After sitting on edge every April waiting to see if Congress will approve its annual reprieve on Medicare cuts for physician services, the sustainable growth rate that created those annual cuts is finally dead and buried. President Obama signed the Medicare reform legislation on April 16 to end use of the SGR after bipartisan efforts in both the House and the Senate––imagine that––brought legislation together just in time to avoid another 21% cut.

A new era in payment methods – at least for physicians

The permanent "doc-fix" deal ends a fight over Medicare payments that has dragged on for more than a decade. But it also sets up a two-track payment system that's designed to push physicians away from the traditional fee-for-service reimbursement model. That's unfamiliar territory.

Dialysis providers have already completed a few laps on pay-for-performance. The Quality Incentive Program requires them to meet a certain performance score each year in order to keep their composite rate payment intact.  Those who run the clinics have complained in the past that nephrologists have been exonerated from meeting those scores––they don’t get penalized if the clinic does, yet many of the quality measures deal with the physician-directed dialytic prescription. Physicians also should have an influence over access type and in convincing patients to get a fistula; yet, if too many patients have catheters, the dialysis provider faces the penalty.

Physicians have been the most significant holdout in the industry's movement away from the fee-for-service payment system, said Blair Childs, senior vice president of public affairs at Premier, an alliance of hospitals and other providers working on alternative payment models, in an interview with Kaiser Health Network. “This makes it starkly clear. There's no question that everyone's being pushed to alternative payment models,” Childs said. “Physicians are going to start to engage in a way they haven't before.”

How will this work?

Physicians will get a small pay raise for the next four years and then, starting in 2019, those who have at least 25% of their patients in value-based payment models will be eligible for 5% bonus payments through 2024. After that they'll receive annual payment bumps of 0.75%, three times the level of the increase for physicians that remain on the fee-for-service track.

While the transition from fee-for-service to alternative payment models won’t happen overnight, some are already expecting pushback from physicians who will be getting annual payment hikes based on performance. The American Medical Association endorsed the legislation, but that effort was likely aimed at agreeing to anything that would detonate the SGR.


Quality improvement…?

Then the question is will an overhaul of Medicare's physician payment system create more cost-effective, higher quality treatment models. Some argue that it will only force doctors into hospital-run Accountable Care Organizations. At a recent nephrology conference, an attendee voiced concerns about whether independent nephrologists would survive if the renal ACO demonstration starting in July “locks out” those who are not part of the ESRD seamless care organization that holds the Medicare contracts.

Dr. Robert Berenson, a health care finance expert at the Urban Institute, told Kaiser Health Network that he is skeptical about how the new system will work with very few quality measures designed for physician practice. “I don't think the provisions that purportedly will produce value-based physician care will achieve that perfectly good, aspirational objective,” said Berenson, who previously served on the Medicare Payment Advisory Commission. “We have lousy measures that don't measure the core activities of what doctors do.” The new law does call for allocating $75 million to develop new quality measures.

Ultimately, physicians have four years to prepare for this new approach: getting paid based on the quality of care delivered. We know that comes with all kinds of rat traps and obstacles: no two patients with the same diagnosis are alike. Hopefully, we’ll learn something from the renal ACO demonstration about how best to match quality care with quality outcomes.