The New Look of Health Care Reform

DC may commit a trillion new dollars to an ambitious effort this year. The Academy's Washington advocate explains how it will help – and how it could thwart – ophthalmology practice.

BY WILLIAM L. RICH III, M.D., F.A.C.S.

William L. Rich, III, M.D., F.A.C.S., is Medical Director of Health Policy for the American Academy of Ophthalmology. He also practices general ophthalmology at Northern Virginia Ophthalmology Associates in Falls Church, Va.

The historical record of health care reform in the United States abounds with long periods of inactivity, followed by abrupt bursts of sweeping legislative change. It has been 45 years since the last such seismic upheaval, when President Lyndon Johnson signed Medicare and Medicaid into law as part of his Great Society initiative. In hindsight, we tend to imagine these landmark programs springing forth unanimously from a nation riding high on postwar confidence and affluence — but in fact they marked the end of a fierce national debate that lasted decades. Presidents Roosevelt, Truman and Kennedy all tinkered with various forms of medical public assistance, only to see their ideas die political deaths. Debate over what would eventually become Medicare and Medicaid raged for 30 years, yet when its time came, the legislation took only 5 days to write.

We now find ourselves at a similar crossroads. First emerging as an issue during the 1992 presidential campaign, healthcare reform has ever since occupied a central or at least peripheral role in our national discourse. After nearly 20 years of deliberation, scuttled plans and ad-hoc fixes, the new administration in Washington appears determined to enact a radical overhaul. And, to show they mean business, they are backing their words with more than a trillion dollars in new spending.

Given the current political climate, the resolve of a Democratic-controlled White House and Congress, and the staggering sums of money already pledged, some of what follows certainly rates as fait accompli, but a great deal also remains open to modification via the vagaries of the legislative process. For the sake our patients and our profession, ophthalmology needs to have its say in the final outcome.

Overview

The bulk of the proposals will progress along two lines. First up is Medicare payment reform. As you may already know, President Barack Obama has set aside $330 billion in his proposed budget to eliminate the cuts in physician reimbursements triggered by the sustainable growth rate (SGR) formula. That's the good news. Less promising is the pervasive belief within the Beltway that money should be shifted away from specialties like ophthalmology in favor of increases to primary care providers.

Central to Medicare reform efforts will be the idea that "transactional" payments must be phased out in favor of "value-based" medicine. This means physicians will be paid based on performance standards rather than on providing individual services. Under the system as it stands now, everyone collects the same fees regardless of the level of quality he or she provides. The days of this system are numbered, probably not beyond the next 2 or 3 years.

A value-based system implies the need for assessment of practitioners' performance, and reformers have suggested quality and efficiency be measured by so-called "episode grouper" software programs developed by commercial insurance corporations. Here activism by ophthalmology may be necessary. Many aspects of these programs discriminate unfairly against ophthalmologists, a topic that will be addressed later in this article.

There will also be efforts to curtail growth of in-office testing, both in terms of volume and reimbursement rate. No other expenditure in health care is growing faster than in-office testing, and ophthalmologists receive a great deal of their revenue from in-office tests. Hopefully, these cuts will be offset by increases in our major surgical procedures.

The second path health care reform will take is a push for universal health care coverage, for which the president has set aside in his proposed budget a $634 billion "down payment." The details of this initiative are less concrete, but Obama has said it will be paid for by a combination of tax increases and efficiency gains (the latter being the impetus for the recent stimulus package's $20 billion in incentives for purported "money-saving" electronic medical records). At a White House forum on March 5th, Obama vowed that any plan that called for a single insurance payer would be excluded, but otherwise unveiled no specifics about how to cover 46 million uninsured U.S. citizens. He did say he would welcome input from insurance and pharmaceutical companies. A central question remains whether medical coverage will be "mandated" in the same fashion as motor vehicle insurance. During his campaign, Obama promised to eschew mandates, but some experts believe them unavoidable. In any event, Washington watchers predict proposed legislation as early as June.

The Need for Reform

Regardless of your political beliefs, to categorize our current system as anything but untenable would be difficult. At its current growth rate, Medicare Part A (fees to hospitals) will be bankrupt by 2019; Part B expenditures (fees to doctors) are exploding. Among Medicare patients, patient premiums have doubled since 2001, and non-Medicare patient premiums have increased by 73% since 2000. Health care costs swelled to $2.2 trillion in 2006, representing 16% of the GDP, and should grow to 20% of GDP by 2017. Despite all this spending, only 55% of Americans receive recommended care and 46 million languish without medical insurance.

