Reforming SGR: Prioritizing Quality in a Modernized Physician Payment System


Hearing Description:

The Health Subcommittee recently met to review the draft legislation designed to repeal the current SGR (Medicare’s Sustainable Growth Rate) and replace it with a more sensible reimbursement program. Representatives in the subcommittee were in unanimous agreement that a change to the SGR is needed and they are currently looking at using an incentive laden program to improve the quality of care.

Hearing Date: June 5, 2013

Hearing Summary: Prepared for AAPS by the Market Institute

The Health subcommittee recently met to review the Medicare’s Sustainable Growth Rate (SGR) system of paying doctors. The review of discussion draft legislation was the focus of the hearing. Chairman Joe Pitts (R-Penn) recounted the phased outline House Republicans prepared that would repeal the current SGR and move to a Medicare reimbursement system that would reward quality care over volume. He went on to summarize the draft legislation phases as the following:

  • Phase 1
    • Repealing the current SGR formula while providers will work the Secretary to identify goals and methods of measurement
  • Phase 2
    • Tying quality measurement to fee for service payments while using provider input to define quality medicine

The members of the subcommittee, on both sides of the aisle, are committed to building upon the progress made in the past and building out a legislative framework that makes sense. Rep. Fred Upton (R-Mich.) said in his opening statement that repealing the SGR would ensure economic stability for physicians, access to care for seniors, and securing the future of the Medicare system.

In her opening statement, the first witness Cheryl Damberg, Senior Policy Research & Professor at the Pardee RAND Graduate school said that a continuous payment approach for physicians would incentivize and increase the quality of care. Over time, but in the near-time especially, incentives should be increased from their current state. By linking payment to performance, providers would adapt to offer innovative and redesigned healthcare delivery methods to better serve patients.

The second witness, William Kramer, Executive Director for National Health Policy at the Pacific Business Group on Health said in his opening statement that large employers want to see payments directly tied to the value of services provided. There also needs to be better performance measures to support a new physician payment system. The goal of a new performance based system should be achieving measurable improvements in quality and affordability, but most importantly, putting patients first and helping them identify the best doctors and then rewarding those doctors.

The third witness, Dr. Jeffrey Rich, Director at Large, Virginia Cardiac Surgery Quality Initiative said in his opening statement that placing incentives at a higher level, rather than at an individual physician level would be more effective and encourage more collaborative learning and quality improvement. Placing incentives on just individuals would also detract from the teamwork aspect of care. Spreading the accountability around should insure that patients receive the best care possible.

The fourth witness, Dr. Thomas Foels, Executive VP at Independent Health stated that primary care would play a pivotal role in a new performance based system. The system should be based on metrics that gauge meaningful impact and not necessarily those that are easy to measure. IHA’s own model has shown that physicians participating in a pilot performance based system resulted in higher levels of care in comparison with physicians outside of the pilot program.

In response to questioning, Cheryl Damberg said:

  • Consumers want transparency in prices
  • Electronic Health Records will play an important role in measuring metrics
  • Primary physicians and clinical subspecialists should both be involved in identifying performance gaps to improve patient care
  • In order to be successful, CMS and physicians need to work in concert

In response to questioning, Jeffrey Rich said:

  • Providers need to measure what communities (socio and economic) are not being addressed and incentivize their physicians to see improvement in care

In response to questioning, William Kramer said:

  • Positive incentives are very powerful, but mechanisms for penalties to deter things like high infection rates are worth looking at
  • Keeping the focus on patient outcomes will resolve many of the underlying problems facing healthcare

In response to questioning, Thomas Foels said:

  • Fee for service reimbursement does little to reward quality or efficiency among providers
  • Collaborative efforts and team-based care are too important to let individual incentives overshadow them

Hearing Webpage:

Links to Testimony:

  • Cheryl L. Damberg, Ph.D.; Senior Policy Researcher; Professor Pardee RAND Graduate School
  • William Kramer; Executive Director for National Health Policy; Pacific Business Group on Health
  • Jeffrey B. Rich, M.D.; Immediate Past President of the Society of Thoracic Surgeons; Director at Large, Virginia Cardiac Surgery Quality Initiative
  • Thomas J. Foels, M.D., M.M.M.; Executive Vice President, Chief Medical Officer; Independent Health

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