Wednesday, April 29, 2009

Baucus White Paper on Delivery System Reform

As you may know, Finance Committee Chairman Baucus released last night a white paper outlining potential options for reforming the health delivery system.  Release of the document precedes a discussion among Finance Committee Members of both parties scheduled to be held today.  Further discussions will be held on access and financing in the upcoming weeks, with white papers on those issues to be released in advance of those meetings.

The two biggest issues addressed in the delivery reform white paper surround Medicare Advantage (MA) and physician reimbursement.  On the former, the white paper proposes linking some portion of MA plan payment to pay-for-performance results on quality measures, as well as new overall payment methodologies that would result in lower payments to plans.  One approach would result in arbitrary reductions such that MA plan payments would be tied to fee-for-service Medicare spending, while the second approach would apply competitive bidding to MA plans—but traditional Medicare will not be required to compete.  Some Members may also note that the white paper discusses “simplifying the amount and type of extra benefits offered by MA plans”—suggesting that Chairman Baucus may want to limit plans’ attractiveness to beneficiaries by restricting their ability to provide services to seniors that traditional Medicare does not.

With respect to physician reimbursement and the Sustainable Growth Rate (SGR) mechanism, the white paper proposes a 1% update (i.e. increase) in physician reimbursement levels for 2010 and 2011, followed by no increase in 2012, and a reversion to current law formulas in 2013.  One proposal would establish a floor for the SGR, preventing physicians from receiving greater than a 3% cut in reimbursement levels (or 6% in areas with high growth rates of fee-for-service spending).  The white paper implicitly acknowledges the significant cost associated with both proposals, noting that “the Committee is continuing to explore other options” due to the high price tag associated with SGR reform.

Other highlights of the Baucus proposals include:

  • Establishment of pay-for-performance methodologies for hospitals, home health agencies, and skilled nursing facilities, with payment based on standards related to certain quality measures—the performance pool for hospitals would constitute up to 5% of existing inpatient reimbursement levels;
  • Expansion of the Physician Quality Reporting Initiative to require physician certification, as well as new quality reporting initiatives for inpatient rehabilitation facilities and long-term acute care hospitals;
  • Adoption of appropriateness criteria with respect to imaging services;
  • A 5% payment bonus for primary care physicians and general surgeons practicing in (newly defined) rural scarcity areas—paid for by an across-the-board reduction in reimbursement levels to other physicians, or other potential offsets;
  • Creation of a hospital re-admissions policy that would withhold up to 20% of hospital reimbursements for institutions with high levels of preventable re-admissions, along with a long-term move to bundled payment for all post-acute care services occurring within 30 days of discharge;
  • Creation of accountable care organizations (ACOs) in an attempt to deliver more integrated care, that would allow provider groups to share half of the potential savings to Medicare if operating efficiencies generate savings levels greater than 2%;
  • Expanded eligibility for health IT incentive payments created in the “stimulus” to include nurse practitioners, physician assistants, and other providers;
  • Creation of an independent institute to govern comparative effectiveness research—along with safeguards that, while attempting to recognize the personalized nature of health care, would permit government programs to use the research for reimbursement purposes in some circumstances;
  • New reporting requirements on drug manufacturers to disclose financial relationships and transactions with providers, and make such information publicly available;
  • A prohibition on physician-owned specialty hospitals, along with significant new restrictions on the expansion capabilities of current hospitals;
  • Additional requirements related to nursing homes, including ownership disclosure, compliance and ethics requirements, reporting of staff position categories and expenditures, independent monitoring, a standardized complaint form, and state-based complaint processes;
  • Re-distribution of unused residency training slots to encourage primary care or general surgery training, along with other provisions to increase and re-allocate the health care workforce;
  • Additional provider screening and data matching to combat fraud and abuse, along with a requirement for providers to implement compliance programs, additional penalties for violations, and enhanced fraud and abuse funding.