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"Doc Fix" and the Potential to Improve Readmissions

This piece was originally featured in the Healthy Transitions Colorado March newsletter.

There has been a lot of buzz lately about the “doc fix” or the proposed repeal of the Medicare Sustainable Growth Rate formula (SGR). The SGR was put into law in 1997 as part of an attempt to regulate Medicare spending and essentially linked physician Medicare reimbursement to an economic target. The formula turned out to be rather quirky and soon resulted in proposed reimbursement cuts of more than 5 percent per year. To counter unsustainable cuts to reimbursement levels, Congress began periodically issuing temporary fixes to postpone the cuts and maintain physician reimbursement levels. Over time, the cuts dictated by the SGR have continued to grow and this past January physicians were looking at a potential cut in Medicare reimbursement of more than 20 percent.
This year a temporary patch was put in place to once more delay the prescribed reimbursement cuts, but an effort is underway to permanently fix and completely repeal the SGR. In February, three bipartisan committees proposed the SGR Repeal and Medicare Provider Payment Modernization Act (Act). The Act is designed to repeal the SGR and replace it with a new system focused on value and quality. A critical part of the Act also incentivizes movement to alternative payment models as a means of supporting value-based care, rather than the current volume-based fee-for-service system. The Act also promotes the use of Medicare data to improve transparency and overall quality.
So, what does this mean for readmissions and care transitions? Obviously, we can’t say with any certainty exactly what will happen, but there are several components of the legislation that strongly support care coordination and continuing work on improved care transitions and reducing readmissions:

  • Focus on Quality and Value: Anyone who works to reduce hospital readmissions knows that many of the interventions and processes put into place to decrease readmissions also lead to more engaged patients and caregivers, more effective use of home-based community services and supports, and lower overall costs. The new reimbursement strategy offers explicit incentives for improved care coordination, rather than just penalties for excessive readmissions. Doctors are strongly encouraged to coordinate care and communicate with other care givers to improve the quality of care and their own reimbursement.
  • Incentivizes Alternative Payment Models: The current fee-for-service payment system is in direct conflict with quality improvement efforts that reduce the amount of unnecessary and duplicative care patients receive. While providers are primarily concerned with giving the best possible care to their patients, the current volume-driven payment system has an impact on which care options the provider may pursue. By financially rewarding providers who move to alternative payment models, this proposed payment system will alleviate some of the monetary concerns of leaving the fee-for-service world. These new payment models will be quality and value-driven, and frequently incorporate shared savings with the provider. Under these kinds of models, higher quality care at a lower price suddenly takes on new appeal and reducing readmissions becomes even more important to the health care system.
  • Promotes Data Transparency: Part of this legislation will support increased data transparency and the use of that data to drive decision-making. The Act specifically increases the flexibility and use of Medicare data by data entities across the country, like the Colorado All Payer Claims Database. Access to the information these databases can provide will help give care givers and facilities complete and accurate information about their patient population, including all-cause readmissions from a variety of sources. The increased data transparency will allow these organizations to better understand where they have opportunities to improve care and lower costs.

The next months are going to be very interesting as Congress contemplates the proposed changes to the SGR. As of today, there is no set funding to finance the SGR repeal. There have been several proposals, but nothing has been decided or fixed. Given the bipartisan nature of the legislation and the strong support from various sectors, the Act is could potentially pass regardless of the funding situation. For now we’ll have to wait and see what the final results mean for health care, care transitions and readmissions.
For more information:
http://healthcareblog.pyapc.com/2014/02/articles/healthcare-reform/hr-4015-the-sgr-repeal-and-medicare-provider-payment-modernization-act-of-2014-out-with-the-sgr-in-with-the-mips/
http://www.modernhealthcare.com/article/20140206/NEWS/302069944
http://democrats.energycommerce.house.gov/index.php?q=news/senate-house-leaders-introduce-sgr-replacement-bill
(PDF of Act) http://www.ama-assn.org/resources/doc/washington/sgr-bill-sections-summary-02-04-2014.pdf

About the Author: Kristin Paulson is CIVHC's Senior Manager of Policy and Initiatives. Contact her at kpaulson@civhc.org.

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