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Alternative Methods for Medicare Payment at the Heart of 'Doc Fix' Bill

By Emily Ethridge, CQ Roll Call

July 26, 2013 -- Health care providers are ready with a variety of payment models they say have already worked in the private sector and should be recognized under the Medicare physician payment system created in a House bill.

Under the House bill (HR 2810) that would replace Medicare's current physician payment formula, physicians would be allowed to enter into alternative payment models—some already in progress and some yet to be created. The House Energy and Commerce Committee will mark up the measure this week.

"We always hear about organizations finding ways in the private sector to lower costs. This system is a way to test and then introduce those same saving models to Medicare," Bruce Harvie, aide to bill sponsor Rep. Michael C. Burgess, said in an email.

The bill does not specify exactly which payment models would be approved under the new system, but provider groups say there are several that could work and that have already been tested by Medicare and in the private sector. Among those most frequently cited are accountable care organizations (ACOs) and patient-centered medical homes, both for primary and specialty providers.

Doctors, who have clamored for a more stable system yet would experience change in the way they are reimbursed by Medicare, do have suggestions as House members' development of the measure continues.

Shari Erickson, vice president of government affairs and public policy at the American College of Physicians, said that although the bill would allow providers to remain in fee-for-service, it should contain more hardship exemptions for providers who aren't able to move to the new program, such as those nearing retirement—although no one "needs to have a free pass," she said.

"I think that this whole new system does need to lead us into a different payment delivery system over time, and that means there will be change, and sometimes uncomfortable change for physicians," said Erickson.

Under the measure, the Department of Health and Human Services (HHS) would have two tracks for approving the alternative payment models – one for models that already have data on their effectiveness, and another for models that could be developed and tested for up to three years.

The new models are meant to encourage cost savings and improved quality through collaboration, and to move away from the fee-for-service system that many providers criticize for rewarding volume of services over value.

The measure does not address the question of offsets, which is to be determined later. The Congressional Budget Office estimates the cost of repealing the current payment formula at $139.1 billion over 10 years.

Although most providers may choose to stay in the bill's enhanced fee-for-service system, Burgess said, providers could choose to opt into an alternative payment system at any time – and switch back.

"Somebody says, 'Look, I'm getting out of residency, I'm going to this big ACO, do I need to be worried about any of this stuff' – no!" the Texas Republican said in an interview. "If they leave the ACO, would they be able to be in the modified fee-for-service? Yes they would."

Physician groups are pushing for a wide array of "Alternative Payment Models (APM)," the term used in the bill, to accommodate a variety of providers nationwide. The models would be known, respected and researched, but not necessarily widely used now in Medicare. The bill calls for a transfer of $2 billion from the Medicare Part B trust fund to help with development and payments made under the alternative payment models.

"The new models must be accessible to physicians in all practice sizes and settings so the country's physicians can have a stable practice environment that allows them to invest in their practices in order to provide high value care for Medicare patients," said American Medical Association Ardis Hoven in a statement.

One model that providers say is ready to go is the patient-centered medical home, which organizes primary care services and encourages collaboration between several providers. In that model, the team of providers in the medical home is responsible for meeting the majority of a patient's physical and mental health needs, and to focus on the patient's needs, culture, and preferences.

"From our perspective, the most promising and prevalent model at this point is the patient centered medical home," said Erickson. "I think that that will be a big chunk of what would be the alternative payment model program."

The American Academy of Family Physicians also praised the bill for promoting the development of patient-centered medical homes and recognizing that they could function as an alternative payment model.

The bill would encourage medical homes by directing the HHS Secretary to establish new Medicare payment codes for services provided by a medical home for managing complex chronic conditions. To qualify for those services, a provider must have achieved a certain level of certification as a medical home by the National Committee on Quality Assurance (NCQA), or equivalent certification.

Erickson noted that the NCQA's standards and certifications would help provide "a meaningful avenue" as the administration determines which standards and criteria it will use to approve the alternative payment models.

According to the NCQA, more than 27,500 clinicians have earned its patient-centered medical home recognition, and more than 150 practices apply for the recognition each month.

The NCQA also has a certification standard for patient-centered specialty practice – a model similar to the medical home that includes specialists who coordinate with primary care physicians. The focus in those groups is the same: organizing care around patients and including patients and their families in planning care and managing health conditions.

"I could see that as another APM that really wouldn't take that much to roll out more broadly," said Erickson.

In addition, Harvie said he expected ACOs, some of which are already participating in Medicare, to be able to participate as an APM. ACOs are groups of doctors, hospitals, and other providers that coordinate care and share any savings they achieve for Medicare by delivering quality care. Medicare currently offers three different ACO programs.

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