Healthcare News from Capitol Hill and the Department of Health and Human Services

In an open letter to the “health care provider community,” Senators Max Baucus (D-MT) and Orrin Hatch (R-UT), the leaders of the Senate Finance Committee, have asked for suggestions on reforming the Medicare physician payment system. The letter notes that the current Medicare sustainable growth rate (SGR) formula is broken and must be repealed.

Fee schedule payments by the Centers for Medicare and Medicaid Services (CMS) are determined by the SGR formula, as mandated by the Balanced Budget Act of 1997. Each year, Congress is required to pass temporary so-called “doc fix” legislation in order to avert major cuts in fee schedule payments. The SGR formula will lead to a 25% cut in physicians’ Medicare reimbursements by CMS on January 1, 2014, unless Congress again acts to avert the cut.

In the May 10, 2013 letter, the Senators state that they are committed to seeking a permanent solution to SGR and physician payment reform and that they are seeking input from healthcare providers in reaching this objective. The Senators write that they recognize that the current fee-for-service (FFS) system, which dictates reimbursement rates based on the SGR formula, will continue to be standard for the short term and, for certain physician practices, the longer term as well. However, the FFS system may lead to unnecessary utilization of healthcare services.

In their letter, the Senators request input on the following three questions:

  • What reforms should be made to the physician fee schedule to ensure that physician services are valued appropriately?
  • What policies should be implemented that could exist with the current FFS payment system and that would identify and reduce unnecessary utilization of healthcare provider services?
  • Within the context of the current FFS payment system, how can Medicare incentive physician practices to undertake the changes needed to participate in alternate payment models?

Public comments on the letter are due by May 31.