AMA: Shift from Volume to Value Will Aid in SGR Elimination

June 13, 2012

The AMA is recommending a “multipronged approach” to slow Medicare cost growth.

The most recent proposal put forth by the AMA to replace the flawed physician Medicare pay formula, also known as the Sustainable Growth Rate (SGR) Formula, would usher in widespread physician participation in new reimbursement models.

“We know that the cycle of scheduled cuts and short-term patches (14 so far) only grow the problem and must end,” AMA president Peter W. Carmel wrote on KevinMD.com. “Now is the time to focus on what comes next. Eliminating the [SGR] formula is imperative – but what should be put in its place?”

The plan most recently put forth by the AMA is detailed in a letter to the House Ways and Means Committee, which asked for recommendations regarding what alternatives could replace the current Medicare physician payment system and flawed SGR.

Carmel referred to the recommendations as a “multipronged approach” that would increase usage of alternative reimbursement models to slow Medicare cost growth.

Here’s how it would work:

• First, Congress would eliminate the SGR.

• Then, a five-year transition period would occur in which physicians would move away from fee-for-service reimbursement to new payment and delivery innovation models, which base physician reimbursement on quality and cost of care. Such models would include accountable care organizations, bundled payments, and Patient-Centered Medical Homes.

• Once that broad range of innovative practice models became available, Congress would pass legislation to promote their widespread usage. At the same time, Congress would wind down traditional fee-for-service.

• By the sixth year of transition, widespread use of new reimbursement models would occur.
Carmel wrote that for physicians, participation in new models would not be a “one-size fits all” approach. “Physicians should be able to select from the innovations that work to determine the best fit for their practices, their local communities, and their patients,” he wrote.

It’s crucial that Congress seriously considers proposed solutions to the fee-for-service reimbursement system and the flawed SGR, like the one just proposed by the AMA.

For more than a decade, it has rolled over the SGR problem with a series of short-term solutions. And while that’s helpful to physicians - if Congress had failed to step in last year physicians would have experienced a 27 percent pay cut to Medicare services - it’s terrible for the healthcare system and the nation as a whole.

Last year’s rollover cost an estimated $9 billion, according to a Congressional Budget Office estimate. And if Congress continues to rollover the SGR until 2022, the office estimates it will cost a total of $316 billion dollars.

“We are pleased that discussions on this topic are beginning now,” Carmel wrote. “With a busy election season ramping up and many pressing issues requiring attention this fall and winter, we need to plan ahead for the about 30 percent cut that will occur if action is not taken this year.”

How likely do you think it is that the AMAs recommendations will come to fruition?