MedPAC Review of CMS' Estimate of the Physician Update for 2009

On April 10, 2008, the Medicare Payment Advisory Commission (MedPAC) reviewed the Centers for Medicare & Medicaid Services (CMS) preliminary estimate of the physician update for 2009. In calculating the update, CMS projects the update for 2009 to be -5.4%.

To calculate the update, CMS used estimates that are consistent with recent trends. Even if the estimates changed, CMS predicts the result of the update calculation is unlikely to change because of the growth in spending for physician services that has occurred in recent years and because of increased spending associated with legislative overrides of negative updates.

The projected reduction in the physician fee schedule’s conversion factor would follow a 10.6% decrease scheduled to take effect July 1, 2008 when the 6-month 0.5% increase provided through the Medicare, Medicaid, and SCHIP Extension Act of 2007 comes to an end. These reductions would be a continuation of negative updates called for since 2002 under the current Sustainable Growth Rate (SGR) formula. As mandated, the Commission will include its findings in MedPAC’s June 2008 report to Congress on the update estimate.

MedPAC Further Explores a Path to Bundle Payment Around a Hospitalization

MedPAC continued last month’s discussion on the feasibility of bundled payments around a hospitalization and supported a revised package of draft recommendations for hospitals and physician services over an episode of care for select conditions:

• The first recommendation states that Congress should require the U.S. Department of Health and Human Services Secretary to confidentially report readmission rates and resource use around hospitalization edipisodes to hospitals and physicians. Beginning in the third year, providers’ relative resource use should be publicly disclosed.
• The second recommendation states that in order to encourage providers to collaborate and better coordinate care, Congress should direct the Secretary to either reduce payment to hospitals with relatively high readmission rates for select conditions or allow shared accountability (sometimes referred to as gainsharing) between physicians and hospitals. Spending implications for both recommendations are indeterminate, but the intent of either policy is to produce Medicare savings or at a minimum be budget neutral, and improve coordination of beneficiaries care.
• The third recommendation remains unchanged from the last meeting. It states that Congress should require the Secretary to create a voluntary pilot program to test the feasibility of actual bundled payments for services around hospitalization episodes.

The Commission will formally present its recommendations for adoption of Medicare payment incentives to motivate doctors and hospitals to work together more efficiently to treat select medical conditions in its June report to Congress.

MedPAC To Promote Use of Primary Care Services

After review and considerable discussion on the importance of primary care services and initiatives to promote use of a medical home, MedPAC, in its June report to Congress, will recommend an increase in Medicare payments for those practitioners designated as primary care providers. MedPAC believes that primary care services have become undervalued over time, and risk being under provided over time. The concern for other specialty physicians is that the modification would be budget-neutral and would redistribute payments towards primary care practitioners through an adjustment to the fee schedule that focuses on incentives for certain types of providers and services deemed as “primary care.” The medical home program would also encourage the care coordination component of primary care.

The recommendation for the fee schedule adjustment states that “Congress should establish a budget neutral payment adjustment for primary care services billed under the physician fee schedule and furnished by primary care practitioners” even though current Medicare law prohibits payment differentials based on physician specialty designation. Primary care focused practitioners are those whose specialty designation is defined as primary care and/or those whose pattern of claims meets a minimum threshold of furnishing primary care services. The Secretary would use rulemaking to establish criteria for determining a primary care focus practitioner. According to MedPAC, the implications for spending, as a budget neutral policy, it would not affect Federal benefit spending relative to current law and would improve beneficiaries’ access to primary care services. For physicians and other providers, it would have redistributive effects.

According to MedPAC, medical home initiatives would enhance the viability of primary care practice and access by focusing on certain other activities like care coordination. Since multi-specialty, primary care and geriatric medicine practices are natural candidates for medical homes, it was recommended that Congress should initiate a medical home pilot project in Medicare. Eligible medical homes would have to meet stringent criteria, including at least the following capabilities:

• furnish primary care, including coordinating appropriate preventive, maintenance, and acute health services; use health information technology for active clinical decision support
• conduct care management
• maintain 24 hour patient communication and rapid access
• keep up-to-date records of patients’ advanced directive; and
• be accredited or certified from an external accrediting body.

It was also recommended that the pilot require a physician pay-for-performance program.

The pilot would have clear and explicit thresholds that require upfront costs, primarily in the form of monthly fees to medical homes. During the first year, these costs will be in the range of $50 million to $250 million. MedPAC envisions that this pilot would be four times larger than the medical home demonstration project already under development through the Tax Relief and Health Care Act of 2006. This initiative will help sustain the relationship beneficiaries have with their personal physician by enhancing access to primary care and improving care coordination.

Both initiatives were presented as additions to, and not in lieu of, the other contributions that have improved upon the RUC process, such as the Five-year review that impacted Evaluation and Management (E/M) services and the change in practice expense methodology.