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Docs Urge Congress to Go Slow on 'Pay for Performance'

February 28, 2005—A physicians group on Monday warned lawmakers to move cautiously on proposals to link Medicare payment for doctors' services to their performance on measures of quality of care, saying that many physicians are not ready for such a change.

The Alliance of Specialty Medicine, a coalition of 13 medical groups representing more than 200,000 specialty physicians, also urged Congress to take steps this year to avert scheduled annual payment cuts of approximately 5 percent between 2006 and 2013.

At a Capitol Hill briefing, Alliance representatives responded to recent recommendations from the Medicare Payment Advisory Commission concerning both the sustainable growth rate (SGR) formula, which is used to determine pay increases for Medicare physicians, and the "pay-for-performance" initiative.
Among the problems with the current SGR formula, speakers said, is that it is based on changes in the gross domestic product rather than changes in beneficiaries' need for medical services. Another problem with the SGR is that it fails to account for price inflation when adjusting for the cost of providing services.

The SGR also includes Medicare-covered drugs and other services, the cost of which physicians cannot control. Removing those elements from the SGR would help make the formula more equitable, the group claims.
MedPAC has raised concerns about the SGR as a volume control mechanism and has recommended its elimination.

In testimony presented Feb. 10 to the House Ways and Means Health Subcommittee, MedPAC chairman Glenn M. Hackbarth said that instead of relying on a formula "MedPAC recommends a different course—one that involves explicit consideration of Medicare program objectives and differentiating among physicians."
Yearly payment updates should ensure that physician payments are adequate to maintain Medicare beneficiaries' access to care and the growth in the volume of physician services should be addressed directly, Hackbarth testified.

MedPAC has also endorsed linking physicians' Medicare reimbursements to the quality of care they provide.

Instituting pay-for-performance now could be problematic, the Alliance said, because it could not be applied equitably to all services.
While physicians are interested in improving quality, not all physicians are ready to do that through pay-for-performance, said Nancey McCann, chair of the Alliance's Medicare Working Group.

Not all fields have equal experience in pay-for-performance testing, she said. While some large primary care practices have begun demonstrations and some specialties, such as thoracic surgery, have experience in that area, other smaller physician practices have not.

Instituting pay-for-performance measures in hospitals is far different than physicians offices, McCann said, due to vast differences in numbers (6,000 hospitals vs. 800,000 physicians) and procedures (10 measures in hospitals vs. almost 10,000 different procedures for physicians).

McCann said lawmakers are looking carefully at implementing pay-for-performance measures this year, noting the Ways and Means Health Subcommittee hearing and future hearings before the Senate Finance Committee.

McCann also predicted while Congress would take action this year to advert a scheduled cut in physician payments, it was unclear whether lawmakers would seek to overhaul the SGR or instead opt for a short-term fix.

In the Medicare drug bill (PL 108-173), for example, Congress dumped scheduled physician payment cuts and substituted a 1.5 percent payment increase in 2004 and 2005.
McCann is hoping for a broader overhaul of the payment system. "Every time they do that (limited solution) it compounds the problem," she said.

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