Private Physician Practice Takes Another Blow From A New 2,400-Page Government Rule

Just before former House Speaker John Boehner handed the gavel to Paul Ryan, he shepherded legislation that eliminated a despised Medicare payment formula under which physicians faced a 21.2% pay reduction.

Congress could not allow the pay cut to take place and take the risk that physicians would turn away their Medicare patients. But the “Sustainable Growth Rate” payment policy for Medicare was law—passed as part of the Balanced Budget Act in 1997 to restrain government spending.

Physician groups swarmed Capitol Hill every year for more than a decade to oppose significant cuts, and the physician payment reductions had been averted 17 times by congressional patchwork.

Finally, last year, the SGR was eliminated with MACRA—the Medicare Access & CHIP Reauthorization Act that passed Congress with bipartisan support and was signed into law by President Obama.  It called for physicians to receive a 0.5% payment update (instead of a 21.2% pay cut), but the price was creation of a new payment program to reward quality performance.

The Centers for Medicare and Medicaid Services (CMS) was tasked with writing the implementing rules for how MACRA would work.  Its proposed rule spelled out the details of how Washington would pay for “value” not “volume” under the fee-for-service payment system.  Physicians and other clinicians would now be financially rewarded or penalized based upon how well they satisfy a complex new system of government rules meant to improve quality of patient care and control costs.

CMS received nearly 4,000 comment letters to its proposed rule, with many of them very critical.  The 2,398-page final rule was released Oct. 14, implementing what is likely the most complex clinician payment program in Medicare’s history, known as the Quality Payment Program, born out of MACRA.

Carol Monaco, an expert in health regulation, produced a study for the Galen Institute, published before the final rule was released, explaining in detail the significant problems the proposed rule presented to the physician practice.

“As MACRA is implemented, the hope of financial stability and administrative relief for physicians treating Medicare patients may be short-lived,” Monaco writes.

“If past is prologue, physicians should prepare themselves for years of payment system revisions, modifications, and amendments that go well beyond 2019 when the Quality Payment Program’s first payment adjustments go into effect.”

Some health industry leaders said they were relieved that the final rule allowed more flexibility than the earlier proposed rule.

Andy Slavitt, acting CMS administrator, said the 4,000 comment letters prompted him to direct regulation writers to make “the transition to MACRA as simple and as flexible as possible.”

The rule is meant “to create a more modern patient-centered Medicare program by promoting quality patient care while controlling escalating costs,” Slavitt said in a letter to clinicians posted online. The rule itself proclaims “high-quality, patient-centered care” as “the bedrock of the Quality Payment Program.”

Katie Orrico, JD, director of the Washington office for the American Association of Neurological Surgeons (AANS), told MedPage Today that her members are concerned about the impact of the rule on private physician practice.

Some are concerned about the cost: For those physicians whose participation is mandatory, Orrico said CMS has underestimated the cost of compliance. The agency has estimated a cost of about $1,200 per physician to develop the necessary infrastructure to comply with the new program, but a recent Government Accountability Office (GAO) report cited studies that place that figure closer to $40,000 per physician.

Others are very concerned about the intense focus on paperwork rather than patients.  “A lot of time is spent trying to prove [you did the right work] instead of caring for patients. Face-to-face interaction is just not there anymore,” according to Natarajan Bala, MD, who works in a single-specialist Gastro-Intestinal group of 11 in Houston.

The American Medical Association reiterated it was pleased that SGR had ended and said it was relieved that CMS listened to its concerns about the earlier proposed MACRA rule.  “Our initial review indicates that CMS has been responsive to many of the concerns raised by the AMA, and in the days ahead, the AMA will conduct a comprehensive review of the final rule to ensure that it promotes flexibility and innovation in the delivery of care to help meet the unique needs of all patients,” AMA President Dr. Andrew W. Gurman said.

Others are less pleased, including the Medical Group Management Association.

