basis.
Significant Provisions
Stuffed into the 265 page bill are the following significant provisions:
- Repeals the SGR and provides stability and five years of payment updates for physicians and providers while focusing payments on the quality, value, and accountability of care provider rather than simply the number of procedures.
- Extends for two years the Children’s Health Insurance Program (CHIP) that provides comprehensive, affordable health care to 8 million children nationwide.
- Removes the imminent threat of cuts to Medicare providers and ensures a five-year period of annual updates of 0.5% to transition to the new system.
- Incentivizes care coordination efforts for patients with chronic care needs.
- Extends the Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program.
- Provides a two-year extension of Secure Rural Schools.
- Reverses the 21% SGR cut that went into effect on April 1.
- Current quality incentive and payment programs are consolidated and streamlined into a new Merit-based Incentive Payment Program (MIPS), and the aggregate level of financial risk to practices from penalties has been mitigated in comparison to current law.
- Physicians in alternative payment models (APM) receive a 5% bonus from 2019-2024.
- Strong incentives are created for physicians to participate in a qualified Patient Centered Medical Homes (PCMH). Physicians in qualified PCMHs will get the highest possible score for the practice improvement category in the new MIPS program. PCMHs that demonstrate the capability to improve quality without increasing costs, or lowering costs without harming quality, can also qualify as an APM without having to accept direct financial risk.
- Technical support is provided for smaller practices, funded at $20 million per year from 2016 to 2020, to help them participate in APMs or the new MIPS program.
- Funding is provided for quality measure development, at $15 million per year from 2015 to 2019. Physicians retain their preeminent role in developing quality standards.
David A. Fleming, M.D., MA, MACP, President, American College of Physicians (ACP) said we are witnessing something “quite extraordinary and historic” and transitioning us to a new value-based system.
Legislative Kabuki Theater
The fix wasn’t free or cheap and caused eight U.S. Senators, including presidential candidates Marco Rubio of Florida and Ted Cruz of Texas, to vote against the physicians.
The new law wasn’t fully paid for, with policy changes governing Medicare beneficiaries and providers paying for only about $70 billion of the approximately $210 billion package. The Congressional Budget Office has said the bill would add $141 billion to the federal deficit.
Cruz, the junior senator from Texas and a leader of a group of Senators that shut down the government a couple of years ago over Obamacare, said the new law “institutionalizes” Obamacare and will add about $500 billion to the deficit over the next decade.
Paying for Value
The biggest challenge of the new law will be to figure out exactly how to pay physicians for “value.” The law doesn’t say anything about what quality metrics will be used to gauge whether physicians are good or bad—or what counts as an alternative payment model.
“It’s way easier in Congress to get agreement on general principles than on details, ” says Mark McClellan, who directs the Health Care Innovation and Value Initiative at the Brookings Institution. He previously ran the Medicare program under President George W. Bush. “That means a lot is going to hinge on how this and future administrations implement the law.”
The federal government will be required to use quality indicators that physician groups suggest to the health and human services secretary. The secretary can add her own metrics to the list—but doctors are then free to pick and choose which metrics they want to be judged on.
“I’m very skeptical of this, ” Urban Institute Fellow Robert Berenson said in an interview with Vox. “It’s really absurd that we don’t have any measures for most doctors that can place a value on their performance.”
Timeline to Metrics
By January 1, 2016, the HSS Secretary must develop and publish a draft plan for the development of quality measures for use in the MIPS and in APMs. The draft plan must take into account how measures from the private sector and integrated delivery systems could be used in Medicare and “how clinical best practices and clinical practice guidelines should be used” in developing quality measures.
The Secretary must prioritize:
- outcome measures
- patient experience measures
- care coordination measures
- “measures of appropriate use of services, including measures of over use.”
The Secretary also must consider whether measures to be developed under these arrangements would be electronically specified and consider clinical practice guidelines (where they exist).
By May 1, 2017, and annually thereafter, the Secretary must report on the progress made in developing quality measures, including the number of measures developed, descriptions of the measures under development, a timeline for completion of such measures, and information on quality areas being considered for future measure development.
To carry out this mandate, the law authorizes up to $15 million annually for 2015 through 2019.
Patrick Dunham, CEO of Currant Health, told Forbes that to better refine a value-based system, healthcare leaders must take several steps, including standardizing the definition of value, developing payment models geared toward positive outcomes and aligning stakeholder interest.
John O’Shea, a senior fellow at the Heritage Foundation who previously advised House Energy and Commerce Chairman Fred Upton, said, “The existing quality measures aren’t relevant to what [doctors] do in their everyday practice. They don’t result in better patient care. I think we’re going to need better quality measures.”
Let the Lobbying Begin
Whether or not the new funding formulas will work, will be up in the air for a while. The new payment system won’t start until 2019, giving President Obama and his successor four years to sort out the devils in the details. All the K Street lobbyists and legislative staffs of medical societies who have made careers of getting rid of the SGR will now have a new mission of getting the government to accept their clients’ definition of quality.
