Sustainable Growth Rate Repeal: Why the “Why” Matters

Why did Congress repeal Medicare’s Sustainable Growth Rate (SGR) payment system January 6, 2015? In 1997 SGR replaced Medicare Volume Performance Standards (MPVS), which served as physician payment mechanism between 1990 and 1997. Prior to 1990 physician charges was the basis of Medicare payments.¹

During 30 years, since 1989, annual increases in the valuation of physician work and the increase in the consumer price index (CPI) are similar. Overall government fixed physician charges the last 14 years, since 1998, are less than CPI.^2,3

Centers for Medicare and Medicaid Services (CMS) contained high annual fee percentage increases. Did SGR need to be fixed based upon these outcomes?

Second, politicians and physician based political action committees (PACs) may say it was keeping a bargain to fix SGR in trade for endorsement by the American Medical Association (AMA) supporting the Affordable Care Act (ACA). Maybe, however, fulfilling a political quid pro quo promise to fix doctor payment in exchange for use of the AMA brand has not been a high priority since 2010. Was keeping a promise the reason or were there other reasons?

Another reason might lie within the 2015 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. This and previous annual reports find Medicare deficits year after year. In 2014 CMS paid out $613.3 billion and total income was $599.3 billion. Furthermore, in order to mitigate ACA costs Medicare funds have been transferred to ACA insurance programs. Trustees report ACA contains roughly 165 provisions affecting the Medicare program by reducing costs, increasing revenue…, identify alternative provider payment mechanisms, health care delivery systems and other changes to improve quality and reduce costs. About these ACA changes to Medicare Trustees write… “The most important of which are the reductions in the annual payment rate updates for most categories of Medicare providers.” Physician fee schedule services total approximately $69.2 billion compared to hospital inpatient and outpatient expenditures totaling about $183.3 billion. Yet it is physician fee schedule services, which are targeted, to reduce Medicare costs. Repeal of SGR should reduce Medicare payments. Between 2015 and 2019 physician update amounts will equal a little over 2¢ per $1.00. This is not per year. The SGR repeal says 2¢ for five years. After five years the increase is zero per year. Physician’s fixed updates do not vary based upon economic conditions, technologies physicians employ to care for patients, or physician costs to comply with expensive regulation. Trustees hope finally Medicare physician costs will be predicable.⁵

But Trustees warn all of the following: if the health sector cannot transition to more efficient models of care delivery and achieve productivity increases commensurate with economy-wide productivity, and if the provider reimbursement rates paid by commercial insurers continue to follow the same negotiated process used to date, then the availability and quality of health care received by Medicare beneficiaries would, under current law, fall relative to that received by those with private insurance. These Trustees know new interventions and therapies created by economic incentive may make some current untreatable diseases routinely treatable and generally this increases costs.⁴

Table 1.

A Tabulation of annual percentage increases in physician payments

Years	Methodolgy	Annual Percent Increase
1980 – 1990	Physician Fee for Service (FFS)	13.40%
1990 – 1997	Medicare Volume Performance Standard (MVPS)	9.35%
1997 – 2013	Sustainable Growth Rate (SGR)	5.23%

Most ominous, however, Section 13 (A) and (B) (iv) of the SGR repeal grants the Secretary of CMS broad authority without administrative or judicial review to establish methodology of a merit-based incentive payment system (MIPS) based upon performance scores. A committee of 11 members (no more than five can be physicians or persons who provide services to patients) appointed by the Comptroller General of the United States shall advise the Secretary and determine a performance number using the following four measures (1) quality, (2) resource use, (3) clinical practice improvement, and (4) meaningful use of electronic health records (EHR). Beginning January 1, 2019, this committee’s decisions - exempt from administrative and judicial review - will apply to merit-based incentive payments (MIPS), determine physician performance standards and thereby physician payment updates.⁷ Like the unpopular Independent Payment Advisory Board (IPAB) created by ACA, Section 13 (A) and (B) (iv), gives this CMS committee authority free of review.

Fis custodia ipsa custodium - who will watch the watchers - applies to our Federal executive branch just as it did to the Roman Senate. Without administrative or judicial review should be a red flag for Medicare patients and physicians From its beginning CMS in its administration and entitlement manuals states: “The law (i.e. Medicare) does not permit the Federal Government to exercise supervision or control over the practice of medicine, the manner in which medical services are provided, and the administration or operation of medical facilities. The patient is free to choose any qualified institution, agency, or person offering him/her services. The responsibility for treatment and the control of care remains [sic] with the individual’s physician and the hospital or other facility or agency furnishing services.”⁸

Can the Federal government find eleven disinterested experts - the majority of whom have never cared for patients - to determine what constitutes good patient care? Are these appointees somehow free of bias and able to craft (1) quality, (2) resource use, (3) clinical practice improvement activities better than physicians or other Medicare providers who take care of Medicare patients? Should a committee, whose decisions cannot be reviewed, like IPAB or the Center for Medicare and Medicaid Innovation, be allotted $ 5,000,000.00 annually to determine or replace physician standards?⁵

Here is a better alternative. The new SGR repeal law encourages physician registries. These are guides to and assessment of good clinical practice. Quality, resource use, and clinical practice improvement (i.e. 1, 2, and 3 above) should be the purview of physician registries. Registries already exist in cardiothoracic surgery, ophthalmology’s Intelligent Research in Sight (IRIS) among others. Registry performance should be the standard by which providers are judged in 3:4 categories the Secretary uses for MIPS performance scoring.

What follows is a pragmatic example. Dementia affects 10% of people older than 65; it could be a focus of performance. Clinicians, members of the American Academy of Neurology (AAN), have extensive experience diagnosing and caring for patients with dementia. These practicing doctors crafted guidelines to identify which resources are best employed to categorize patients with dementia due to Alzheimer’s disease (AD), dementia with Lewy bodies (DLB), frontotemporal dementia (FTD), vascular dementia (VAD) and other causes.

Accurate diagnoses may distinguish who might respond better to traditional antipsychotics versus serotonin reuptake inhibitors. Use of AAN guidelines should fulfill 3:4 performance criteria and should immunize primary care physicians, neurologists and others against performance downgrade in this area.¹⁰

A book, By the People, author Charles Murray, a W.H. Brady scholar at American Enterprise Institute, suggests instruments like physician-generated registries could be used by legal defense funds to challenge regulations, which are arbitrary and capricious based upon prima-facie circumstances or facts.¹¹ Physicians could subscribe to his concept, an indemnity, similar to Ophthalmology Mutual Insurance Company’s successful malpractice insurance model.

We are not lawyers or alchemist who can transform a bureaucratic contrivance “commensurate with economy-wide productivity” into good care for a sick individual. We are doctors responsible for diagnosis and treatment of a patient’s illness along the patient, the hospital, or other facility or agency furnishing services as written in Medicare Manual 100-1 chapter 1 section 20. This is my 2¢ worth.

Biography

Patrick K. Price, MD, is a Kansas City ophthalmologist, MSMA member since 1982, and formerly served as Medical Director for Kansas, Nebraska, and Western Missouri between 1993 and 2008.

Contact: pprice@discovervision.com