PRACTICE MANAGEMENT: THE ROAD AHEAD John I. Allen, Section Editor
Fifty Years of Medicare Dawn L. Francis Division of Gastroenterology and Hepatology, Mayo Clinic, Jacksonville, Florida
In 2006, I wrote an article for AGA Perspectives entitled “Medicare Basics: An enigma wrapped in a mystery.” Understanding what Medicare is (and will become) remains complex but it is critical for gastroenterologists to realize how it is changing and has become more of a driver of health care delivery reform than any time in its history. In a recent New England Journal of Medicine Perspective article (http://www.nejm.org/doi/pdf/10. 1056/NEJMp1500445), Sylvia M. Burwell (US Secretary of Health and Human Services) stated that by 2018, 90% of Medicare reimbursement will be linked to quality or value and 50% of payments will occur through alternative (to fee for service) models such as bundles or episodes of care. The American Gastroenterological Association has led our specialty in helping define how such models might be structured. This month, Dawn L. Francis, MD, MHS, takes us through the 50 year history of Medicare and helps us understand at least part of the enigma. John I. Allen, MD, MBA, AGAF Special Section Editor uring the first decades of the twentieth century, modern medicine was making huge strides with the advent of antibiotics, anesthesia, and aseptic techniques in the operating room. The role of the doctor evolved from prognosticator to reliable healer. However, with this evolution, it was clear that our nation had a problem paying for health care. People were living longer, and less than 50% of those older than 65 had health insurance. Coverage was simply unavailable or unaffordable to the rest, because the elderly paid more than 3 times as much for health insurance compared
D
Resources for Practical Application To view additional online resources about this topic and to access our Coding Corner, visit www.cghjournal.org/content/ practice_management.
Clinical Gastroenterology and Hepatology 2015;13:1036–1041
with their youthful counterparts. Our elderly faced the conundrum of more costly services at a time in their life when they could least afford it. As early as the 1940s, various national health insurance plans were introduced to Congress. The national debate on this topic was long and fierce, spanning nearly 25 years. Three presidents had introduced a Medicare bill (Presidents Roosevelt, Truman, and Kennedy) but had failed. Their failure was due in part to an opposing coalition led by the American Medical Association (AMA) who had labeled the bill as an attempt to legislate “socialized medicine.”1 President Lyndon Johnson successfully championed the Social Security Amendments bill to create Medicare under Title XVIII and signed it into law on July 30, 1965 (Figure 1). The amendments provided for 2 separate health plans for those aged 65 or older, the required hospital insurance program (Part A) and a voluntary supplementary medical insurance (Part B) for outpatient care. These programs were derived from earlier bills proposed by Democrats and Republicans, respectively. Democrats had pushed for a “social insurance” bill paid for by a broad tax (this became Part A), whereas the Republicans advocated a voluntary premium support program administered through private insurers (an iteration of this idea became Part B). The Tax Equity and Fiscal Responsibility Act passed in 1982 authorized Medicare to contract with risk-based private health plans for the costs of their enrollees’ care in exchange for a prospective, monthly, per-enrollee payment. This created Medicare Part C, also known as the Medicare Advantage program. Beneficiaries continue to pay premiums directly to Medicare for Part B for physicians’ services and, if they choose it, Part D for drug coverage. Different from Parts A and B, they receive health insurance for all services through their Medicare
Abbreviations used in this paper: ACA, Patient Protection and Affordable Care Act; ACO, accountable care organization; AMA, American Medical Association; CMS, Centers for Medicare and Medicaid Services; DRG, diagnosis-related group; GI, gastrointestinal; MPFS, Medicare Physician Fee Schedule; PQRS, physician quality reporting system; RUC, AMA/ Specialty Society Relative Value Scale Update Committee; RVU, relative value unit; VBPM, value based payment modifier. © 2015 by the AGA Institute 1542-3565/$36.00 http://dx.doi.org/10.1016/j.cgh.2015.03.026
PRACTICE MANAGEMENT: THE ROAD AHEAD, continued
Figure 1. Milestones in CMS payment policy as it relates to the practice of gastroenterology.
Advantage plan. For beneficiaries this may mean that they have more services fully covered, and out-of-pocket costs are less. However, they lose choice in providers because they have to stay within the Medicare Advantage program in which they have enrolled. The programs are administered by the Centers for Medicare and Medicaid Services (CMS), which also has jurisdiction over Medicaid and the Children’s Health Insurance Program. CMS is a component of the Department of Health and Human Services. Medicare provides health insurance for Americans aged 65 or older and people with end-stage renal disease, amyotrophic lateral sclerosis, or other long-term disabilities. In 1966, Medicare enrolled 19.1 million people; in 2013 around 52 million were enrolled.2 For Medicare beneficiaries, Medicare covers roughly half of their health care charges.2 The other half may be covered with supplemental insurance (Medicare supplement or Medigap) or out-of-pocket expense such as long-term care, dental, hearing, and vision care. Over the years there have been important expansions of coverage. In 1972, the program expanded to include benefits to speech, physical, and chiropractic therapy. The option of payments to health maintenance organizations was also added. Eligibility was expanded to include younger people with permanent disabilities and those who have end-stage renal disease. Hospice benefits were added in 1982. In 2001, Congress expanded Medicare to cover younger people with amyotrophic lateral sclerosis.
