CMS forges ahead with pay for performance reimbursement plan

According to CMS Administrator Mark B. McClellan, MD, PhD, the agency has no choice but to reform a system under which costs are skyrocketing as physician services increase at record rates without resulting in significant improvement in the quality of care.

In testimony before the House Energy and Commerce Health Subcommittee in mid-November, Dr. McClellan acknowledged that physicians would face severe reductions in reimbursements over the next several years under the existing Medicare payment system, including an overall 4.4% reduction in 2006, raising concerns about patient access to care.

"We also recognize that the very rapid growth in physician-related Part B services has contributed significantly to the extent of this payment problem," Dr. McClellan told the subcommittee. "Although CMS carefully examined the possibility of taking administrative action to address statutorily mandated cuts, we have concluded that we have no authority under existing statute to make changes that will immediately or directly impact the physician update.

"Moreover, even if we took administrative actions suggested by the physician community, this step would add substantially to Medicare costs and beneficiary premiums."

Many physician groups, including AUA, have called for an end to the Sustainable Growth Rate (SGR) formula used to control the growth in expenditures each year. SGR comprises four factors:

"Unfortunately, actual spending has greatly exceeded targeted spending, and the formula results in negative updates to physician payments to correct this disparity," Dr. McClellan said.

AUA and other physician groups have called on CMS to retrospectively remove drugs covered under Part B from the definition of physician services, thus revising the SGR. CMS has said such a move would be difficult to achieve. Further, Dr. McClellan said, it would not result in a positive update for several years.

"Consequently, CMS believes that statutory change is needed to improve the physician payments," he declared. "Such changes should do more than simply add substantial taxpayer and beneficiary payments to the current payment system."

According to CMS, use of physician services increased 6.3% in 2004 and was estimated to grow by 5.6% in 2005 and by 6.4% in 2006, compared with an average increase of about 1% between 1992 and 1999. Much of that increase was attributed to increases in office visits, lab tests, minor procedures, and physician-administered drugs.

Dr. McClellan said "much of the spending increase cannot easily be explained by changes in treatments based on new medical evidence and valuable new technologies."

"We have seen rapid spending growth over the past few years, partially because our payments do not encourage and support physicians in their efforts to become more efficient or focused on innovative approaches to improving quality," Dr. McClellan said, adding that, as a result, beneficiaries do not get the best care possible, despite increased out-of-pocket costs, nor are Medicare's long-term financial needs addressed.