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Recent Initiatives to Reform Medicare Payment Process for Physicians

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Repealing the “Sustainable Growth Rate”

Today, bipartisan leadership introduced legislation that would repeal the “sustainable growth rate” (SGR), the 1997 formula that currently determines Medicare Part B physician payment rates. Instead, physicians would receive an annual 0.5 percent increase over the next five years as a “pay for performance” type model is phased in by CMS.

The SGR links physician payment to an economic growth target, so in times of strong economic growth where spending is below target, physicians would receive pay increases. However, in 2002, poor economic performance led to a 4.8 percent cut in all physician fees. Since then, Congress has delayed the cuts mandated by the SGR, which reached a steep 24.4 percent in January, out of fear of driving physicians away from Medicare. Because Congress repeatedly overrode SGR mandated cuts, there is now an enormous gap between actual Medicare spending and the amount determined by the SGR formula. The Congressional Budget Office estimates that repealing the CBO could cost between $116 to $150 billion over the next decade.

Doctors Abusing Medicare Face Fines and Expulsion

In a January 15 directive, CMS administrator Marilyn B. Tavenner ordered new steps to identify and punish providers who repeatedly overcharge Medicare patients or provide services substantially in excess of patient needs. Federal officials estimate that 10 percent of payments in the traditional fee-for-service model are improper, suggesting at least $6 billion in improper physician payments annually. “Recalcitrant providers,” meaning those who abuse the Medicare payment system and do not improve after extensive education, will be referred to Daniel R. Levinson, the inspector general at the Department of Health and Human Services. Levison has the authority to impose civil fines and exclude providers from Medicare, Medicaid, and other programs. There is some disagreement on how to screen for “recalcitrant providers”; one possibility is the use of cumulative payment thresholds for each specialty to identify and then investigate providers who exceed the threshold. 

Also, effective March 18th, CMS will have the ability to release data on how much Medicare paid individual doctors. Such information could be useful to consumers, as well as researchers who can help CMS identify fraud and abuse. Physician groups, however, are voicing concerns about privacy and the possible spread of inaccurate, misleading analysis. 

These initiatives mirror CMS’ proposals for the Medicare Part D 2015 Contract Year. The policy changes included measures to increase CMS’ authority to investigate and punish providers who abuse the Part D payment system and/or prescribe inappropriately. CMS also proposed the release unencrypted prescriber identifiers and pharmacy identifiers to a broader audience of requestors with the goal of encouraging external researchers to investigate areas of Part D integrity and quality.


One thought on “Recent Initiatives to Reform Medicare Payment Process for Physicians

  1. Pingback: Update on Medicare’s Sustainable Growth Rate | AcuPartD

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