Bipartisan House-Senate Medicare payment reform legislation passes out of committee; Congress includes 3 month patch to stop the 25% SGR cuts in budget deal The Orange County Medical Association (OCMA) and California Medical Association (CMA) are pleased that legislation aimed at repealing the Medicare sustainable growth rate (SGR) was approved in the Senate Finance Committee and the House Ways and Means Committee yesterday, December 12, 2013. The Senate Finance Committee and the House Ways and Means Committee this week unveiled revised legislative proposals to repeal the Medicare sustainable growth rate (SGR) and establish a new payment system. Both committees have said that they expect to "mark-up" (pass out of committee) the legislation on Thursday, December 12. The changes they have made since the initial October "discussion draft" are all positive and address most of the issues raised by the California Medical Association (CMA). Yesterday's committee votes came just before Congress recesses for the holiday, pushing any further action into 2014. Congress has also included a three-month SGR patch-with a 0.5 percent payment raise-as part of the federal budget agreement, which will give lawmakers a little more time to finalize the long-term Medicare payment reforms. The bills are being passed out of Committee without funding sources. When lawmakers return in January, they will begin to marry the funding sources to the Medicare payment overhaul legislation. "With the drastically reduced price tag of $116 billion, Congress must seize the opportunity to set Medicare on a more stable course for current and future generations of physicians and patients," says CMA President Richard Thorp, M.D. "While the bill still needs work, CMA supports moving the bills through committee to continue to move the process forward. This is the most progress Congress has made on Medicare physician payment reform in a decade and we need to keep the momentum going." The revised proposals will first and foremost eliminate the badly broken SGR formula that has plagued policymakers and physicians for more than a decade. The legislation also establishes two payment tracks. A fee-for-service payment track coupled with a streamlined reporting program, called the Value Based Performance Program. The bill provides substantial physicians bonuses up to 12 percent. It also includes penalties. (However, existing law includes 8-9 percent penalties for non-participation next year without any bonus potential.) The second payment track allows physicians to work with the Centers for Medicare and Medicaid Services (CMS) to establish alternative payment models, such as medical homes, that will provide 5 percent bonus payments. To help small practices transition to these models, they have provided a transition period and up to $125 million in funding assistance. The legislation also requires CMS to ensure that the new payment systems work for small practices as well as surgeons/specialists and primary care. The legislation meets many of CMA's long-standing goals for Medicare reform, including: Repeal of the SGR; Automatic payment updates before the new models begin; Incentives to participate in new payment models (5 percent bonus); A phase-in period and funding assistance to help small practices transition to new payment models; Retention of a fee-for-service program; Elimination of the current penalties and a consolidation of the current quality reporting programs (Physician Quality Reporting Program-PQRS, EHR Meaningful Use, and the Value Modifier) into a single program with a substantial new bonus pool; Improvements to the Value Modifier; Payment for complex chronic care management; Timely data feedback for physicians; Ensures that physicians develop the quality measures and are widely consulted on the new payment programs; Update for the Medicare physician payment localities (California GPCI fix). In response to CMA's comments, the committees made the following additional improvements: Provides increased funding assistance ($125 million) to ALL small practices, not just rural and HPSA practices; Allows a longer time-frame for physicians to prepare to participate in the new models; Gives special consideration to small practices when developing the clinical improvement activities, the value modifier methodology and the alternative payment models; Requires the fee-for-service value-based program to reduce administrative burden on physicians and gives credit for improvement rather than just meeting a benchmark; Ensures the Value Modifier will be cost and risk-adjusted; Requires CMS to develop models that are attainable for specialists and surgeons, as well as primary care physicians, and small practices; Allows physicians to partially qualify for the new alternative payment models; Expands the "total cost of care" data available to physicians to help physicians more efficiently manage their practices; A study to examine total Medicare program cost savings (Part A, Part B and Part D) achieved by physicians. Allows physicians to report data on the group level, including virtual groups, to improve the accuracy of the data. Improvements to the Relative Value Unit process; Ensures that any practice guidelines or payment policies do not establish a standard of care for medical liability actions. In a last-minute change, the Ways and Means bill now provides a stabilizing 0.5 percent automatic update each year for three years until the new payment models begin. The Ways and Means bill also includes the California geographic payment locality update ("GPCI fix"), which would transition the outdated payment localities to the current and regularly updated metropolitan statistical areas used to calculate payments to hospitals. This transition would take place over 6 years and guarantees that rural counties are not negatively impacted by the change. This GPCI fix would provide an additional $400 million to California physicians over 10 years. The Senate Finance Committee bill does not, however include an automatic payment update in the first three years. The Senate Chairmen want to wait until the Congressional Budget Office scores the legislation and they negotiate funding sources before adding any payment updates. The Senate bill also does not include the California GPCI fix, as the committee has stated it wants to keep state-specific issues out of the committee mark-up. However, both Senate Finance Committee Chairman Max Baucus and Ranking Member Orrin Hatch have pledged to address the CMA GPCI issue during the January negotiations.