October 10, 2008
3 min read

Washington Update

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Subcommittee witnesses disagree on ways to reform physician payments

Washington Update

During a hearing before the House Ways and Means Subcommittee on Health in September, several witnesses disagreed on the best course for reforming payments to physicians under the Medicare physician fee schedule.

Since 2003, the formula used to update physician payments under the fee schedule has led to significant reductions in physician payments that are usually stopped by Congress at the last minute, leaving physicians feeling uncertain as to what the reimbursement future may bring. Unfortunately, each time the payment cuts are temporarily halted, they grow even larger the following year.

For years, this pattern of eleventh-hour congressional action has persisted, and now Congress is under pressure to finally address the underlying problems. Lack of a permanent solution in the past has largely been blamed on the cost of an overhaul.

On Sept. 11, Donald Crane, head of the California Association of Physician Groups, testified before the Ways and Means Subcommittee on Health that a capitated payment model would provide the best incentives for high-quality, efficient and cost-effective health care. Mr. Crane argued that traditional fees for service reimbursement are “ill-equipped to manage seniors with multiple chronic conditions.” However, another witness, Bruce Vladeck, of Ernst & Young and also a former Medicare administrator, disagreed, saying that a capitated model was not the best direction to achieve necessary reforms.

The sustainable growth rate formula was passed by Congress as a way to control physician spending by comparing the actual growth rate of physician services to a spending target. When the actual growth rate exceeds the spending target, the result is a decrease in the payment rate the following year.

The Sept. 11 hearing was the first hearing on this issue since Congress passed the Medicare Improvements for Patients and Providers Act of 2008 in July, which replaced a 10.6% Medicare reimbursement cut for physicians with a payment freeze for the rest of 2008 and a 1.1% increase beginning in January.

Physician group representatives testified at the hearing that the system must be fixed because further cuts could encourage physicians to stop treating Medicare beneficiaries, which could ultimately lead to access problems for many. Although the experts agreed that there is no one solution to the sustainable growth rate problem, they noted that medical groups themselves are exploring approaches to encourage appropriate utilization, quality of care and reimbursement, including the medical home concept, bundling, quality reporting and others.

CMS postpones 2009 competitive acquisition program

In September, the Centers for Medicare and Medicaid Services announced that it would postpone the 2009 Medicare Part B competitive acquisition program (CAP). The current program will continue through Dec. 31.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 required CMS to implement a CAP for Medicare Part B drugs and biologicals that are not paid on a cost basis or under a prospective payment system. Beginning with drugs administered on or after July 1, 2006, physicians had the choice of buying and billing these drugs under the average sales price methodology or obtaining the drugs from a vendor selected through a competitive bidding process.

Earlier this year, CMS solicited bids for new vendor contracts for the 2009 to 2011 competitive acquisition program. The current vendor, BioScrip, has been the sole vendor for the program since its inception in 2006. Although CMS apparently received several qualified bids, successful bidders chose not to enter into contracts with the agency, resulting in CMS’ decision to halt the program at the end of the year.

Participation in the CAP has been voluntary, and because the program started in 2006, participation has not been as high as CMS expected. Therefore, the election process to participate in the program for 2009 will not be held, and CAP drugs will not be available from a CAP vendor for any dates of service beyond Dec. 31.

CMS is expected to provide additional guidance for physicians who are currently participating in the competitive acquisition program, explaining how to transition out of the program. This information will be posted on the CMS Web site at: www.cms.hhs.gov/CompetitiveAcquisforBios/ 02_infophys.asp.

CMS intends to seek feedback on the CAP from physicians who participated, as well as from vendors, and will use this information to inform its decision to proceed with another bid solicitation at a later date.

Information about how to submit comments will be available at: www.cms.hhs.gov/CompetitiveAcquisforBios/.

For more information:

  • Chandra Branham, JD, can be reached at Arnold & Porter LLP, Suite 900, 1600 Tysons Blvd., McLean, VA 22102-4865; 703-720-7004; fax: 703-720-7399; e-mail: chandra.branham@aporter.com.