College of American Pathologists
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December 9, 2010  •  Volume 26, Number 25
Next Issue: January 6, 2011
© 2010 College of American Pathologists

In This Issue:

Congress Extends Doc Fix, TC Grandfather through 2011
ACO Update: CAP Joins Brookings-Dartmouth Learning Network
Congress Passes Bill Exempting Physicians from Red Flags Rule
CAP Questions Pathology Role in Proposed Physician Website
Illinois Passes New Out-of-Network Billing Legislation
Deficit Commission Recommends Sweeping SGR Reforms
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Congress Extends Doc Fix, TC Grandfather through 2011

Dec. 9—This afternoon Congress passed a one-year fix to the Sustainable Growth Rate (SGR) formula for Medicare physician payments, averting the 25% cut set to occur on Jan. 1 and extending the current payment rates through Dec. 31, 2011. In addition, the bill (H.R. 4994) will also extend the technical component grandfather provision through the end of 2011.

Under H.R. 4994, also known as the the Medicare and Medicaid Extenders Act of 2010, the 2.2% update enacted in 2010 will continue through Dec. 31, 2011. The estimated cost of the SGR fix is $14.9 billion over 10 years, and will be paid for by revising the amount of money that consumers will have to repay if they receive an excess subsidy through the insurance exchange program beginning in 2014.

This bill passed the Senate yesterday, Dec. 8, by unanimous consent. The House then approved the bill today by a vote of 409-2 and is expected to be signed into law by President Obama by as early as tonight.

ACO Update: CAP Joins Brookings-Dartmouth Learning Network

To help ensure pathologists have a role in structuring new healthcare delivery models, the College has joined the 2010-2011 Brookings-Dartmouth Accountable Care Organization (ACO) Learning Network. The Network is headed up by Dartmouth Institute for Health Policy and Clinical Practice’s Elliott Fisher, MD, and former CMS Administrator Mark McClellan, MD, PhD, who is now with the Brookings Institution’s Engelberg Center for Health Care Reform. Both Drs. Fisher and McClellan are leading experts on ACOs; Dr. Fisher is credited with launching the ACO concept.

This is the first opportunity that specialty physician groups have to join the Network; membership was expanded this year after leaders noted a gap in representation. “This group is influential and centrally placed, in terms of working closely with CMS and private payers who are developing models for implementation of ACOs and medical homes,” said Stephen Black-Schaffer, MD, FCAP, of Massachusetts General Hospital (MGH) and an Associate Professor of Pathology at Harvard Medical School. Dr. Black-Schaffer also co-chairs CAP’s ACO network and is vice-chair of the Economic Affairs Committee.

The significance of the College’s involvement is twofold, he explained to Statline. Much of the discussion surrounding ACOs and medical homes has centered on primary care and hospital services. But as a network member, the CAP has the opportunity to listen to what other ACO sites are doing, as well as raise issues that will impact pathology. “We now have the opportunity to not only ask critical questions about how these models will be structured, but we also have the opportunity to encourage these health care economy leaders to think about issues that will disproportionately affect pathologists, so we can be at the discussion table throughout the development of these regulations,” said Black-Schaffer.

Integration Challenges

Health care providers continue to await final regulations for ACOs, which CMS was expected to release this fall. CMS is mandated by the health care reform law to launch a comprehensive ACO program by Jan. 1, 2012.

The agency is, however, looking to stakeholders for information on developing and implementing these models. In comments recently submitted to CMS Administrator Donald Berwick, MD, in response to a request for information (RFI), the American Hospital Association (AHA) noted the regulatory barriers in the form of Stark laws and anti-kickback regulations that inhibit clinical integration.

These regulatory barriers prove particularly challenging for specialty physician groups who have limited access to capital to invest in information technology, according to the AHA. Sharing best practices and peer data—all necessary to create clinically integrated relationships—are also likely to be thwarted under this regulatory environment.

“CMS needs to ensure that these kinds of relationships will be permitted under the shared savings program,” said AHA Senior Vice President, Public Policy and Data Analysis in the comment letter. “Otherwise, the only options available to those in solo or small practices will be to become employees of the hospitals or to form large multi-specialty group practices.”

The AMA also pushed for explicit safe harbors from antitrust enforcement and related statute waivers for independent physician groups in its comment letter to CMS. “Currently, all of these laws and associated guidelines favor hospital-based systems with employed physicians, yet the best way to preserve opportunities for appropriate competition in health care and choice for patients is to enable physicians to form ACOs in ways that enable them to continue practicing independently of hospitals and large health systems,” said AMA CEO Michael D. Maves, MD, in the letter.

Congress Passes Bill Exempting Physicians from Red Flags Rule

The House passed a Senate-approved bill on Dec. 7 focused on exempting physicians from the Federal Trade Commission’s (FTC) “red flags rule”, which was slated to begin on Jan. 1, 2011. At press time the bill, which passed the Senate on Nov. 30, was awaiting President Obama’s signature to become law.

Earlier this week, the College and other specialty providers wrote to House Speaker Nancy Pelosi (D-CA) and Republican Leader John Boehner (OH) urging immediate action on this bill—the Red Flag Program Clarification Act of 2010 (S. 3987).

Aiming to mitigate identity theft, the red flag rule requires businesses deemed as creditors to implement an identity-theft prevention and detection plan by the enforcement date. In addition to banks and credit card companies, the FTC had defined physicians who do not receive full payment at the time of service as creditors.

However, the passing of S. 3987 attempts to address this issue by narrowing the definition of a creditor. Under this definition, the bill’s sponsors have stated that physicians, dentists, and other professionals would not generally meet the definition of a “creditor,” and are therefore exempt from the rule’s requirements. However, the bill does leave open the possibility that the FTC may revisit the issue in the future through the rulemaking process.

