MedPAC changes could aid practice bottom line
April 1, 1999
MedPAC changes could aid practice bottom line
Medicare’s growth rate formula could change
A powerful commission that advises Congress on physician payment matters has advocated a change that would benefit practices.
Reacting to complaints that the current method of adjusting Medicare’s physician fee schedule for inflation could short-change providers by as much as $645 million this year alone, the Medicare Payment Advisory Commission (MedPAC) wants to change how annual fee updates are calculated.
MedPAC recommends several modifications to the sustainable growth rate (SGR) system. These include "revising the SGR to account for changes in the composition of Medicare fee-for-service enrollment, cost increases that reflect desirable improvements in medical capabilities and technology, and inaccuracies in the forecasts used in estimating the SGR each year," MedPAC Chairman Gail Wilensky said at a March 2 hearing before the House Ways & Means health subcommittee.
Ambulatory care payment concerns
MedPAC also is seeking technical changes that would make SGR changes more consistent to avoid large swings in yearly estimated payments while making updates for each upcoming year available earlier so providers will have more time to review them before they take effect. For instance, MedPAC wants HCFA to publish estimated conversion factor updates by March 31 of each year before they are implemented, rather than in the fall as it currently does for implementation on Jan. 1.
"I’m very encouraged and pleased the commission is correcting the problems with the sustainable growth rates," says D. Ted Lewers, MD, an American Medical Association trustee who also serves as a MedPAC commissioner.
The SGR is based on medical inflation, changes in Medicare fee-for-service enrollment, growth in the gross domestic product, and changes in spending due to revised laws and regulations. Authorized by the Balanced Budget Act of 1997, the new system took effect in 1998, replacing Medicare’s volume performance standard.
Specific changes would include:
• Allowing for more growth. These proposed changes reflect the position among advocates that some extra allowance should be added to the gross domestic product (GDP) part of the formula when estimating the projected growth rate for physician expenditures. The general feeling is that the GDP alone was too tight of a benchmark to permit Medicare payments to track ongoing improvements in medical treatment and advances in technology, Wilensky told the committee.
• GDP change. Noting MedPAC felt the SGR formula "ought to be GDP plus something," Wilensky wants HCFA to add at least one — possibly two — percentage points to the GDP formula.
• Revised updates. To avoid payment shortfalls, MedPAC also wants HCFA to revise the estimates it uses to calculate future SGRs when better data become available. For example, if fee-for-service enrollment actually declines by only 3.3% during fiscal year 1999, rather than the 4.3% decline HCFA has projected, the fiscal year 1999 growth rate would be revised upward.
• Health status. MedPAC urged Congress to require that changes, including health status in the Medicare population, be used in calculating the growth rate. The panel found that fee-for-service beneficiaries in 1997 were somewhat older and sicker than in 1993, and physician payments per beneficiary increased slightly when these data were taken into consideration.
• Time period. A mismatch between the dates used for the SGR target year and the actual time period measured for comparison also should be addressed, the panel said. It recommended that all data used in calculating the sustainable growth rate and the update adjustment factor be based on a calendar year to avoid "extreme oscillation in conversion factor updates."
Despite favorable changes made to the SGR, the AMA expressed concern over a MedPAC recommendation that all payments for ambulatory care — including physicians’ payments — be moved under a combined volume control and update mechanism.
The lack of a single system for all settings creates an incentive for "site shopping" by physicians for the highest reimbursement rate, Wilensky told Congress.
The AMA urged the panel to take a closer look at the impact a single control mechanism would have on physicians, hospitals, and patients. The AMA said it doubted the accuracy of MedPAC’s assumption that changes in costs and technology would occur at the same rate across all ambulatory care sites.
Site-of-service differences
MedPAC also made recommendations about HCFA’s refinements in new practice expense values being phased in over a four-year period starting this year. As part of the new methodology, HCFA has expanded the number of services where separate practice expense values are calculated depending on whether the service is performed in the physician’s office or another facility.
Several medical specialties have argued against the creation of separate and higher office practice expense values — even for services that are rarely done in the office — because they might create an incentive to move services into the office even when they cannot be safely performed there.
With respect to practice expense payments, MedPAC agreed that for some services it is appropriate to pay a lower practice expense amount when physicians perform the service in facility-based settings outside the office.
Wilensky, however, recommended using a service-by-service approach to decide which services are subject to this site-of-service differential, rather than applying the same decision to entire groups of services.
"Payments for services generally recognized as inappropriate to perform in a physician’s office should also be reduced by the site-of-service differential," she said.
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