| Statement of Robert A. Berenson, M.D., Senior Fellow, the Urban Institute Testimony Before the Subcommittee on Health of the House Committee on Ways and Means May 10, 2007
Chairman Stark, Mr. Camp, and
members of the Committee:
I appreciate the
opportunity to provide testimony to the Health Subcommittee on a subject I have
been deeply involved with through most of my professional career. I practiced
internal medicine for over twenty years, twelve of which were in a group
practice just a few blocks from here. I was the first representative of the American College of Physicians to the American Medical Association’s Resource-Based
Relative Value Scale (RBRVS) Update Committee (RUC). In the last part of the
Clinton Administration, I had operational responsibility for the Medicare
Physician Fee Schedule at the Centers for Medicare and Medicaid Services (CMS).
Finally, in recent years as a Senior Fellow at the Urban Institute, I have had
a chance to study how well the Medicare Physician Fee Schedule has worked and
what might be done to improve it.
I believe that
this is an important hearing -- because the focus of the hearing is not on how
to use marginal dollars – 1-2% -- to try to influence physician performance or
on paying third-party disease management organizations that are separated from
the physicians actually providing the medical care to beneficiaries with
chronic conditions -- but rather explores how the program might better spend
the 100% base of physician spending, which is now approaching $60 billion. It
is important to explore the likely effects of these newer approaches to
improving quality and efficiency on beneficiaries, physicians, and the Medicare
program overall.
The hearing is
also important because it signifies that the budgetary pressure of finding a
solution to the shortfall created by the cumulative deficit produced by the
sustainable growth rate (SGR) formula should not occupy all of the time and
attention of health policy makers. Indeed, as I will try to make clear, I
believe that greater attention to how we spend the base of $60 billion can
provide both short-term and long-term improvement to the financial bottom-line
and ease off some of the SGR pressure that currently exists. In recent months,
very constructive ideas, including some presented at today’s hearing, have been
raised. I hope to contribute to that discussion in my remarks today.
Many policy makers
use the term “fee-for-service Medicare” to designate the original Medicare
program and to distinguish it from the various kinds of Medicare Advantage
products. However, this convenient short-hand actually mischaracterizes how the
traditional Medicare program pays providers. Indeed, in a book on Medicare
prospective payment that I co-authored with Rick Mayes last year, I emphasize
that the Medicare Fee Schedule (MFS) is one the last payment approaches in
Medicare that remains truly fee-for-service (FFS).
Initially, with the Hospital Inpatient Prospective Payment System and then
subsequently with a series of prospective payment systems created in the
Balanced Budget Act of 1997 and later legislation, providers typically receive
bundled payments for an episode of care, appropriately case-mix adjusted to
take into account patient severity. Under these bundled payment approaches,
providers have an incentive to provide services more efficiently, for less than
the average costs on which payment amounts are based. Accumulated evidence
documents that prospective payments based on episodes of care have moderated
cost increases in the traditional Medicare program.
In contrast, the
physician payment system remains FFS, although even in the fee schedule there
are significant examples of bundled or packaged payments, most notably the
90-day global fees for surgical procedures under which routine pre- and post-
operative services are included into the global payment amount, and the monthly
payment to renal physicians overseeing renal dialysis for patients with End
Stage Renal Disease. These long-standing approaches to bundling can be looked
to for guidance on how to expand episode-based payments to physicians.
Because the
physician payment system is almost purely FFS, it was understandable that
Congress, in OBRA 1989, placed a volume expenditure target – then called the
Volume Performance Standard – as an admittedly crude approach to containing
spending growth under the MFS that began in 1992. It is interesting to note
that the 1989 Physician Payment Review Commission Report thought that the
expenditure target mechanism could work only for a few years and that organized
medicine needed to actively develop clinical practice guidelines, with
accompanying physician education efforts, as a needed long-term solution to
constrain volume growth. Unfortunately, efforts to find alternatives to the
top-down expenditure target approach were not sustained. And the program is now
experiencing an explosion of volume and intensity growth in some clinical
areas.
Yet, for the first
decade or so of the MFS, the evolving expenditure target approaches actually
worked reasonably well to constrain spending growth. The situation has clearly
changed in the past 6 years, and Congress, with the exception of 2002, has
acted to override the across-the-board fee reductions called for under the SGR
mechanism. In the absence of broad-based clinical practice guidelines and
because of the volume growth of services that are inherently discretionary in
nature and, increasingly, under physicians direct control, in my opinion there
is little question that bundling payments for episodes of care needs to be a
primary objective of physician payment reform, just as it has been successful
when applied to other providers in Medicare.
Examples of Bundled Services
I will provide one
important example of why moving to bundled payments for physicians, in contrast
to fee-for-service, makes good policy sense. The work of Dr. Edward Wagner, at
the MacColl Institute for Healthcare Innovation in Seattle, Washington, on what
he calls the Chronic Care Model makes clear that the proper management of
patients with one or more severe chronic conditions, such as diabetes and
congestive heart failure, involves lots of communication with patients outside
of standard office visits by phone and, possibly, email; care by
multi-disciplinary professional teams; active use of patient registries; and
enhanced coordination among professionals and providers practicing in many
locations. In my view, it would be foolhardy to try to pay for most of these additional
services on an a la carte basis, as FFS does.
