A witness at a hearing on the U.S. health care provider payment system said that payment reform efforts can have unexpected effects, and that improving the current system may involve more than simply paying providers a flat fee for each patient served.

The witness, Dr. Thomas Foels, is chief medical officer at Independent Health, a nonprofit health carrier in Buffalo, N.Y. 

Foels testified at a hearing organized by the House Energy & Commerce health subcommittee on efforts to replace the current “sustainable growth rate” (SGR) approach to holding down Medicare physician reimbursement costs with another, more practical system.

Independent Health has been active in testing new approaches to paying physicians, hospitals and other providers based on all care provided a whole patient, rather than traditional “fee for services” (FFS) approaches based on paying for one service at a time, since 2000.

The company started a “patient-centered medical home” test program in 2009. A patient-center medical home is a primary care practice that employs nurses or social workers to provide wellness coaching, chronic care case management and other types of case management on-site.

The company later set up a “shared savings” that rewards groups of providers for working together to hold down the cost of a patient’s care while improving the quality.

The shared savings program has helped get providers to work together better, and it’s encouraged specialty practices to use efficiency and effectiveness scores to compete for patients’ business,” Foels said, according to a written version of his testimony.

“A ‘ripple effect’ of improvement efforts is now evident across the region’s competing hospital systems  as well,” Foels said.

The new system gives specialty practices a strong incentive to move all facility-based procedures to cost-effective hospitals, Foels said.

But Foels said policymakers, plan designers and others need to think carefully about reimbursement program design.

“FFS remains a valuable mechanism to promote utilization of important and potentially underutilized services, including preventive services,” Foels said.

The SGR system
Congress included the SGR system in the Balanced Budget Act of 1997. 

The SGR system is supposed to hold per-capita increases in physician fees to the same rate as growth in U.S. gross domestic product (GDP). Because growth in physician fees has been much faster than growth in GDP, the gap between the actual Medicare physician reimbursement rate and the rate required by the SGR system has grown to about 30 percent.

Physicians have succeeded at persuading Congress to put off implementation of the SGR system year after year. Congress has been so reluctant to let the SGR system take effect that official congressional and Medicare analysts now prepare two sets of forecasts: One set that assumes the SGR system will take effect, as required by law, and a second set that assumes that Congress will continue to put off implementing the SGR system.

House Energy and Commerce Committee Republicans have proposed that Congress try to replace the SGR system with a new, quality-based payment system developed in conjunction with health care providers.

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