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Payment Limbo: Medical societies take on SGR reform

by Geri Aston •

One thing is clear, however: The longer it takes for Congress to solve the problem, the more it will cost. In 2005, fixing the formula would have cost $50 billion. Today, the price tag is almost $300 billion, Dr. Rohack said.

The payment picture has been complicated further by the creation of the Independent Payment Advisory Board (IPAB). Much of organized medicine was opposed to the 15-member board, which was appointed by the president and confirmed by the Senate. In January, the American Academy of Otolaryngology-Head and Neck Surgery and 74 other organizations stated their opposition to the IPAB in a letter to Senators Harry Reid and Nancy Pelosi.

The reform law sets target growth rates for Medicare. If expenditures are expected to exceed that target, the IPAB is required to recommend proposals to reduce spending by specified amounts, according to a Kaiser Family Foundation fact sheet. The Department of Health and Human Services must implement the proposals unless Congress adopts an alternative with equivalent savings or the president vetoes the congressional package and the veto isn’t overridden. The first set of recommendations is due in 2014 for implementation in 2015.

The board is limited, however, in that it cannot submit proposals that would ration care, increase taxes, change Medicare benefits or eligibility, increase beneficiary premiums and cost-sharing requirements or reduce low-income Part D subsidies. Through 2019, the board is barred from recommending payment cuts to providers, primarily hospitals and hospices, that are already slated for reductions. Alarmingly, the IPAB can propose physician payment cuts.

Physicians are worried the board could propose something that, like the SGR, penalizes doctors when patient volume increases, Dr. Rohack said.

Because the board is now part of the law, doctors are trying to figure out how best to approach it, Dr. Kuppersmith said. One goal is to have a surgeon on the IPAB so that surgeons’ viewpoints are represented, he added.

Your Payments, Explained

Medicare pays for physician services based on the physician fee schedule. Under this system, payment rates are based on relative weights, called relative value units (RVUs). These account for the relative value of the amount of work required to provide a service, the expenses of maintaining a practice and liability insurance costs.

Each of the three RVUs is adjusted using geographic practice cost indexes to reflect price variations in different markets. The fee schedule payment amount is then determined by summing the adjusted weights and multiplying the total by a standard dollar amount, called the conversion factor.