Obama Signs SGR Repeal, Heralding New Era in Medicare Reimbursement

Blase N. Polite, MD, MPP

With the flourish of a pen, President Obama put an end to a yearly nightmare of congressional budget wrangling when he signed the Medical Access and CHIP Reauthorization Act of 2015 (MACRA), otherwise known as the Sustainable Growth Rate (SGR) formula repeal.

The move eliminates an unwieldy formula for determining physician Medicare payments and brings doctors a big step closer to what the Department of Health and Human Services has envisioned as a value-based care environment.

MACRA, which passed overwhelmingly in both houses of the Legislature, contains a vastly improved set of incentives for doctors to meet performance measures, which are designed to end the practice of relying on volume of care to build up revenues, Blase N. Polite, MD, MPP, chair of the Government Relations Committee for the ASCO, told OncLive in an interview.

“I think this will really up the stakes for us, and I hope this will bring us to the stage in 2019 where we have much more flexibility to innovate with ideas that are coming from the ground up,” Polite, a medical oncologist with the University of Chicago Medicine & Biological Sciences, said.

Polite is optimistic that the level of involvement physicians had in helping to design MACRA and the changes that were incorporated into the $200 billion-plus spending measure means that the Centers for Medicare & Medicaid Services (CMS) will be more receptive to physician input in the future as the incentive plan is refined.

The SGR, designed to keep physician payments in line with inflation and GDP, was blasted for its reliance on huge congressional spending adjustments each year to avoid wild swings in physician compensation. This year, a threatened 21.2% SGR cut in spending helped to prompt movement on the repeal measure.

The replacement package involves $175.4 billion in additional spending over 10 years to keep physician payments stable and to incentivize improvements in coordination, efficiency, and quality of care delivered. The bill also would temporarily extend the Children’s Health Insurance Program (CHIP) and a number of other expiring provisions related to Medicare, Medicaid, and certain grant programs.

An analysis by the Congressional Budget Office has predicted that through 2025 MACRA will increase direct spending by about $145 billion and revenues by about $4 billion, causing a net increase in federal budget deficits of $141 billion.

The program will lead to modest improvements in physician pay over the next several years, with much higher increases and also bonuses to kick in later, based on measures of performance and whether physicians participate in alternative payment models (APMs), which CMS believes will be key to cost-efficient high quality care.

Some of the pay adjustments that may result could reduce CMS compensation for physician services by up to 9%, but Polite notes that there are opportunities for physicians to receive fairly substantial pay increases and bonuses. “Those at the top end could receive as high as a 27% bump,” he says. Those who enter the APMs may eventually qualify for 5% bonuses that are based on their Medicare payments over the previous year.

“The drafters of this would like to see a lot of providers go into programs like this,” Polite said.

Participation in APMs, such as medical homes, accountable care organizations, and bundled care, can help physicians sidestep the penalties that may result from failure to meet performance standards in the Merit-Based Incentive Payment Systems (MIPS) that are a hallmark of CMS changes.

Initial annual pay increases amount to just 0.5% a year under the program but MACRA also provides for annual $500 million payments from 2019-2024, which help to support some of the incentives.

In a review of the legislation, CMS indicated that certain factors such as an unsteady economy or inflationary pressure could still necessitate the congressional “patches” that were common to the SGR-based payment formula. However, CMS expressed confidence otherwise that MACRA represents a balanced replacement for SGR.

“The physician payment rates would be problematic under [MACRA] in years with high inflation, in 2025 when the 5% APM bonus and the $500 million additional pool for MIPS are scheduled to expire, or at the point when the cumulative effects of payment updates not keeping up with physician costs become too large,” CMS wrote.

Key to the optimism expressed by Polite was a shift in performance measures that graduated the penalties and rewards under the program, rather than having broad cutoffs based on certain achievement scores that would have made a single point the difference between getting a bonus, larger fees, nothing at all, or even seeing your payments reduced, Polite said.

“We were always concerned about threshold payment systems,” he said. “It creates winners and losers and disincentives people from working together.”

Physicians are also concerned about being forced into competing with each other rather than competing with themselves, Ted Okon, executive director of the Community Oncology Alliance, said about the program. He noted that a physician who achieved improvements over a period of time but didn’t do as well as another practice in the same care bracket may still face penalties. This is an apparent feature of the Oncology Care Model APM introduced earlier this year by CMS, he said. “We’re hoping with a little input that [CMS] will actually change that model before it’s introduced in 2016. It has to be viable in that practices will actually sign up for it and viable in that it will actually produce some savings.”

Like Polite, Okon believes MACRA is a “step in the right direction.” APMs can be effective, Okon said, noting a body of evidence has accumulated in recent years showing that experiments with these models have worked out.

COA wants CMS support for a different oncology care model, however—one that involves input from the oncology community. He says physicians should be able to formulate their own APMs as long as they meet achievable criteria laid down by CMS. US Representative Cathy McMorris Rodgers is backing proposed legislation for a different APM that COA also stands behind, Okon said.

The group aims to take up the subject of MACRA, care models, and payment pathways at its annual conference next week in Washington, DC.

While there is reason for hope, Polite said, there could still be the case where a physician finds himself getting whittled down on the revenue side by negative performance reviews.

“We have no idea, and I don’t think CMS has any idea yet, how they’re going to set up these merit based payment systems so that they’re equitable,” Polite said. “That is a concern for everybody. On the MIPS side, that is the 10,000 pound gorilla in the room.”

“They absolutely have to be set up in the right way, otherwise you have what people call a payment randomization program, where if I have the wrong mix of patients or have a different set of resource uses for whatever my practice is, I can be penalized even if I’m doing the right thing,” he said. “That’s where all of the specialty groups are going to be vigilant in the next few years in helping them get the risk adjustment mix right.”

MACRA also puts a 6-month hold on enactment of the controversial “two midnight” rule for determining whether hospital patients are inpatients or outpatients for purposes of Medicare billing. Under the rule, a patient who stays for two nights can be considered an inpatient, and rates of payment can be considerably higher. Physicians contended the two midnight rule, established in 2013 though not enforced, penalizes them for innovations that improve efficiency of care and reduce hospital stays.

HHS Secretary Sylvia Matthews Burwell has said she wants 30% of all Medicare payments tied to APM participation by 2016 and 50% by 2018. From 2019-2024, providers receiving large amounts of revenue through APMs would receive lump sum bonuses equal to 5% of their Medicare payments. Also, those in an APM would receive annual 0.75% increases each year will others would see only 0.25% increases yearly.