Senate Finance Committee's Health Reform 'Options Paper' Prompts Swift Academy Response

In response to a discussion paper issued by the Senate Finance Committee, the AAFP and two other primary care physician organizations have told the committee that in 2010, total Medicare payments for primary care physician services should be increased by at least 10 percent more than those made to nonprimary care physicians and other providers. The three groups also have recommended increases of an additional 5 percent each year for the subsequent four years.

In late April, the Senate Finance Committee issued a discussion paper on health care reform that includes a Medicare bonus of at least 5 percent for primary care physician services for the next five years. It also suggests implementing an additional 1 percent increase in the overall physician payment rate in 2010 and 2011.

The paper prompted a quick response from the AAFP; the American College of Physicians, or ACP; and the American Osteopathic Association, or AOA, which together represent the vast majority of physicians who provide primary care to Medicare patients.

"A 5 percent increase in payments for evaluation and management codes provided by primary care physicians, although well-intended, will not be effective in influencing more physicians to choose primary care or to sustain those currently in practice," said the three organizations in a joint recommendations document addressed to the committee.

"New models of payment to support primary care physicians' roles in care coordination and prevention should be accelerated," said the organizations, calling for an increase of 10 percent in payment for all Medicare services provided by primary care physicians in 2010. They also called for annual increases though 2014 that would be based on a market analysis, but that would require at least a 5 percent increase for primary care physicians each year.

According to the recommendations, primary care physicians would have to provide a specified minimum level of primary care services to ensure that eligibility for the bonus payments would be limited to those who actually provide primary care.

The Senate Finance Committee's discussion document, known as an options paper, (52-page PDF; About PDFs) notes that payment for any bonus to primary care health professionals would have to be offset by reducing Medicare payments for nonprimary care services under Medicare by about 0.5 percent.

However, said the joint recommendations from the primary care organizations, "We believe that increased payments for primary care should be funded in a way that takes into account the overwhelming evidence that producing more primary care physicians will lead to overall cost savings, mostly from Medicare Part A, rather than simply redistributing payments from other physicians."

In addition, the three organizations said the criteria for determining who should qualify for increases should only include physicians who are truly providing primary care, as evidenced by their specialty, types of service provided or other factors. In the meantime, Congress should direct HHS to make additional incremental payments to primary care physicians in 2011, 2012, 2013 and 2014 until market competitiveness is achieved.

According the to recommendations, these incremental payment increases should be cumulative, permanent, and adjusted each year by HHS based on the initial market analysis and the actual effectiveness of payment increases on increasing the numbers of primary care physicians.

"Payment policy and workforce policies should be expressly linked. Legislation should state that payment reform must have as a specific goal to increase the numbers and mix of primary care physicians and be sufficient to achieve it," the recommendations document said.

The AAFP also issued a separate point-by-point response to the finance committee's options paper. In particular, the Academy noted that the options paper does not propose the elimination of the sustainable growth rate, or SGR, formula. According to the option paper's proposals, Medicare would mitigate the effects of the flawed formula for at least the next two years, but it would not eliminate the SGR.

"We should not postpone resolving the annually recurring problem of the SGR," said the AAFP in its response. "It needs to be eliminated not just to provide stability to the Medicare payment system, but also to accurately reflect the actual practice costs that physicians bear."

The AAFP also expressed other concerns about the options paper. For example, the paper includes a brief description of a modest supplemental fee that Medicare would pay to a primary care practice that provides a covered evaluation and management service to a beneficiary within 30 days after discharge from a hospital stay. This would apply to beneficiaries suffering from a major chronic illness who are released from a hospital 30 days after discharge and who are not readmitted within 60 days after the initial discharge.

"In this payment for transitional care activities, there is a potential unintended consequence," the AAFP said. "Many of the chronic diseases that are listed, if managed well, would not result in hospitalization at all. In this case, a primary care practice that actually keeps chronically ill patients out of the hospital would not be eligible for this bonus payment."

The options paper also calls for a shift in payment from fee-for-service to accountable care organizations, or ACOs, which could place small and rural physician practices at a disadvantage because they would have the most difficulty participating in ACOs, according to the AAFP.

"The paper places a great deal of faith in the efficacy of ACOs, but these are untested models that need careful monitoring in multi-year demonstrations," said the AAFP. "We are particularly concerned that these models, which are designed to reduce costs, may not support quality improvement."

According to the AAFP, "solo, small- and medium-sized practices, especially those in rural areas, would not be able to secure the financial and technical resources needed to create the formal legal structures mandated by the recommendation."

"Consequently, this proposal might make hospitals the employers of primary care practices or force consolidation of many functioning small, independent practices into large, multi-jurisdictional institutions," the AAFP said in its response.

The options paper also proposes taking steps to speed the implementation of the patient-centered medical home, or PCMH. But "CMS has struggled to initiate the Medicare Medical Home Demonstration program since it was authorized in 2006," said the AAFP. "Even after the demonstration program begins, it will take five more years to test and evaluate the model. (CMS) needs to have the authority to be more nimble in implementing models like the patient-centered medical home that would help improve quality for patients and potentially contain costs for them and for the federal government."