Former Administrators Share Insights On A New Physician Payment System

Early last week four former Centers for Medicare and Medicaid Services (CMS) administrators, Mark McClellan, Thomas Scully, Gail Wilensky and Bruce Vladeck, sent a letter to the Senate Finance Committee outlining their vision for a new Medicare physician payment system.

Responding to an earlier request made by Senate Finance Committee Chairman Max Baucus (D-MT), the former administrators expressed to the committee that CMS needed to implement reforms to the current payment system within five years. The letter also recommended that the Sustainable Growth Rate (SGR) needed to be replaced “by other, more practical and administrable limits on total Medicare outlays.”

The former administrators also said that CMS should develop alternative reimbursement plans, including changes to the current fee-for-service (FFS) structure. The administrators stopped short of recommending that FFS be entirely eliminated, and even suggested that provider participation in any alternatives developed by CMS should be voluntary and allow physicians to remain in the traditional FFS payment system if necessary. The group did acknowledge, however, that change to FFS would be necessary and should be subject to a reformed spending limit.

In the five years leading up to a new payment system, the former administrators said that CMS should freeze most physician’s fees at current levels and adjust payments to primary care and rural providers as needed. In the meantime, the group said that CMS should begin immediately to experiment with the bundling of appropriate fee-for-service codes into bundled payments to appropriate physicians or groups of physicians. They also suggested that “physician organizations should be encouraged to lead the development of these reforms, which must also include robust quality measures.”

Adjusting Geographic Payment Yields Minor Reimbursement Change

The Institute of Medicine (IOM) released a report last week which found that provider payments would increase or decrease by no more than 5 percent if changes were made to the Medicare geographic reimbursement system.

The IOM suggested that the changes necessary to accurately reflect the costs associated with a particular geographic region would affect 88 percent of Medicare hospital discharges and 96 percent of physician billings but wouldn’t dramatically affect the payment rates for physicians. In other words, instituting these changes may not have a significant impact on the distribution of providers in areas where access to health care may be limited.

The report, commissioned by the Department of Health and Human Services, included the following recommendations to improve geographic adjustments:

  • using the same      geographic boundaries and payment areas for hospitals and health care      practitioners;
  • using different data sets for computing the compensation of clinical and administrative hospital staff and those at office-based sites; and
  • expanding the types of occupations used to make the geographic adjustments.

To access this report, click here.

CMS Official Testifies at Senate Hearing About Demo Project

Last week Melanie Bella, director of the Medicare-Medicaid Coordination Office at CMS, testified at a hearing before the Senate Special Committee on Aging that CMS is ready to handle the enrollment of up to 2 million beneficiaries into the dual-eligibles demonstration program. In her testimony, Bella stated that the goal of this demonstration is to allow for the delivery of more efficient and better coordinated care. Bella also informed the committee that 26 states have already submitted applications to be included in the demo, however, she reiterated that not all of the applications would be approved.

This hearing was held as a result of mounting concerns from providers groups and some lawmakers that the program design contained many flaws and that implementation should be delayed until these issues were addressed. As reported earlier, the Alliance of Specialty Medicine sent a letter to CMS urging it to delay implementation of the demonstration program.

More information on the hearing, please click here.

State Grants for Innovations in Health Payment Models Announced

Last week, the Centers for Medicare and Medicaid Services announced a $275 million grant program for states to design and test new payment and delivery models in Medicare, Medicaid and the Children’s Health Insurance Program. The State Innovation Models initiative was developed to encourage states to design and test multipayer models that can deliver better health and lower costs.

Model Testing awards totaling $225 million will be given to as many as five states and the CMS Innovation Center will also award a total of $50 million in Model Design awards to up to 25 states. According to CMS, the Model Design awards will provide funding and technical assistance to help states determine what type of system improvements will work best in their states.