Consider, as an
example, phone calls. The transaction costs of billing and collecting would be
more than the reimbursement for most of the individual services; program
integrity concerns would abound; and the inevitable explosion of volume on
easily provided and well-appreciated phone calls would become financially
prohibitive. The alternative that MedPAC and others have discussed is a chronic
care management fee for primary and principal care physicians who would agree
to be accountable for providing the array of services in the Chronic Care
Model, much as the American Academy of Family Practice, the American College of
Physicians and others have envisioned in the patient-centered medical home. My
own preference would be to provide a “per beneficiary per month” fee not only
for care coordination but also for some or all of the actual medical services
provided by the same practice.
The right approach, which should be tested in multi-payer demonstrations, might
actually be a mixture of reduced fee-for-services combined with monthly fees
for specified bundles of services.
The medical home
concept presents a number of specific operational challenges, which I am
prepared to discuss, but the main point to make is that it is the conceptually
right thing to do. The approach not only should improve the care provided to
beneficiaries with chronic health problems, but importantly, would provided
involved practices with improved incentives to avoid unnecessary downstream
utilization by other providers. In this context, pay-for-performance to reward
efficiency and to protect against under-provision of important primary and
secondary preventive services might play a useful, supportive role.
Episode-based
payment not only for primary care physicians but also for specialists caring
for a variety of acute and chronic health care medical problems has inherent
appeal. There, are, however, important implementation issues regarding
specialist bundling as well. In particular, given the documented problem of
inappropriate procedures producing unjustifiable and costly practice
variations, any episode-based payment system should not incorporate an inherent
bias for performance of procedures, as already exists in the RBRVS-based fee
schedule. Although the costs of an episode need to recognize that there are
direct physician expenses associated with the procedure provision itself, the
valuation of condition-specific episodes should minimize payment differentials
that reward clinical decisions to provide the procedural intervention.
Further, as with
all episode or period of time based payment approaches, clinically
sophisticated case-mix adjustment is needed to prevent perverse effects, such
as physicians giving preference to less severe patients within a cohort with a
particular condition or over-diagnosing relatively minor complaints to generate
compensable episodes. All payment systems offer “gaming” opportunities. The
work on developing payment bundles and episodes needs to protect against such
behavior. Fortuitously, in recent years, we now have much more sophisticated
approaches to case-mix adjustment such that payment approaches, such as
capitation, that often foundered when used by private health plans in the past,
now might be much more successful.
One size no longer fits all
It is time to
recognize that a “one size fits all” physician payment system may no longer
work properly to support the increasing diversity of physician activity that
has resulted from sub-specialization. Primary care physicians and particular
sub-specialists typically care for patients over many years, and much of their
value derives from continuity and consistency. As already noted, an immediate
Medicare challenge is to develop a payment approach to support robust chronic
care coordination and management. At the other end of the physician spectrum,
some physicians, including radiologists, pathologists, anesthesiologists, and
emergency room physicians, mostly provide one-time, discrete services and typically
do not have ongoing responsibilities regarding individual patients. For these
physicians, FFS would seem to be an appropriate reimbursement mechanism for a
third-party payer, such as Medicare, which does not employ physicians and thus
are unable to pay a salary. In the middle of the spectrum, many physicians
provide both discrete, one-time services and have ongoing care
responsibilities.
Ideally, all
specialties would work together, either in real multi-specialty group practices
or in virtual multi-specialty collaborations, with payment made to the
organization on a per beneficiary per month basis for “medical home” services,
with payment adjustments for episodes of illness that require highly
specialized services. The current physician group practice demonstration is a
very important one in recognizing the opportunity to compensate large real and
virtual groups differently from the payment approaches that apply to individual
physicians or single specialty groups. Further, physician pay-for-performance,
generally should attempt to measure group-level, rather than individual,
physician performance.
In sum, Medicare
should develop and maintain different payment approaches for multi-specialty
groups and collaboratives able and willing to be accountable for costs and
quality, rather than pay them on the lowest common denominator approach that
would apply to a solo practitioner. At the same time, FFS will be with us for a
long time – for those physicians unable or unwilling to accept bundled payments
that places them at significant financial risk and for physicians outside of
large groups who provide specialized, one-time services.
Improving the RBRVS System to Promote
Efficiency
I have recently
co-authored medical journal articles critiquing recent implementation of the
MFS, especially the RBRVS component.
But I do not want these published comments and concerns to be misunderstood.
The RBRVS approach, first implemented in 1992 and still a work in progress, was
a marked improvement over the charge-based fee schedule that preceded it in
Medicare. And for all of RBRVS’s complexity, the right institutions are in
place to make important and overdue improvements to the fee schedule refinement
process. Unfortunately, the MFS, I believe, has suffered from a relative lack
of attention in recent years by Federal policy makers – at CMS, at MedPAC, and
in Congress, as policy interest has focused elsewhere. As a result, the program
has spent unnecessarily because of a failure to anticipate and guard against
highly inflationary increases in the volume and intensity of many physician
services.
