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Might the Sustainable Growth Rate Be on Its Last Legs?

With two-stage plan to replace the formula, ACP official sees hope for ending roller coaster ride

Doing away with the Medicare sustainable growth rate once and for all is long overdue, both Republican and Democratic lawmakers have said in recent weeks at congressional hearings on the issue.

Others who have testified at the committee hearings also backed the idea of replacing the SGR.

The American College of Physicians submitted written testimony, outlining a two-stage process for moving beyond the SGR and recognizing the value of primary care to the nation's health care system.

"We were asked for input by a bipartisan group of legislators on the energy and commerce subcommittee who want to do something meaningful and sustaining about this problem," said Dr. Yul D. Ejnes, chairman of the ACP's Board of Regents and an internist in private practice in Cranston, R.I.

According to the ACP plan, the first step would be to pass legislation eliminating the SGR as a factor in determining annual updates to the Medicare fee schedule. Instead, ACP calls for guaranteeing that no physician services would be cut and ensuring that annual payment updates for evaluation and management services would be no less than 2 percent for years 2012 through 2016. Those services -- including office, emergency room, hospital nursing home, home, custodial care, preventive and wellness visits -- have long been undervalued, ACP told Congress.

"Stage one is best summarized as a stage of stabilization: stabilizing payments to physicians, trying to address the problems we know exist now and threaten access on a day-to-day basis, as well as addressing the undervaluation of services provided in the office by primary care physicians," Ejnes said.

But no plan can work without addressing the escalating costs of health care, particularly for providing care to the chronically ill, he said. So at the same time, physicians would voluntarily participate in payment initiatives demonstrated to improve efficiency and outcomes, such as patient-centered medical homes and accountable care organizations.

In the second stage of ACP's proposal, participation in such programs would become mandatory. Physicians would be given a timetable to transition their practices to the improved delivery models that Congress and the Department of Health & Human Services determine to be most effective.

Ultimately, ACP told Congress, this would lead to not only doing away with the SGR but to reforming the existing Medicare payment system in a way that recognizes the importance of primary care and improves care coordination, quality, appropriateness and costs.

"We recommend the development of different payment initiatives for different specialties and types of practice, rather than a 'one-size-fits-all' model for all physicians," Ejnes said. "Some practices might do better in a patient-centered medical home. Some might do better as an accountable care organization. Some might do better in a model that has yet to be developed."

Problems with the SGR date back over a decade. Enacted in 1997, the SGR sets a growth rate for Medicare spending on physician services that is linked to the gross domestic product. If the cost of providing the services exceeds GDP growth, or the rate the economy is growing, the Centers for Medicare and Medicaid Services must reduce payments accordingly.

Since 2002, the cost of providing the services has outpaced GDP growth, which has left physicians facing substantial cuts in reimbursements unless Congress intervenes. Each year, Congress eventually has done that, enacting last-minute fixes to prevent the cuts from going in effect.

But the fixes, including the latest one signed by President Obama in December, are temporary. Each year, the issue looms again. On Jan. 1, 2012, physicians face a projected cut of 28 percent and an additional cut the following January.

"The SGR is a failed formula," Dr. Cecil Wilson, president of the American Medical Association, said in testifying at a House Energy and Commerce subcommittee on health hearing. "The longer we wait to cast it aside, the deeper the hole we dig. It is past time to replace the SGR with a policy that preserves access, promotes quality and increases efficiency."

Wilson recommended an approach similar to what ACP is recommending, including repealing the SGR, implementing a five-year period of stable Medicare physician payments and testing new payment models.

In its plan, ACP also recommends continuation of the Medicare primary care bonus program, the electronic health records incentive program and the Medicaid primary care pay parity program.

"The fact that there seems to be additional interest and some energy behind this is reason for hope," Ejnes said. "This roller coaster ride we go through every year or two needs to be stopped."

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