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CAPITOL PERSPECTIVES column LIFESCIENCELEADER.COM APRIL 2014 10 By J. McManus PARTISANSHIP SCUTTLES BIPARTISAN REFORM OF SGR J O H N M c M A N U S The McManus Group Partisanship Scuttles Bipartisan Reform of SGR arch 15 — Something ex- traordinary has occurred in Washington: The three healthcare committees of jurisdiction quietly collaborated on a bipartisan basis to develop a replace- ment for the dysfunctional "Sustainable Growth Rate" (SGR) payment formula that dictates Medicare payments to phy- sicians. Unfortunately, it was not to last. This substantial bipartisan achievement was soon scuttled and overtaken by the partisan bickering over the healthcare issue that has consumed the country for the past five years: implementation of Obamacare. The SGR has vexed policymakers for more than a decade. Enacted as part of the Balanced Budget Act of 1997, the SGR requires payment cuts to physicians and other practitioners when cumula- tive Medicare spending on those pro- viders exceeds GDP per capita growth. The formula worked for a few years in the late 1990s when a growing economy fueled by the dot-com bubble allowed for modest pay increases that approximated physician practice cost increases. But that bubble burst, and the more typical trajectories of healthcare costs outpacing the economy resumed. As a result, the SGR called for payment cuts. M Congress allowed a 5 percent cut to occur in 2002 but has legislatively intervened more than a dozen times since then to override scheduled payment cuts. The "SGR fix" has become an annual ritual in Washington, creating a legislative vehi- cle that policymakers have often used to cut other providers or tack on other unrelated health items. Congress funded the initial SGR fixes by steepening physician payment cuts in the "out years," kicking the can to a future Congress. We are living in those out years now. Result: Physicians across America now confront a 23 percent cut for the care they provide Medicare ben- eficiaries. Cuts of that magnitude would have a cataclysmic impact on healthcare and make patient access for Medicare beneficiaries more akin to Medicaid. Just as troubling, these constantly looming cuts have restrained physician practice investments in new technology and spurred thousands of physicians to exit independent practice entirely by becoming employees of hospitals. How can any business operate with a threat of possibly losing nearly a quarter of its revenue from its major customer base if Congress fails to enact a law? LOWER SCORE = OPPORTUNITY FOR REFORM Congress and the physician communi- ty caught a break last year when the Congressional Budget Office (CBO) final- ly acknowledged that six years of steadi- ly declining physician volume growth per capita constituted a trend (see chart on page 12). Policy makers were shocked when the CBO cut the cost of repealing SGR by 60 percent — dropping it from about $300 billion over 10 years to $117 billion. That reduced score spurred Con- gressional action to develop a program that would replace the SGR, as policy- makers did not want to simply write doctors a blank check or create a new formula that would come back to bite them a few years later as SGR had. The Energy and Commerce Committee was first out of the box in July of 2013 with a bill developed by the biparti- san staff with substantial input by Rep. Burgess (R-TX) and the House Physician Caucus. The Senate Finance Committee and House Ways and Means Committee worked in bipartisan, bicameral collaboration throughout the autumn to develop legislation that not only repealed and replaced SGR but also consolidated the disparate incen- tive programs on quality reporting, electronic health records, and value- based modifiers that were enacted over the past decade. Those bills were voted out of committee on a bipartisan basis in December. After six more weeks of negotiation and hard work, the three committees introduced bicameral, bipartisan con- sensus legislation that would repeal and replace SGR. The bill encourages physi- cian practices to strive to deliver higher quality and become more conscious of the resources physicians prescribe in all sectors of healthcare by eventually putting 9 percent of their payments at risk. Physicians will be judged on met- rics that specialties develop based on how they compare to their peers. The bill encourages value over volume by enabling practices to develop alternative payment models that could include capi- tation and bundled payments. OFFSETS: STILL FUNDAMENTAL IMPEDIMENT Of course, the fundamental impediment to enactment — how to finance the bill — had been mitigated by the lower CBO score but remained fundamentally unsolved. Interest groups assailed Congress, mak- ing the case that they should not be a focus of the savings. AARP threatened retribution on any member that voted for Medicare reforms that result in higher beneficiary costs. The American Hospital Association, nursing homes, pharmaceu- tical companies, and other sectors initi- ated all-out lobbying campaigns to con- vince Congress that they had paid enough for the Affordable Care Act and could not absorb additional cuts. When robbing Peter to pay Paul, you'll find few volunteers to play the role of Peter. 0 4 1 4 _ C P . i n d d 1 0414_CP.indd 1 3 / 2 1 / 2 0 1 4 1 1 : 0 8 : 1 6 A M 3/21/2014 11:08:16 AM