AAFP Board Member Urges Congress to Adopt New Medicare Payment Model

Congress needs to restructure the Medicare payment system to recognize and reward care coordination and quality and to prevent expensive and duplicative tests and procedures, said AAFP Board member Bradley Fedderly, M.D., of Milwaukee before a House subcommittee on Nov. 8.

"Medicare beneficiaries comprise about a quarter of the typical family medicine practice," said Fedderly, testifying before the House Small Business Subcommittee on Regulation, Health Care and Trade. "Therefore, an accurate and more contemporary physician payment method is key."

The subcommittee’s hearing on the impact of scheduled Medicare cuts on solo and small group practices underscored the inadequacies of the sustainable growth rate, or SGR, formula, which determines physician payment rates under Medicare. Fedderly, who was joined on a panel by representatives from several other physician organizations, assailed the SGR formula as "inaccurate and outdated." He urged Congress to replace it with a new payment formula that "considers and reflects the change in the cost for small business medical practices to provide care."

"Enact a two-year positive update for payment rates and use the time to develop a replacement for the dysfunctional SGR formula," advised Fedderly.

He also urged Congress to adopt the patient-centered medical home as a central part of the Medicare program and to "incorporate a fee for physicians who coordinate the care of Medicare patients."

"This should be a blended model that combines fee for service with a monthly coordination payment," said Fedderly. "Such coordination will go to the physician practice chosen by the patient. Any physician practice prepared to provide care coordination should be eligible to serve as a patient's personal medical home."

Rep. Michael Burgess, R-Texas, an OB-Gyn who testified before the committee on a separate panel, said the "SGR must be eliminated" and replaced with a Medicare payment system that adjusts for growth in services and that is agile enough to determine what constitutes appropriate growth in service volume.

Burgess predicted that Congress would intervene and block the pending 10.1 percent cut in physician payment rates before scheduled reductions take effect on Jan. 1. He noted, however, that Congress intervenes each year between Thanksgiving and the end of the year to stop the SGR cuts, turning the exercise into an annual ritual that fails to fix the underlying problem of the payment formula. By not repealing the SGR, Congress is making an ultimate solution much more difficult and expensive to address, said Burgess.

"Eventually we will be in a deep hole that we are unable to get out of," he warned.

The SGR formula is "fantasy, it is fiction and it is made up," from the perspective of physicians, Burgess said. He called on Congress to replace the SGR with a formula that is based on the Medicare Economic Index, or MEI.

Rep. Charles Gonzalez, D-Texas, chair of the subcommittee, decried the cuts called for under the SGR formula, saying in a prepared statement that the "potential impact of these cuts must be considered in light of the fact that these medical practices function like any other small business and face low profit margins."

"Physicians are responsible for expenses like rent, payroll, employee health insurance and malpractice insurance," Gonzalez said. "Beyond the Medicare cuts, these general business costs are expected to increase 20 percent in the next nine years."

Nevertheless, Gonzalez said he hears conflicting reports about whether physicians are declining to treat Medicare patients because of low Medicare payment rates.

"The reason you are getting a conflicting message is because of what we do as physicians," Fedderly said during a question-and-answer segment of the hearing. "We have trouble saying 'no.'" By the time primary care physicians are forced to turn Medicare patients away, those physicians already are in desperate straits, he noted.

"As primary care physicians, we feel like we are hamsters on the wheel," said Fedderly. "We are making the wheel go faster and faster to try and accommodate everybody."