On April 28, 2009, the Senate Finance Committee issued the first of three papers identifying policy options for health system reform. The 48-page document is filled with varying approaches for reforming the Medicare payment system for hospitals and physicians, with a focus throughout on rewarding quality initiatives. First among them is the establishment of a value-based payment system for hospitals by 2012 that proposes to reward performance based on patient outcomes. Incentive bonus payments for qualifying hospitals would be derived from reductions in other Medicare inpatient prospective payment system (IPPS) payments. Disproportionate share hospital (DSH), indirect medical education (IME), outlier and low-volume adjustment payments, however, would not be affected. Quality incentive payments would be applied to physicians through an expansion of the Physician Quality Reporting Initiative. Other proposed options include incentives and reductions in payments tied to hospital readmission rates and bundled payments for IPPS and post acute care services occurring or initiated within 30 days of discharge from a hospital beginning in 2015. Also proposed is the institution of an independent, private, non-profit corporation to generate and synthesize evidence on comparative clinical effectiveness research. This entity would set the national agenda for research priorities within its proposed mission.

An option to amend the in-office ancillary services exception in the Stark Law would require physicians to disclose ownership interest in imaging facilities or services, including MRI, CT, PET and other "designated health services," effective January 1, 2010. The policy options paper also contains several proposals aimed at determining a "best practices" standard with regard to ordering and proper use of diagnostic imaging and directs the Secretary of the U.S. Department of Health and Human Services (HHS) to work with stakeholder groups on developing appropriate use and reporting criteria. Varying payments to physicians ordering imaging services based on adherence to the new criteria would be implemented by 2013, with lower payments to physicians who exceed the national threshold. Another imaging-related option would establish a Diagnostic Imaging Exchange Network (DIEN) to facilitate the exchange of information regarding a patient's imaging history.

Primary care and general surgery are targets for incentive payments and additional attention under proposals aimed at incentivizing graduate medical education (GME) training. With respect to proposed bonus payments for general surgeons and primary care physicians, this option would be offset by an across-the-board reduction in payments for services under all other codes. GME slots would be open for redistribution, with 75 percent of such slots being allocated toward primary care and general surgery. Teaching hospitals would be allowed to apply for additional slots in accordance with several proposed criteria. Clarifying a policy that has been the subject of litigation, the counting of time for certain non-patient care activities, such as didactic and scholarly activities in a non-hospital setting would be allowed in calculating GME payment.

Another policy option directly addressing physician-owned hospitals proposes that the whole hospital exception to the Stark Law be eliminated, grandfathering hospitals that have physician ownership and a Medicare provider agreement in effect on July 1, 2009. Additionally, the proposal identifies multiple reporting requirements for such hospitals and certain safety requirements for hospitals without 24-hour physician coverage.

The takeaway for providers from this first roundtable? Major changes to the Medicare program are coming and will not be necessarily dependent on the ultimate success of any reform legislation. Two additional roundtables, one on expanding coverage and another on financing reform will be held May 5 and May 14, respectively. It is anticipated that additional option papers will be released by the Committee following these meetings.

The Senate Finance Committee has requested stakeholder "input" with respect to several of these proposals. Baker Hostetler would be pleased to discuss the manner in which such feedback could be provided.