To use a sports
metaphor, attempting to get the prices right is the blocking and tackling of a
fee schedule. Yet, in recent years, fee schedule prices have become distorted,
but without much notice. These pricing distortions have occurred in Medicare
but even more so in most commercial health plan fee schedules, which are based
on Medicare’s. Prices have been allowed, increasingly, to deviate from the
underlying costs of production, producing unfortunate behavior responses by
physician, which I will detail in a moment. Yet, in my view, it would be
relatively straight-forward technically to correct the distorted prices, if
there were the political will and support to do so.
In the recent
articles, colleagues and I have attempted to explain some of the technical
reasons why the prices became distorted. I will emphasize two issues here.
Keeping the relative values accurate requires an effective process that
reflects changes in medical practice and trends in physician productivity. But,
for the most part, relative values have defied gravity – going up or staying
the same but rarely coming down.
Because physician time spent is a crucial element in estimating both the work
and practice expense components that make up the RBRVS approach, it is time to
base time elements for high frequency services on objective time data, rather
than on surveys of self-interested specialty groups. In that way, time
estimates can be kept more current and accurate than under the five-year review
process that is now used.
Second, problems
with accurate estimation of relative values for practice expenses have worsened
as physicians in some specialties have billed for more ancillary services
associated with high equipment expenses. CMS has used unrealistically low
assumptions about rates of use if equipment and unrealistically high
assumptions about amortization rates for large equipment purchases.
Furthermore, the payment of average costs for services whose variable costs are
low encourages physicians to order more services and to view the services as
profit centers. These services include imaging and clinical tests, which are
among the fastest growing services in Medicare. In short, because of the
failure to consider that the cost of providing a service such as an MRI scan is
reduced with every scan performed, Medicare’s reimbursements overpay and create
an incentive for ordering and providing too many such scans.
During site
visits to twelve nationally representative metropolitan areas through work
conducted by the Center for Studying Health System Change, my colleagues and I
have observed increasing numbers of physicians building capacity to compete
with hospital outpatient departments by offering these lucrative services.
Indeed, such market-based developments provide a direct signal to policy-makers
of distorted payment levels, pointing to priority targets for price error
corrections.
It is not by
simple chance that CMS and MedPAC find the volume and intensity of imaging,
tests, and minor procedures – all discretionary services which ostensibly
produce little or no patient harm – are growing much faster than the categories
of major surgical procedures and evaluation and management services. The latter
services provide much less opportunity for physician-induced demand.
We now see that
single specialty groups are merging to have the size and scope to purchase or
lease imaging equipment, such as MRI and PET scans. This behavior suggests that
the prices for advanced imaging services, such as MRI and PET scans are too
high and can be safely reduced without compromising patient access to these
important services. (Conversely, other imaging services, such as screening
mammograms and DEXA scans for osteoporosis, where access problems appear to
exist are likely under-priced.)
There are many
technical reasons for why the RBRVS system has gotten off track. The Congress
can play an important role in assuring that the technical experts within
organized medicine, at MedPAC, and at CMS make the needed corrections to
currently distorted prices. And while work proceeds to adopt bundled-based
payments for physician services, in my opinion there remains a strong policy
rationale for expenditure targets, but specifically targeted to discretionary
services that are growing rapidly. In sum, in the long-term we need fundamental
reform of how physicians are paid in traditional Medicare. In the short-term,
greater attention to correcting incorrect prices and more carefully targeting
expenditure targets can produce savings and produce the climate needed to
accomplish the needed fundamental reforms that the witnesses have discussed at
this hearing.
Rick Mayes and Robert A. Berenson, Prospective Payment and the Shaping of
U.S. Health Care, (Baltimore: Johns Hopkins University Press, 2006)
Goroll, HA, Berenson RA, Schoenbaum SC, Gardner, LB. Fundamental Reform of
Payment for Adult Primary Care: Comprehensive Payment for Comprehensive Care. Journal
of General Internal Medicine, 22(3):410-415, 2007.
Bodenheimer T, Berenson RA, and Rudolf P. The Primary Care-Specialty Income
Gap: Why It Matters, Annals of Internal Medicine 146(4):301-306, 2007;
Ginsburg PB and Berenson RA. Revising Medicare’s Physician Fess Schedule – Much
Activity, Little Change. New England Journal of Medicine 356(12):1201-1203,
2007; Maxwell S, Zuckerman, S, and Berenson RA. Use of Physicians’ Services
Under Medicare’s Resource-Based Payments, New England Journal of Medicine 356(18):1853-1861,
2007.
Ginsburg and Berenson
Berenson RA, Bodenheimer T and Pham, HH. Specialty-Service Lines: Salvos in the
New Medical Arms Race, Health Affairs 25:w337-w343, 2006.
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