American College of Physicians: Internal Medicine — Doctors for Adults ®

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The need for payment reform takes on new urgency

From the October ACP Observer, copyright 2005 by the American College of Physicians.

By C. Anderson Hedberg, FACP

When the College convened a summit two years ago on the revitalization of internal medicine, it brought together more than 70 leaders who represented the entire breadth of our specialty, from academic medicine, private practice general internal medicine, subspecialties and internal medicine board certification.

During that two-day meeting, internist leaders identified four major goals. By consensus, the first goal was to reform a dysfunctional payment system that fails to adequately reimburse key segments of our specialty.

The payment system has undervalued the work of general internal medicine specialists and some subspecialists. That is making internal medicine less unattractive to medical students as a career, which could adversely affect patient access to care.

At the heart of the dysfunction is the sustainable growth rate (SGR) formula, introduced by the Balanced Budget Act of l997 to slow the growth of Medicare spending. The SGR links physicians' yearly Medicare fee update to the previous year's gross domestic product—without taking into account any of the escalating practice costs physicians now face.

As a result, physicians are repeatedly threatened with a negative update, a threat Congress has avoided in the last three years by voting in a small yearly increase. Now, however, projections for the next five years beginning in 2006 are grim: If unchecked, the SGR will cut physician payments by an untenable 26%, while costs are expected to rise at least 15%.

This is a recipe for financial disaster for many practices, particularly for specialists in general internal medicine and some subspecialties. While virtually all national medical societies have for several years called for repealing the SGR, that appeal has now taken on new urgency.

Reluctant lawmakers

According to ACP's Washington office, Congress is grappling with growing financial constraints as the mounting cost of this summer's hurricane devastation gets added to the war budget and the federal deficit.

In the current climate, legislators are apparently reluctant to scrap the flawed SGR formula and approve new federal money for an across-the-board fee increase. While many in Congress are convinced the update formula must be changed, they repeatedly point to ongoing problems in health care quality, safety and costs—and conclude that quality improvement must be factored into any new reimbursement calculation for physicians.

Lawmakers want to link SGR relief to physicians' ability to demonstrate quality improvement, and they're not alone. This summer, the Medicare Payment Advisory Commission, which advises Congress on Medicare, recommended introducing pay for performance into the Medicare program. The idea is to realign payment incentives to reward quality, rather than pay solely on the basis of the volume of patients seen and services rendered.

Pay for performance is already a major component of physician reimbursement in the British health care system. Here at home, it has been embraced most notably by Bridges to Excellence, a nonprofit program launched by large employers, and by the Integrated Healthcare Association, a consortium of major health plans and medical groups in California. The Centers for Medicare and Medicaid Services (CMS) is now supervising pilot studies to test this concept.

Legislation and leadership

This summer, two bills were introduced on Capitol Hill that address the issues of physician payment and pay for performance head-on.

The Medicare Value Purchasing Act of 2005 (S. 1356) was introduced by Sens. Charles Grassley (R-Iowa) and Max Baucus (D-Mont.), both of the Senate Finance Committee. Almost concurrently, Rep. Nancy Johnson (R-Conn.), chair of the House Ways and Means Committee's subcommittee on health, introduced the Medicare Value-Based Purchasing for Physicians' Services Act of 2005 (H.R. 3617).

In written comments, ACP pointed out that the Grassley-Baucus bill, if passed, could help improve the quality of patient care by establishing rules for pay-for-reporting and pay-for-performance programs. The bill would not, however, repeal the SGR—and in its current form is not being supported by the College. Without fixing the SGR, the College has pointed out to the bill's authors, physicians won't have the resources to invest in the information technology needed to efficiently participate in pay for performance. (The College's comments can be found online.)

In July, I testified before the House Ways and Means health subcommittee, while the College also submitted a written statement endorsing Rep. Johnson's bill. The bill would scrap the SGR, ensuring that all physicians receive positive yearly updates and allowing higher payments for those who participate in quality measurement, reporting and improvement. (Dr. Hedberg's testimony can be found online.)

Rep. Johnson and the House subcommittee staff have recognized ACP for helping provide the bill's pay-for-performance framework and for offering pertinent recommendations. Those recommendations, many of which have been incorporated in Rep. Johnson's House bill, include:

  • Allowing additional payments to physicians who participate in performance reporting and improvement.

  • Phasing in voluntary reporting of quality data over a two- or three-year period, using evidence-based performance measures developed by physicians.

  • Using the phase-in period to develop structural changes, such as the use of electronic health records, within office practices; assess the lessons learned from the CMS' pilot programs; refine risk adjustment measures for disease severity; develop mechanisms to protect against physician de-selection of our sickest patients; and study public reporting for utility and fairness.

What we need

The differences between the two bills must be worked out in a short Congressional session this fall. ACP is calling on its members to make our needs known to our elected officials. Members can access the ACP Legislative Action Center for more information and for sample letters to send to Congress.

Although the ultimate fate of these reforms is still in doubt, we as a field have taken many important steps in the right direction. We have forcefully conveyed our commitment to quality improvement and designed a policy framework that would allow us to move forward with quality innovations.

At the same time, ACP continues to strongly influence the national debate over how we can achieve the reimbursement we need to put innovations into practice. By maintaining our momentum now, we hope that a final law may emerge that will meet our expectations and fulfill our patients' needs.

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