CAP Questions Pathology Role in Proposed Physician Website

While the CAP supports providing meaningful physician performance information to consumers and other providers through the forthcoming Physician Compare Website, there is concern that a core set of measures will not apply to all physician specialties, including pathology. The College recently submitted these and related comments on the Website, mandated by the Affordable Care Act, in response to questions posed by CMS.

CMS has proposed using a still-undefined core measure set, most likely drawn from those currently used in the Medicare physician quality reporting system (PQRS; formerly PQRI). The CAP has long been critical of a “one-size-fits-all” approach to performance measurement, as such an approach rarely encompasses the practice of pathology.

While the College has two approved PQRS measures on breast and colon cancer, not all pathologists can report on these measures. The current process for developing and reviewing measures impedes timely review and adoption of new measures. For example, CAP also has developed five other measures that are still pending review through the multi-layered process.

Because of this issue with measures, the College does not believe the PQRI participation is a valid measure of pathology quality. Therefore, pathology will not be accurately assessed if these measures are then used as the framework for the Physician Compare Website. “In situations where patients do not select their physician (e.g. pathology, emergency medicine, radiology), there is limited value in including comparisons on the website,” state the CAP’s comments to CMS. “At a minimum, the Physician Compare website should indicate when there are no measures or limited measures available for a physician to participate in the PQRS.”

Illinois Passes New Out-of-Network Billing Legislation

Both chambers of the Illinois Legislature have approved a bill—H.B. 5085—requiring insurers and out-of-network providers to negotiate reimbursement rates for services provided when a patient has made a good faith effort to use an in-network provider. If the parties fail to agree on a rate, then arbitration may be initiated by either party through the state’s Department of Insurance. This is a significant departure from current state law requiring the insurer to reimburse an out-of-network provider in full for services provided in these situations.

The CAP and Illinois Society of Pathologists, working with a coalition led by the Illinois State Medical Society (ISMS), have opposed the legislation. However, during negotiations, insurance industry officials convinced legislative leadership to push the Senate-amended legislation through the House. The bill passed the House on Nov. 30; Gov. Pat Quinn (D) has 60 days to sign the bill into law after receiving it from the legislature.

The ISMS is asking Gov. Quinn to veto the legislation. “We believe that the current bill provides a strong disincentive for insurers to reimburse fairly or to offer fair contracts to physician,” wrote ISMS Chair, Board of Trustees Craig A. Backs, M.D., in a letter to Gov. Quinn. “After all, if they can reimburse physicians for less than their network contracted amount, why would they wish to pursue a contract with that physician?”

Deficit Commission Recommends Sweeping SGR Reforms

Escalating Medicare spending is the most daunting fiscal challenge for the federal government, so it is no surprise that recent recommendations from President Obama’s National Commission on Fiscal Responsibility and Reform call for a major overhaul of the Sustainable Growth Rate (SGR) formula for determining physician payments. The recommendations are outlined in the Fiscal Commission’s Dec. 1 report entitled The Moment of Truth.

Of course, it is unclear if these recommendations will move forward, given that there were not enough votes among panel members to send the report to Congress. However, because the future of SGR is uncertain (after 2011), lawmakers may rely on these recommendations in some form to determine how physicians are paid under Medicare in the coming years.

The Fiscal Commission report focuses on two options to rein in spending associated with the flawed formula—reforming the SGR and determining a way to pay for the SGR.

To reform the SGR, the report presented two policy options. Lawmakers can either freeze payments between 2012 and 2020 at a cost of $267 billion or direct CMS to develop an alternative formula that fosters greater care coordination and pays physicians based on quality, rather than quantity, of services. To pressure CMS to develop this alternative payment model, the SGR formula would be reinstated in 2015 (based on 2014 spending levels). The current formula would be in effect until CMS unveils the new formula. This last proposal has the Fiscal Commission’s support over the payment freeze option, as it saves the government an additional $22 billion.

To pay for the SGR, lawmakers would have to identify approximately $400 billion to pay for costs associated with repealing the SGR. This money could come from a variety of disparate policy options, including (but not limited to) medical malpractice reform, granting greater authority to CMS to pursue fraud and abuse, extending Medicaid drug rebates for dual eligible beneficiaries, and reducing excess payment to hospitals for medical graduate medical education.

Revamping a Flawed Formula

Some critics claim that any revision—no matter how extreme—to the SGR formula will fail to result in any savings. “The alleged physicians ‘savings’ under SGR will never be realized,” health care economist Jeff Goldsmith, PhD, president of Health Futures, Inc., told Statline. “They are like a bad mortgage on the federal balance sheet and should be written off as uncollectable.”

Goldsmith also blames the SGR for the increase in inappropriate testing in an environment where financial incentives exist, particularly in imaging. This is a central issue in his recently published book, The Sorcerer’s Apprentice: How Medical Imaging is Changing Health Care (Oxford University Press). “The fact that the return on using your brain in medicine has been too low has resulted in a lot of excessive testing as a strategy to prevent physicians’ incomes from falling,” he explained, adding that there has been no practical way for physicians to respond to exceeding the SGR caps. “There is nothing national about physician care, and no national mechanism of adjusting physician behavior to fit within the SGR caps,” he said.

To appropriately capture pathology’s value, physician payments should be based on episodes of care, according to Goldsmith. “The challenge to pathology in episode payment is demonstrating that effective diagnosis and monitoring of care can reduce episode costs,“ he explained. “There ought to be empirical evidence that elegant, resource sparing diagnosis saves money by averting inappropriate treatment and reducing complications.”

Bundled payments and a host of other payment reform options are being closely monitored by CAP as possibilities to control Medicare spending.

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