Does the Sustainable Growth Rate Mean Smarter Reimbursement?

Last week, the House of Representatives passed legislation that permanently repealed the Sustainable Growth Rate (SGR) formula and established an original reimbursement plan with fundamentally implemented value-based care incentives.

The Senate declined to take up the SGR repeal legislation before it resumes again on April 13. When the Senate convenes again at this time, it will have only one day to debate and pass this legislation as a possible end to the annual “doc-fix” ritual becomes a reality.

Physicians now face an additional two week hiatus to account for processing before Medicare reimbursement cuts take place, according to the Centers for Medicare and Medicaid Services (CMS). Physician reimbursement faces cuts of twenty-one percent beginning on April 1.

The positive and negative implications of the legislation as it stands require further examination.

RevCycleIntelligence.com spoke with Andrew Boyd, Physician and Assistant Professor of Biomedical and Health Information Sciences at the University of Illinois (UIC) at Chicago, about SGR’s possible effect on the healthcare industry at large, particularly in relation to Medicare acceptance as the transition into value-based pay matures further.

From actionary to reactionary

The positive implications of the SGR involve confidently executed financial resolutions, says Boyd.

Physician practices, especially smaller group practices, face continued uncertainty about whether or not to accept Medicare patients. Regarding the Sustainable Growth Rate’s short term implications for the healthcare industry, practices will be able to make more intelligent budgeting decisions with a reduced amount of uncertainly about accepting Medicare patients, Boyd states.

Negative SGR implications for the healthcare industry at large involve a merging together of multiple smaller measures, such as concierge physicians only accepting private insurance or cash, explains Boyd.

“There are lots of physicians who feel it is a vocational obligation to take Medicare and Medicaid because you go into treat patients regardless of their insurance status,” Boyd maintains. “The reality is healthcare is an industry. Where you live and who you’re able to see is always going to be implicated.”

It is difficult to accurately predict how many physicians will accept Medicare in the future, says Boyd. But, these impending decisions increase the formula’s stability going forward, he adds.

“[SGR] is going to help people make better decisions instead of reactionary decisions,” claims Boyd.

What’s in a name?

“You want to reward physicians for doing right and for delivering high quality care. The challenge, of course, and the timing of all of this is quite interesting,” says Boyd, in reference to the October 2015 ICD-10 transition.

Although Boyd says he is supportive of moving to value-based pay, he expresses concern that the impact of doing in relation to ICD-10 implications so has not been studied on a nationwide or regional basis as the healthcare industry continues to measure with old definitions.

“All of the value-based algorithms were published and peer reviewed in ICD-9. We’re changing definitions and there is no way to validate the algorithms until we have experience,” says Boyd.

“We are completely changing the definitions of what a diagnosis is and we’re tying payment and value to it, but there’s no way to know whether they reflect what we measured historically.”

Regarding the example of gestational diabetes, Boyd explains, “One of the codes historically used in ICD-9 was 648.03. One of the synonyms was gestational diabetes, diabetes that occurred when you were pregnant. However, when measuring diabetic care in ICD-10, it’s all pre-existing diabetes.”

Historically categorized patients lumped into denominators because they were once classified as having gestational diabetes no longer exist, says Boyd.

“The definitions have changed and we won’t be measuring the same thing,” he explains. “It’s hard to evaluate value when you don’t know what you’re measuring. Is it a good idea? Yes.”

Stability reigns

The effect on revenue cycle and payments involves increased stability from with an unwavering Medicare reimbursement formula which will allow individuals to plan more successfully, confirms Boyd.

“Instead of a twelve month fix, a six month fix, or an eighteen month fix, you can look at your patient population and make revenue projections based on a better idea of what the minimums and maximums are,” Boyd maintains. “You can make better decisions about contracts and equipment. You know you’re going to get paid. The question is how much?”

Actively tackling such facets as inflation, for instance, means stability will hopefully be maintained across the board.

“The specific percentage allows you to make better informed decisions about what your possible revenue is in the future,” Boyd confirms.

“Small percentages are across large percentage populations across practices,” says Boyd. “Hospitals will make better intelligent decisions going forward. There are multiple competing priorities the legislators have to decide.”

Quality over quantity

Although Boyd maintains there has been ample opportunity to prepare for ICD-10, he urges for a focus on substance behind the development and implication of codes.

“The fact that quality measure in ICD-10CM has not been peer reviewed or fully evaluated is one concern going forward, especially as they’re synchronizing all three physician quality metrics,” says Boyd.

Boyd suggests that as definitions change and new studies are released, the definition of what is being measured changes.

“We want to reward quality. You want to be processed focused,” Boyd states. “You don’t want physicians or hospitals concerned about revenue focused just on selecting the right diagnosis codes. You want the substance behind the codes.”

Financial reflection is only the beginning

Boyd anticipates that in the future, as quality measures become more directly tied to financial reimbursement, they will become more detailed in turn. A simple quality metric on a single disease, for instance, may not apply to a patient with twenty comorbidities, explains Boyd.

“As we move more towards electronic health records, we can better represent individual patients’ phenotype on a system-wide level to understand the complexity of healthcare,” Boyd maintains.

The healthcare industry’s progression towards value based pay and electronic health records only reflects the complexity of the collective industry, says Boyd.  

“We want to make sure the value based algorithms and calculations fully reflect the complexity of healthcare as delivered today,” Boyd states. “Moving forward, I anticipate better understanding, better values, instead of just financial reflection, actual reflection within either measurements of patients or within inside physician documentation itself.”

What’s next?

As the fiftieth anniversary of Medicare’s enactment approaches in 2015, the future of the healthcare industry stands to drastically improve if efficiently delivered Medicare payments and delivery reforms can be successfully enacted now, tomorrow, and beyond.

Stay tuned for more interviews this week from RevCycleIntelligence.com in reaction to SGR legislation.