“MGMA is pleased with the significant burden reduction for physician practices in the first year of the MIPS program and new alternative payment model options outlined in the final rule,” President and CEO Dr. Halee Fischer-Wright said in a statement.

“It’s disappointing that flexibility provided for quality reporting in 2017 largely disappears in 2018 and beyond. The Centers for Medicare and Medicaid Services missed an opportunity to close the two-year gap between the measurement and payment periods, which would facilitate improved patient care by providing actionable feedback to physicians and more timely incentives. The sheer magnitude of a 2400-page regulation and its impact on physician practices can’t be ignored,” Fischer-Wright continued.

To give you a sense of the complexity that physicians face, read this description in a Health Affairs blog describing the Merit-Based Incentive Payment System (MIPS) at the center of the program:

“Think of MIPS as the ‘base’ program for MACRA—if providers don’t participate in it or gain an exemption from it, they receive a payment cut (even in the first year).

“The Final Rule establishes the manner in which eligible clinicians and groups will participate in MIPS, which consolidates components of three existing programs: the Physician Quality Reporting System (PQRS), the Value-based Payment Modifier, and the Electronic Health Record (EHR) Incentive Program. It also adds a fourth performance measurement component, clinical practice improvement activities.”

Monaco’s study shows that experience warrants skepticism about whether it will succeed.  “Current incentive programs have created numerous administrative requirements and increased costs of practicing medicine in and outside of Medicare, pressuring physicians to change the way they care for patients, which so far has produced mixed results in improving quality and controlling expenses.

“Paying for value is laudable, but depending on how value is determined, measured, and quantified, health care providers can find themselves penalized for taking care of sicker, more vulnerable patients.” She says that “physicians will have to determine whether the Quality Payment Program will provide enough of a monetary return to keep their practices operational for their Medicare patients.”

While the final rule (still open to comments for 60 days) softened some of the provisions from the proposed version, the compliance requirements are onerous.  She describes them in great detail in her study of the proposed rule.

Her conclusion offers a chilling warning about the survival of the small private medical practice:

“A 2015 survey showed ‘an estimated 71,000 physicians left their private practice for hospital employment between 2005 and 2013, with an additional 27,000 projected to leave by the end of 2016,’ in large part due to the Affordable Care Act.  Coupled with the proposals for the Quality Payment Program, the survival of the small practice appears slim.

“Due to years of mounting regulations, the solo practice in which patients stayed with the same physician for 20 to 30 years is most likely a thing of the past. That, in and of itself, is interference with the practice of medicine.

“What is dubbed the Quality Payment Program will be, in the coming months and years, Medicare’s data-driven, electronically-formatted clinician payment program, complete with weights and measures, benchmarks and thresholds, numerators and denominators, percentage points and deciles. All of which are expected to ‘incentivize’ physicians to provide comprehensive, patient-centered health care in a cost-efficient manner.

“Whether health care delivery and payment reform is headed in the right direction or toward a single payer system, physicians will have to be vigilant to ensure that the data used to judge their performance are accurate and complete. Given the enormity of implementing the Quality Payment Program, mistakes are bound to be made and there will be significant consequences for physicians.

“As implementation of the Quality Payment Program moves forward, it would behoove all concerned to learn a lesson from a recent lawsuit involving HHS and Caring Hearts Personal Home Services, Inc., which provides physical therapy and skilled nursing facilities to homebound Medicare patients.

“The U.S. Court of Appeals (10th Circuit) ruled against HHS noting that its regulations are too complicated. The court pointed out that Medicare is a complex program with at least 37,000 guidance documents on the agency’s web site. According to the court’s decision, ‘An agency decision that loses track of its own controlling regulations and applies the wrong rules in order to penalize private citizens can never stand.’”

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About the author

Grace-Marie Turner is president of the Galen Institute, a public policy research organization that she founded in 1995 to promote an informed debate over free-market ideas for health reform. Full biography