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Fixing the Sustainable Growth Rate: This Could be the Year, Seriously

by Dan Haley, SVP and General Counsel

The Sustainable Growth Rate. “SGR.” The “doc fix.” These terms float into our political consciousness every year, getting some air time on the evening news to give us a sense that these terms describe something important that has to do with health care and the federal budget. And for most, the understanding ends there. Not for doctors. They know exactly what “SGR” is: an axe held repeatedly and precariously over their necks, year after year.

The SGR and the “Doc Fix”
Here’s what it’s all about in a nutshell: The Sustainable Growth Rate (SGR) refers to a statutory formula implemented in 1997 to determine the annual rate of growth in Medicare reimbursement rates—which, in turn, determines the amounts Medicare reimburses doctors for services. The problem? The SGR is, and always has been, utterly disconnected from reality.

The result? Every year since 2002, the SGR formula has prescribed a significant cut in physician reimbursement, starting at 4.8% in 2002, and escalating steadily to a whopping 26.5% decrease in 2013. To combat the impact of these cuts, Congress passes a temporary measure each year—dubbed the “doc fix”—to fund the shortfall. Each round digs the funding shortfall deeper. There is rare universal agreement in Washington, D.C. about the need for a “permanent doc fix” but it repeatedly falls to pieces when it comes time to sort out the details.

But the Tide is Turning…
In July, the House Energy and Commerce Committee issued the first truly bipartisan proposal to permanently fix the SGR. Building from that foundation, this month the House Ways and Means and Senate Finance Committees issued their own “discussion draft”—a conceptual outline of potential bipartisan, bicameral legislation to repeal the SGR and fundamentally reform Medicare physician payment (we’ll call this “the Proposal”).

The committees solicited public comment on the Proposal, and; athenahealth submitted our comments this week. The seriousness of the Proposal reflects a growing recognition among policymakers that the SGR is a real and growing problem that needs to be addressed. Based on the approach being taken by Congress, there is reason for optimism.
The Proposal would permanently fix the SGR by, among other things (with thanks to our friends at Leavitt Partners, from whom I’m borrowing here):

  • Freezing Medicare reimbursement rates through 2023 and repealing the SGR
  • Pushing physicians away from the fee-for-service paradigm and toward quality reimbursement by establishing two new models: 1) a Value-Based Performance model that combines the Meaningful Use Electronic Health Record incentive program with several other existing incentive programs; 2) an Alternative Payment Model (APM) structure that would pay 5% bonuses to providers to reward the realization of savings through participation in capitation, shared savings, and other non-traditional reimbursement models
  • Bringing needed focus to chronic care by rewarding coordination of care across the continuum
  • Expanding the range of permitted uses by Qualified Entities (QEs) of Medicare paid claims data
  • Enabling physician performance assessment

Where Does athenahealth Stand?
We believe that each of these elements is a positive step toward doing away with that proverbial axe hanging over caregivers. For value-based payment models to work, however, Congress must ensure that all care providers are empowered to participate—not just docs employed by large hospitals and health systems. Remember, independent and small-practice providers still make up the indispensable core of care delivery in this country. Any system that inadvertently excludes them will fail. Here are overviews of the three suggestions we submitted:

  1. Structure APMs with enough flexibility to ensure that independent providers can participate
    Existing value-based models exclude independent and small group doctors by imposing administrative and financial burdens that those providers cannot meet. They also create additional unintended consequences—market consolidation, cost inflation, and creation of proprietary data silos protected by non-interoperable technology—that have myriad negative systemic impacts.


    Recognizing those unintended consequences, athenahealth developed and began advocating for a proposal early this year— which we call the Independent Risk Manager (or “IRM” because everything in DC must have a three-letter acronym). It’s designed to enable independent providers to share risk and savings via a common, interoperable technology platform. It fits perfectly into Congress’s SGR Proposal, and would ensure the ability of those previously excluded providers to contribute to the Proposal’s success. We attached an IRM briefing to our comments.
  2. Make “Meaningful Use” Meaningful
    We are glad to see the Meaningful Use (MU) program wrapped into a broader incentive program designed to drive more than just technology adoption. But MU will continue to fall short of expectations unless policymakers demand 21st century performance from health information technology that’s subsidized with government payments. For information technology to be used “meaningfully” in 2013 and beyond, it must be interoperable across disparate vendor platforms. Period. We’ve been beating this drum for months.
  3. Data Liberation
    Right now, Medicare paid claims data can only be released to QEs. Currently, although there is no specific legal rationale, the powers-that-be effectively exclude for-profit entities from having QE status. Operating under appropriate restrictions and subject to strict safeguards against data abuse, entities like athenahealth have the analytical tools to produce tremendously powerful analyses of the vast Medicare data store—analyses that can enhance and accelerate care coordination, and empower APMs and VBPs to achieve true efficiencies and real savings. Congress should clearly establish that for-profits can qualify as QEs.

We encourage you to take a few minutes to review our full comments. Then, drop a comment to let us know what you think.

Check out Dan Haley's Google+ Profile. Follow @DanHaley5 on Twitter.

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