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Hearing Explores Private Market Solution to Medicare Physician Payment Problem

By Emily Ethridge, CQ Staff

February 7, 2012 -- House Ways and Means Committee Republicans Tuesday turned to the private market for inspiration on a new physician payment system, while Democrats emphasized the role government can play in improving the quality and efficiency of care.

Health Subcommittee Chairman Wally Herger said at his hearing that it was important to hear from the private sector about ways "competition and market forces" could be incorporated into the Medicare program to reduce costs. He again called for a full replacement of the sustainable growth rate (SGR), the often-ignored formula that determines reimbursement rates for physicians who see Medicare patients.

"Our end goal in all of this remains addressing the Sustainable Growth Rate formula through comprehensive physician payment reform done in a fiscally responsible manner," said Herger, R-Calif., at the hearing.

Democrats said that although the replacement discussion is important, lawmakers must turn their attention to a more urgent problem: the Feb. 29 expiration of the current "doc fix." Physicians will face a 27 percent cut in payment rates once the temporary payment patch expires.
"We keep avoiding the topic of Sustainable Growth Rate formula, in favor of the easier conversations about delivery system reforms, around which we have much stronger agreement," said ranking member Pete Stark, D-Calif.

Witnesses discussed advancements their groups have made to develop new payment methods, including accountable care organizations and medical homes, which the 2010 health care law (PL 111-148, PL 111-152) encouraged.

The keys to success for new payment systems are transparency and physician involvement, the witnesses agreed.

"Without full engagement of physicians, explicit vision and purpose, and a focus on community ... any payment system will fall short," said David Share, vice president of value partnerships at Blue Cross Blue Shield of Michigan. He warned that providers will resist any system that payers attempt to impose without first getting their input.

Lewis G. Sandy, senior vice president for clinical advancement at UnitedHealth Group, said his company had implemented successful assessment programs that rate physicians' quality and effectiveness and give feedback to both providers and consumers. He said that making the quality criteria transparent helped providers know what they were doing well and where they could take action to improve.

His group is also trying pilot programs in 13 states for patient-centered medical homes, primary care practices designed to improve care coordination for the chronically ill.

John Bender, the president and CEO of Miramont Family Medicine in Colorado, said the committee should "compel the Department of Health and Human Services to immediately deploy the patient-centered medical home standard nationally."

He said it would help the primary care workforce, increase quality of care and reverse rising costs.

Share and Sandy said their groups were also working on accountable care organizations, which bring providers together under new payment incentives to help streamline care.

Several witnesses said that the government and private payers could work together to encourage new payment system advances in both sectors.

Len Nichols, director of the Center for Health Policy Research and Ethics at George Mason University, said that collaboration would help providers have one set of standards to follow, rather than forcing them to meet a variety of different requirements from private payers and the government.

American College of Cardiology CEO Jack Lewin said Congress should move quickly on payment incentives to spur progress. He praised the new grant program under the Center for Medicare and Medicaid Innovation but said it would take a few years before the program has real results.

Lewin suggested that CMS run a series of national demonstration programs for payment models wherein the savings are shared between Medicare and the provider community. That will help payers move away from the fee-for-service model, without losing income due to the reduced volume of services. With a different financial incentive, providers would be motivated to adopt new models more quickly, he said.

Nichols said the health care law brought about the end of "business as usual," and that all groups should work together to find savings—or else face blunt cuts across the board.

"We could cut our way to fiscal balance, and in so doing, reduce access to care for millions of Americans. I fear this pathway would likely fail," said Nichols. "Alternatively, we could align incentives so thoroughly that we actually link the self-interest of clinicians with our common interest in cost reduction and quality improvement while covering all Americans."

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