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MedPAC Releases SGR Repeal Proposal

Cheryl Clark, for HealthLeaders Media , September 20, 2011

Congress should repeal the controversial Sustainable Growth Rate, or SGR, that's poised to cut physician's pay 30% starting Jan. 1, the Medicare Payment Advisory Commission said in a draft proposal released Monday.

The independent Congressional agency, which advises the U.S. Congress on issues affecting Medicare estimates lost federal revenue, would total $300 billion.

To offset the loss, primary care physicians' pay would be frozen for 10 years while doctors providing more specialized services, from cardiology to endocrinology to rheumatology, would endure cuts of 5.9% in each of three years. Specialists' pay would then be frozen for the remainder of the 10 years.

This MedPAC option, released in written form late Monday with four recommendations, would save about $100 billion in additional federal payments to doctors, only one-third of what would be needed to completely offset what would be lost by repealing the SGR.

The remaining $200 billion would come from other reductions in payment for about 30 other healthcare services and professions, such as reducing payments to clinical labs by 10%, curtailing payments to durable medical equipment suppliers who don't competitively bid and recalculating the formula for skilled nursing facility payments, all of which could save $235 billion over 10 years.

The commission is open to receiving comments on the draft proposal before issuing its final recommendation to Congress, which would have to vote to repeal the SGR and set in motion the other policy changes.

Over the last decade, Congress repeatedly overrode the SGR formula to prevent physician fee cuts, proverbially "kicking the can down the road," as the percentages gradually increased to 23.5% for Jan. 1, 2011. That too was postponed, and now the cut required to balance the books is a 30%.

"Each year, the decision is made to just postpone cuts, the cost of even deferrals rises inevitably and relentlessly as we go forward," said MedPAC chairman Glenn Hackbarth. "In a period of growing fiscal stringency – and I don't think we're talking about a year or two of tight budgets but really a new era of austerity – finding even offsets for deferrals will become increasingly difficult, I fear."

He added, "It is in the best interests of the Medicare program over the long term to deal with the SGR issue once and for all."

But physician groups promptly voiced outrage at the commission's strategy.

The American Medical Association strongly opposes what it called MedPAC's "misguided scheme" because its "drastic cuts would be disastrous for Medicare patients' access to care," by triggering "a wave of physician retirements, threatening access to care for all patients," AMA president Peter W. Carmel, MD, said in a statement.

"The proposal MedPAC is now considering poses a very real risk to compromise physicians' ability to retain staff, care for Medicare patients and make the investments needed to modernize their practices and participate in new models of care delivery like accountable care organizations," he continued.

The American College of Radiology also voiced its objection. Repealing the SGR is essential, but "these recommendations are not based in sound evidence and would only serve to fragment the physician community at a time when it must unify for the benefit of our patients," said an ACR statement.

"This policy should not be based on payment cuts to certain segments of the physician population but rather should be rooted in quality initiatives within a coordinated patient care structure," the statement continued. "The cuts proposed by MedPAC would embody the antithesis of the accountable care philosophy, and would severely impair the multispecialty coordination of care so vital for the continued health and longevity of our country's Medicare patients."

The commission issued three additional draft recommendations.

1. Congress should direct the Secretary to regularly collect data, including service volume and work time, to establish more accurate work and practice expense values, and collect it from efficient practices rather than a sample of all practices.

2. Congress should use data collected from recommendation #2 to identify overpriced fee schedule services and reduce their relative value units.

"Commissioners have reported on their own experience with overpriced services, and recommendations from the RUC (the AMA's Relative Value Scale Update Committee) in recent years have shown that a number of services are overpriced," said MedPAC analyst Kevin Hayes at a commission meeting last week. "Although there is a process for reviewing service prices, "conflicts arise because the process relies on surveys conducted by physician specialty societies. Those societies and their members have a financial stake in the RVUs assigned to services."

3. The Secretary should increase the shared savings opportunity for physicians and health professionals who join or lead accountable care organizations with a two-sided risk model.

Hackbarth said the commission intends to take a final vote on the proposal at a meeting Oct. 6 and 7.

The AMA said that for physicians, no pay increases, and even pay cuts are unsustainable. "Medicare payment updates have not kept up with the cost of running a medical practice, leaving a 20% gap between reimbursement rates and practice expenses, according to Medicare's own conservative estimates," the AMA said in a statement.