Policy Analysis: The Future of Medicare Outpatient Reimbursement A system that requires congressional intervention every year needs a long-term fix, and lawmakers are grappling with what that might look like. Policy Analysis
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Policy Analysis  |   February 01, 2014
Policy Analysis: The Future of Medicare Outpatient Reimbursement
Author Notes
  • Ingrida Lusis
    is ASHA director of federal and political advocacy. ·ilusis@asha.org
  • Carol Polovoy
    is assistant managing editor of The ASHA Leader. ·cpolovoy@asha.org
Article Information
Regulatory, Legislative & Advocacy / Policy Analysis
Policy Analysis   |   February 01, 2014
Policy Analysis: The Future of Medicare Outpatient Reimbursement
The ASHA Leader, February 2014, Vol. 19, 24-25. doi:10.1044/leader.PA.19022014.24
The ASHA Leader, February 2014, Vol. 19, 24-25. doi:10.1044/leader.PA.19022014.24
Politicians, federal officials and health care experts agree—the current Medicare payment system for beneficiaries’ visits to health care providers’ offices, clinics and rehabilitation facilities is broken.
In a nutshell, here’s how the current reimbursement system works. Every service and procedure has a corresponding billing code, known as the CPT code (Common Procedural Terminology ® American Medical Association). Each code has a value that factors in how much “professional” work is required to provide the service, how much “technical” work the procedure requires, and the cost of professional liability for providing the service.
To arrive at a fee, the code’s value is multiplied by a number known as the conversion factor. This number, which changes every year, is based on a formula called the sustainable growth rate. The SGR, mandated in 1997 legislation in an attempt to control costs, is based on a comparison of actual expenditures to target expenditures.
If expenses are too high, the SGR forces a lower conversion factor— and reduced fees for providers—for the next year.
In reality, the system has not worked, as provider groups and senior groups have lobbied Congress to prevent the annual Medicare fee cuts, which in some years could have reached up to 20 percent under the SGR. That scenario would undoubtedly force providers to drastically cut back on the number of Medicare beneficiaries they serve—or even stop serving them altogether—making it difficult for those older adults to access health care.
In response, Congress has passed short-term legislation—known as the “doc fix”—almost every year to prevent the SGR from kicking in.
And then there’s the therapy cap …
The 1997 legislation also included a second cost-containment measure, known as the therapy cap, for Medicare outpatient services. The therapy cap places a limit on how much outpatient physical therapy, occupational therapy and speech-language treatment a single beneficiary may receive in a year. The 2014 therapy caps are $1,920 for occupational therapy and $1,920 for combined physical therapy and speech-language treatment.
As with the SGR, this cost-containment measure reduces seniors’ access to health care. Every year, Congress has delayed implementation or legislated a therapy cap exceptions process that allows beneficiaries to receive services beyond the cap if the provider documents that the services are medically necessary.
If it’s broken, why isn’t it being fixed?
Over the past few years, federal lawmakers have talked about the need to repeal and replace the SGR. One of the key factors to total overhaul is the cost. A recent Congressional Budget Office estimate puts the price tag at $153.2 billion over 10 years, a figure $20 billion less than previous projections. Short-term fixes—that is, the annual legislation to prevent the SGR and extend the therapy cap exceptions—cost substantially less.
Fixing the flawed Medicare payment formula is “some of the most important work facing this Congress,” according to a statement released by Joe Pitts (R-Pa.), chair of the Health Subcommittee of the House Energy and Commerce Committee, and Michael Burgess (R-Texas), vice chair.
Burgess indicated that SGR repeal is “vital to protect the health of our seniors and ensure that our nation’s best doctors continue to see Medicare patients. I am certain that this new [cost] estimate will accelerate the pace in passing the bill. Now is the time to repeal the broken SGR and replace it with a system that is good for both doctors and seniors.”
At the end of 2013, Congress wrestled with a two-pronged approach to the problem: a short-term “patch” related to 2014 rates and therapy caps, and a long-term, comprehensive approach to outpatient payment reform.
Short-term patch
In mid-December, both chambers passed legislation—as they have in most years since the SGR system was enacted—to put a short-term patch on 2014 Medicare outpatient reimbursement (URL for January 2013 article TK). The “doc fix” legislation, in effect Jan. 1–March 31, 2014, overturns the SGR, boosting reimbursement by 0.5 percent over 2013 rates for Medicare outpatient services. Among other provisions, it also extends the therapy cap exceptions process.
Industry watchers expect the House and Senate to use this three-month window to hammer out a deal to permanently repeal the SGR payment system and replace it with a value-based purchasing system that emphasizes quality and efficiency—rather than volume—of services.
Long-term proposals
ASHA and other stakeholder groups—including the American Occupational Therapy Association and the American Physical Therapy Association—have been working with congressional staff to make sure that any long-term SGR payment reform also addresses the therapy caps.
The House and Senate committees with Medicare jurisdiction have approved their own versions of reform legislation.
House of Representatives. In the House, the Ways and Means Committee proposal would increase the fee schedule by 0.5 percent through 2016, at which point fees would remain level. Beginning in 2017, some providers— physicians, physician assistants, nurse practitioners, clinical nurse specialists and certified nurse anesthetists—would move to a value-based purchasing model. In this model, part of the providers’ reimbursement would be through bonuses or reductions based on data related to quality, resource use and outcomes. Audiologists and speech-language pathologists are anticipated to come under this model in 2019.
The House bill does not address therapy caps. During consideration of the bill, however, two House members—Xavier Becerra (D-Calif.) and Erik Paulsen (R-Minn.)— expressed concern about the issue, and urged its inclusion before the bill’s full House vote. Rep. Dave Camp (R-Mich.), Ways and Means chair, indicated that the committee plans to address therapy caps and the use of extenders as the bill moves to the House floor.
The House Energy and Commerce Committee has a proposal that also would base payment on value and outcomes. The two committees will work to blend their respective legislative proposals into a bill that will pass the House.
Senate. The Senate Finance Committee’s proposal would also move providers to a value-based purchasing model, but does not include 0.5 percent increases through 2016. The Senate proposal would, however, repeal the therapy caps and replace them with a prior authorization system for certain services.
In an effort to develop new payment models for outpatient therapy services, the Senate bill also calls for the Centers for Medicare and Medicaid Services to collect standardized data related to diagnosis, severity, affected body structure, functional status and other factors, replacing the current reporting of patients’ functional limitations
Funding—the biggest obstacle—is not addressed in any of the proposals, and none of the committees is sharing information related to payment. The House and Senate will need to negotiate how to pay for a new system, and the president ultimately must agree, before change can take place.
Bottom line?
There is still uncertainty on what will come out of the House and Senate as a final SGR reform proposal. Although many provider organizations are in favor of repealing the SGR, they are not in favor of payment based on outcomes and perceived value. They have not offered alternative solutions, but fear that value-based systems could pit providers against one another based on outcomes, and could move Medicare beneficiaries away from private practices and into other provider configurations, including integrated health care systems, accountable care organizations and medical homes.
House and Senate members who are physicians have also expressed concerns that Congress will not provide modest annual fee increases as Medicare transitions to a new payment system.
Should Congress fail to reach consensus in the next three months, there will no doubt be another short-term patch to allow for continued negotiations.
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