Moreover, a growing consensus among the nation's corporate leaders, politicians and policy wonks holds burgeoning health care costs responsible as a contributing factor in rising unemployment and a worsening economic recession.

Recent History

From 1964 to 1992, the government permitted physicians to charge Medicare fees based on what was deemed "usual, customary and reasonable," with little thought to conserving resources. From our vantage point today, this era looks like a Golden Age — alas, one not destined to return in any foreseeable future.

In 1989, Congress passed the Omnibus Budget Reconciliation Act, which mandated Medicare fees be paid on the inputs needed to provide the service and to stay within an established fee schedule. This was implemented in 1992 via the Resource Based Relative Value Scale (RBRVS), which sought to curb financial growth rates and to pay on the basis of resources rather than on historic charges. RBRVS was also intended to reallocate revenue from proceduralists to primary care providers, thereby encouraging more medical students to select primary care as a vocation.

It was only partly successful. Between 1993 and 2006, real-dollar fees for major surgical procedures fell 42% (although during that time emergency visits increased by 56% and office visits by over 85%). In 1995, ophthalmologists generated 65% of their revenue from surgical fees and 35% from office visits and testing. By 2007, those percentages had been reversed. In other words, the legislation succeeded in shifting revenue from hospital-based procedures to outpatient diagnostic and cognitive codes, but failed to alleviate primary care's manpower problem, and failed to limit overall spending to any of its target goals.

Still hoping somehow to rein in Medicare costs, Congress in 1998 enacted the Sustainable Growth Rate (SGR) legislation, which called for the rate of services/beneficiary growth to stay the same as or lower than the growth of the GDP, or else pay for overruns with cuts made in following years. This has been nothing short of an abject failure. Growth of services always outpaces the GDP and politicians inevitably postpone the necessary cuts that consequently become ever-deeper year after year. It has progressed to the point that SGR now mandates a 21% cut in January 2010 and a total cut of 40% by 2017. That the SGR will almost certainly be repealed, and these cuts avoided, ranks as the best news I can provide in this report.

Pay for Performance

The new Physician Quality Reporting Initiative (PQRI) offers a foretaste of what value-based performance compensation might look like. Introduced in 2007, PQRI is a voluntary program that awards payment incentives to doctors who report data on quality measures for services furnished to Medicare beneficiaries. Though for now it is voluntary and very cumbersome, something similar to PQRI will likely be mandatory in the near future.

Other valuation models expected to be introduced by coming legislation include: "medical home" strategies, in which comprehensive care is coordinated by a single primary care provider (with a view toward improving outcomes for long-term chronic aliments like diabetes); bundling of care, wherein providers are paid a lump sum for varied services; and "gain-sharing," which offers financial rewards to providers employed by institutions that save money.

Stumbling blocks to such proposals might include: the risk of running afoul of Stark anti-kickback laws; worries that in the rush to conserve resources patients may receive sub-par care; and difficulties for patients in obtaining specialty care, similar to those encountered in the early days of capitation-structured managed care plans.

What We Can Do

Ophthalmologists who expect substantial fee increases as a result of SGR's demise should probably temper their optimism. Whatever gains SGR's passing provide will likely be counterbalanced by reallocation of funds to primary care providers, as well as cuts to office-based testing. Across-the-board fee increases for ophthalmology appear unlikely but it is anticipated that the cuts to testing will be offset by revenues shifted to procedures.

There is a strong public policy initiative in Washington toward compensating primary care practitioners for what is perceived to be undervaluation of their services. Policymakers hope increasing payments to primary care will persuade greater numbers of young people to enter the field.

One key player in health care reform will be Democratic Senator Max Baucus of Montana, Chairman of the powerful Senate finance committee. Much of the coming legislation will likely emerge from his camp. Days after Obama's election, Baucus released a white paper titled, "Call to Action; Health Reform 2009." It states, "Payments for primary care physician visits are undervalued, particularly compared to procedures and services furnished by specialists. In fact, the overvaluation of procedures in the Medicare physician fee schedule has both created financial incentives to provide unnecessary services and served as a disincentive for physicians to become primary care physicians."

