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Johnson Doctor Payment Bill Would Repeal SGR, Begin Payment Based on Quality Data in '07

JULY 14, 2005 -- Medicare would junk its controversial formula for calculating payments to physicians and instead start paying them in 2007 based on data measuring the efficiency and quality of their care under a proposal floated late Wednesday by Nancy L. Johnson, R-Conn.

The plan is tentatively scheduled to be considered before the Ways and Means Health Subcommittee, which Johnson chairs, during a July 21 hearing. But its future is by no means certain, as it faces numerous obstacles, including finding a way to pay its estimated $50 billion five-year cost. It also faces objections of many specialty physicians who say there is not yet a way to reliably measure the quality of care they provide.

But Johnson's bet is that enough doctors will be willing to accept the measures if it means an end to the current formula, under which their payments would be cut by about 5 percent per year for the next seven years.

The plan would adopt a completely new strategy for discouraging doctors from ordering tests and services that do not result in improved care. The current "Sustainable Growth Rate" (SGR) formula reduces payments to doctors the following year if an annual target intended to limit the percentage growth in Medicare physician spending is exceeded.

But analysts say that setting a national target to limit physician spending does not give individual doctors enough of a financial incentive to treat patients more efficiently, because the individual doctor can have little impact on the overall spending figure.

Johnson's plan would entail setting minimum standards for quality and efficiency that doctors would have to meet to qualify for payment increases based on changes in the "Medicare Economic Index" (MEI), which tracks yearly changes in the costs of delivering physician care. If doctors don't meet the standards, they would not qualify for the full payment increase.

Johnson has yet to release a copy of her proposal, but physician lobbyists given a peek at the plan Wednesday afternoon said it would set a three-year course toward performance-based payment.

Early next year, perhaps March 1 or so, physician organizations would submit proposed measures of the quality and efficiency of their care to the National Quality Forum or a similar entity. Once that entity okays them, the measures would be sent to the Centers for Medicare and Medicaid Services for approval.

Doctors then would collect data assessing their performance on the measures. They'd qualify for full payment increases simply for submitting the data both in 2007 and in 2008. In 2009, full payment updates would hinge on whether they met the standards for quality and efficiency.

Depending on whether physicians bill as individuals or as a group practice, the standards would be applied to individual physicians or to the group practice as a whole. The data-gathering phase aims to allow doctors, either as individuals or as groups, to measure their care and improve it before payment hinges on performance.

Still undermined is the level of physician payments in 2006. Current calculations of MEI minus a productivity adjustment would mean an increase of almost 2 percent.

The plan differs from a proposal by Senate Finance Committee leaders in that it would end the SGR and have doctors rather than CMS propose the original measures, according to one source. However, a Finance Committee aide said CMS would consult doctors in picking the measures. He added that the Finance Committee plan says the SGR issue needs to be addressed.

House Ways and Means Chairman Bill Thomas, R-Calif., has not yet agreed to the Johnson plan, but joined with her earlier this week in sending a letter to CMS urging administrative actions that would sharply reduce the high cost of repealing the SGR approach.

Still unknown is the level of support Johnson could attract from other members of the Health Subcommittee and the full Ways and Means Committee.

Another unknown is whether such a plan would be included in budget reconciliation legislation matching appropriations to targets in the fiscal 2006 congressional budget resolution. Including it would mean the fix would only have to attract a simple majority to gain Senate passage, but such a move also could open up the package to a wide variety of Medicare-related amendments in that chamber.

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