Medicare Compliance & Reimbursement

SGR system may be broken, but will pay for performance solve the problem?

House health leaders apparently intend to develop a long-term fix for Medicare's troubled sustainable growth rate formula for physician payment. House Ways and Means Health Subcommittee Chair Nancy Johnson (R-CT) said Feb. 10 that she's in favor of moving toward some kind of pay for performance system, and is calling for physicians to come up with quality indicators that could form the basis of such a mechanism. She and other lawmakers are voicing significant confusion about precisely how to proceed, however.

Signaling Johnson's interest in developing a new scheme, the subcommittee began its year with a hearing on the contentious issue. "Unfortunately, I don't believe that the old formula ... can be fixed," said Johnson. "We need to fundamentally rethink the way we pay our doctors."

Congress and the Centers for Medicare and Medicaid Services have fiddled with the SGR formula over the past several years, in hopes of producing more year-to-year payment stability. But the fixes haven't actually fixed anything, Johnson said.

Ultimately, she appears to back a P4P approach. A key problem with the current formula is that "the best and the worst providers receive the same reimbursement," she said. Other sectors are moving toward more performance-based payment, said Johnson. Notably, the 2003 Medicare Modernization Act tied some hospital payments to facilities' willingness to report quality measures related to information technology that hospitals participated in developing.

"It's now time for physicians to come forward with solid indicators" of care quality and efficiency that can serve as a basis for P4P, Johnson said.

Lawmakers will face plenty of barriers to revamping physician payment this year. With looming battles over Social Security and federal spending allotments in an especially lean budget, time itself will be a formidable enemy.

In addition, there seems to be little agreement among physicians or legislators about exactly how to change the system.

The subpanel's top-ranking Democrat, Rep. Pete Stark (D-CA), said that revamping Medicare physician payment is long overdue. The SGR "was made worse over the past couple of years by Congress ... mainly by putting it off," he said. Nevertheless, he seems less inclined than Johnson to move quickly to P4P. "If we begin linking payments to quality ... we're going down a road that I'm not sure we're prepared to do," he said.

Stark also noted that, because the SGR is slating physicians for significant payment cuts over the next sev-eral years, the Congressional Budget Office will attach a very large price tag to any long-term change that Congress develops.
 
In an era when deficit trimming is on many lawmakers' minds, the fact that a long-term fix will carry a large cost - over [...]