Medicare Compliance & Reimbursement

Current system has too many problems, experts say. Come fall, expect Congress and the Medicare Payment Advisory Commission to increase their attention to a task that's likely upcoming soon -- overhauling Medicare's physician-payment formula.

That was the prediction of MedPAC Executive Director Mark Miller at a June briefing with health reporters. Look for lawmakers and analysts to discuss much "more targeted" methods of updating payments, such as mechanisms to rein in just one set of services whose volume is rapidly increasing -- such as imaging services -- or schemes to link quality outcomes and efficiency with payments, Miller said. Like physicians, analysts and lawmakers are concerned about the recent volatility of Medicare Part B payments under the so-called sustainable growth rate formula. But they're also worried about the current formula's failure to check the high growth in volume and intensity of physician services, which continues unabated even though the SGR scheme was enacted specifically to help control it, Miller said. By tying allowable growth in service volume to annual growth in real gross domestic product per capita, the SGR formula was intended to keep real Part B spending growth per beneficiary at levels comparable to overall growth in the national economy, and to incentivize physicians themselves to slow their provision of services if Part B grew faster. Under the SGR, if the volume and intensity of physician services grow faster than GDPin a given year, the next annual increase in physician fees will essentially impose a penalty, setting the fee increase at less than the projected increase in doctors'cost of providing services. On the other hand, if Part B spending grows more slowly than the economy generally, physicians can reap the benefit by seeing their service-by-service fees rise faster than the cost of producing services.

Just one problem, however: These supposed incentives don't work, most analysts agree. In fact, some argue that the system actually encourages physicians to increase their service volume -- thus accelerating spending growth -- to compensate for lower service-by-service fees. MedPAC has argued for several years that Congress should scrap the formula. Imaging May Be First On The Do-To List Evidence demonstrates that the SGR doesn't work, MedPAC Chair Glenn Hackbarth told the House Energy and Commerce Committee May 5. The SGR "is a flawed volume-control mechanism," he said. "Because it is a national target, there is no incentive for individual physicians to control volume. When fee reductions have occurred they have not consistently slowed volume growth, and the volume of services and level of spending are still increasing rapidly."

Furthermore, the SGR method "is inequitable because it treats all physicians and regions of the country alike, regardless of their individual volume-influencing behavior," Hackbarth said.

Those [...]