To the ears of a specialist the above may sound, at the very least, debatable. To begin with, primary care has seen its fee schedule increased by 55% since 1995, while surgical fees fell 42% in that same period. So to categorize primary care as poorly compensated seems not wholly accurate. Besides, if previous RBRVS increases failed to encourage flocks of new primary care recruits, it is difficult to envision how additional raises will meet with more success. What policymakers seem reluctant or unwilling to understand is many factors other than salary influence the choices of young people. Intellectual stimulation, lifestyle, interest in technology and other intangible incentives will continue to play a role. Finally, primary care is not alone in facing manpower shortages. General surgery and many "pure" surgical specialties such as vascular surgery go wanting for candidates every year. In our own field, glaucoma continues to encounter difficulty attracting young physicians.

The ophthalmology lobby will do our best to convince legislators otherwise, but the supposed predominance of primary care is such a deeply entrenched belief among our nation's leaders right now that we face an uphill battle.

We might have more luck in efforts to alter the methods by which physicians' efficiency is measured. By sorting through claims coding data from outpatient, inpatient, laboratory and pharmaceutical sources, software programs known as episode groupers reduce these data to a set of measures that can be easily compared. Employing such software, some private health care insurance companies have been "profiling" doctors on a cost-efficiency basis for at least three years now. The Centers for Medicare and Medicaid is considering adopting these software programs to track expenditures under the reformed system.

Though often protected by proprietary laws, some of these grouper programs have undergone study by the Academy, and what we found was distressing. Most objectionable was a lack of transparent, validated adjustments for severity of disease and/or co-morbidity. For example, billing data fail to differentiate between a glaucoma patient with mild disease and one with severe disease. A stable glaucoma patient on a single drop seen in your office two times a year will certainly generate fewer costs than one with uncontrolled IOP and a need for multiple surgical interventions. Once again, unless these ideas are refuted, those providing more specialized care will take it on the chin.

We at the AAO plan to push for more equitable software. In addition, ophthalmology might also promote new codes that better differentiate gradients of ocular diseases. Here, the fields of diabetes and cardiovascular disease provide instructive examples. Their disease codes identify varying levels of progression. In glaucoma, the disease is identified by a single code. Additional codes would give the software a more granular perspective of our data.

Some Bright Sides

Not all of what appears headed our way will be negative. In addition to SGR's disappearance, we ought to see more federal dollars for clinical trials. As part of efforts to promote the more frequent prescription of generic drugs and demonstrate comparative effectiveness between differing treatment modalities, President Obama has pledged $1.1 billion to the Agency for Healthcare Research and Quality, HHS and NIH for comparative clinical effectiveness studies. This will inevitably lead to an explosion in the kind of trials seldom seen in modern medicine. Big pharmaceutical companies are never in a great hurry to put expensive patented medications up against rivals that may be cheaper, more effective or both. An example of this type of trial is the Comparison of Age-Related Macular Degeneration Treatment Trials (CATT), which is comparing the efficacy of Lucentis to the far less expensive Avastin. So, to those harboring study ideas you never thought had a chance at funding, now is the time to start filling out grant proposals.

Also, as noted above, the stimulus package puts $20 billion toward the implementation of HIT (health information technology): e-prescribing and electronic medical records. According to plans, physicians who use or implement electronic prescribing technologies over the next 5 years will receive hefty financial bonuses. After 5 years, the carrot becomes a stick: those who fail to adopt electronic prescribing will incur penalties. Further, the office of Health and Human Services plans to stipulate interoperability standards for EMRs by November of this year. This marks a huge step forward, because right now no universal standards exist to ensure that these computer systems can communicate with each other. With multiple software packages available, none of which has emerged as the de facto standard, no physician wants to invest in the EMR equivalent of the Betamax.

As with e-Rx, there are proposed financial rewards for EMR adoption starting in 2012 over a period of 4 years to be followed by progressive penalties. Problems with loss of productivity and the lack of a certified ophthalmic EMR will result in less enthusiastic adoption, as will occur with e-Rx. President Bush wanted to wait for a market-based solution to these problems, but it never happened.

What seems certain in the coming months is an enormous battle in Washington over these matters, with specialists, primary care physicians, drug companies and device manufacturers all fighting over an immense pool of dollars. I strongly urge anyone reading this to keep up with every edition of the Academy's "Washington Letter," as we will all likely be living and working in very different health care reality this time next year. Stay tuned. OM