What the SGR repeal means for value-based payment models

Mere hours after the Senate pulled off a last-minute repeal of the long-problematic Sustainable Growth Rate (SGR) formula, panelists at a forum hosted by the National Coalition on Health Care made it clear that while the "doc fix" bill represents a major step forward, it is only one piece of the healthcare reform puzzle.

At the forum, "Health Policy After the SGR: Moving Toward Value-Based Payment and Benefits," speakers offered payer, provider and purchaser perspectives on what they believe are the next steps to speed the transition from fee-for-service to value-based payment models, a shift they all agreed will get a boost thanks to Congress' long-awaited SGR repeal.

The Senate voted 92-8 to pass the bill at 9:40 p.m. Tuesday night, just ahead of the Wednesday deadline that if not met, would have resulted in a 21 percent Medicare pay cut for providers. The House of Representatives passed its version of the bill in late March, and President Barack Obama has indicated he will sign the legislation, though it has drawn some criticism from lawmakers concerned about its $214 billion price tag.  

Blair Childs, senior vice president of Premier Inc., a large provider alliance, was unequivocal about what the repeal means for the industry. "It's a new era," he said. Though his organization has been deeply involved in pursing alternative payment models such as accountable care organizations, "I do think a lot of the physician organizations have not been as engaged in this area," he added. "This is a wake-up call and it is going to have big implications for healthcare in this country."

Indeed, in the immediate aftermath of the news of the Senate's vote, Childs told FierceHealthcare in an exclusive interview that many physicians may not be thinking about what the SGR repeal means in the long-term, beyond the fact that they no longer have to worry about Medicare reimbursement cuts. But ignoring the bill's implications for the shift to value-based payments would be a "big mistake," he said, which Premier has communicated to its membership of 3,400 hospitals and 110,000 alternative care sites.

Mara McDermott, vice president of federal affairs for CAPG, which represents more than 180 multi-specialty physician groups in more than 30 states, agreed that the retirement of the flawed SGR formula will "light a fire" under value-based payment models since the replacement bill includes a 5 percent bonus for alternative payment models with two-sided financial risk beginning in 2019.

Her organization has already taken major steps forward with a model that holds physician groups clinically responsible for a defined patient population and leverages both internal and external quality reporting programs. CAPG therefore has strong evidence that value-based models produce better outcomes, according to McDermott. "Our doctors are passionate about alternative payment models because of what it means for patient care," she said.

While the SGR repeal is a major step forward, there are several aspects that need improvement, said Bill Kramer, executive director for national health policy for the Pacific Business Group on Health, a San Francisco-based company that helps 60 large employers such as Wal-Mart and Levi's purchase health benefits on behalf of their employees. Going forward, it will be important for the SGR replacement to set the bar high for what qualifies as alternative payment models, he said, to ensure that they're "not just dressing up fee-for-service."

Furthermore, there needs to be "rapid development of outcomes measures and a good process for selecting them" so that providers are able to truly define value, he said. Later, Childs echoed this call, noting that the current methods of assigning penalties to providers with high rates of readmissions or hospital-acquired infections leaves much to be desired. "Measurement that doesn't provide clarity for what you need to achieve is ineffective," he said.

Another way to accelerate the shift to value-based payment models in a post-SGR world is through provider network management, according to Shaun Frost, associate medical director for care delivery systems for HealthPartners, a provider-payer hybrid based in Minneapolis, Minnesota. Through this strategy, his organization provides incentives for patients to use high-value providers and care systems such as ACOs--value it determines by leveraging state and federal quality-reporting data as well as developing its own measures to fill in gaps. Indeed, payers are uniquely positioned to lead the transition from fee-for-service because many have pursued alternative payment models for years, FierceHealthPayer has reported.

And HealthPartners has demonstrated that its model is both transferrable and scalable, he said, so "there's very good reason to believe that value-based insurance design can be a successful strategy for Medicare and one that enhances the health of its members as well as the value of healthcare that they receive."