Financing Medicare Part A is funded mostly from revenue generated by the 2.9% payroll tax (typically the
employer pays 1.45% and employee pays 1.45%). Starting in 2013, the Part A tax applies to the first $200,000 of income for individuals or $250,000 for couples; income above those limits is taxed at 3.8%.3 Medicare Parts B and D are funded in part by Medicare enrollee premiums and general fund revenue. A surtax was added to Part B premiums in 2006 for higher income seniors to assist with funding Medicare Part D. The original annual price tag for Medicare was $900 million. The amount of Medicare expenditures in 2012 was $572.5 billion.4 Currently, Medicare spending accounts for about 14% of the federal budget.5 The Baby Boom generation (those born between 1946 and 1964) started retiring in 2011 and will be fully retired by 2030. In addition, the portion of Medicare costs from disability has been rising at a rate that outpaces the increase in retirement-age individuals. These 2 factors combined result in a projected increase in Medicare enrollment from around $48 million to more than $80 million by 2030. The number of workers per Medicare beneficiary will decline from 3.7 to around 2.4.2 The decline in workers supporting Medicare and the overall increase in health care costs both result in significant challenges to the financial solvency of the program.
Centers for Medicare and Medicaid Services and Payment Currently, CMS uses several different and complicated methodologies to determine payment that are based on the type of service and where it is being provided (eg, hospital vs outpatient environment). Before the early 1980s, CMS had a charge-based fee-for-service 1037
PRACTICE MANAGEMENT: THE ROAD AHEAD, continued model where payment was linked to hospitals and provider charges within specific regions. Originally, payments were administered through Blue Cross and Blue Shield to make physicians more comfortable with “government” payments for medical services. As one may imagine, this model resulted in wide variations in payment for similar services among different hospitals and providers. In addition to medical inflation and the economic crises of the late 1970s, this compelled legislators to reform Medicare payment to preserve the program’s viability.
Diagnosis-related Groups When legislators in the 1970s began considering alternatives to fee-for-service reimbursement, the payment system that had been best evaluated (and successfully implemented in New Jersey) was a prospective payment system that was based on diagnosis-related groups (DRGs).6 This model that is termed the prospective payment system has been called the “single most influential postwar innovation in medical financing.”7 It is termed prospective because payment is determined at the beginning of an episode of care that is based on a patient’s diagnosis rather than at the end of an episode of care that is based on the services that have been rendered. For example, all hospitals will get a set amount for a hospitalization and surgery for appendicitis with a DRG of “appendectomy without complication.” The introduction of the DRG model of payment in 1982 was the first in a series of changes in payment models that “bundle” services together and revolutionized the way health care was administered by changing the motivation of providers from delivering high quantities of care to deliver high-quality efficient care. Perhaps most important is that this change in payment shifted the balance of power in the medical industry from hospitals and physicians to the federal government. Seven years after the implementation of the DRG payment model in 1982, Congress enacted the Medicare Physician Fee Schedule (MPFS) as part of the Omnibus Budget Reconciliation Act of 1989. Omnibus Budget Reconciliation Act directed a Resource Based Relative Value Scale for reforming physician payment under Medicare. The Resource Based Relative Value Scale methodology created a numerical weight termed a relative value unit (RVU) for around 7500 Current Procedural Terminology codes. The formula to create the “value” of an RVU accounts for the complexity, time, training, and resources used to perform a procedure or 1038
provide a service.8 The total RVU for a service has 3 components: the physician work to perform the service, the practice expense associated with the service, and the professional liability expense for the provision of the service.
Formation of the American Medical Association/Specialty Society Relative Value Scale Update Committee In response to this change in payment methodology, the AMA formed the AMA/Specialty Society Relative Value Scale Update Committee (RUC) in 1991 to act as an expert panel to provide relative value recommendations to CMS. To be clear, the RUC is not part of the CMS and is not mandated by any legislation. It works on behalf of the health care providers it represents by exercising its First Amendment right to petition the federal government. Although the RUC is not directly responsible for setting the reimbursement rates for Medicare, it heavily influences the process by which rates are initially set and subsequently reviewed with CMS by using the RUC’s recommendations approximately 90% of the time during the last decade,9 although that percentage has been declining in recent years.10 During the past several years, this process has been the subject of intense public scrutiny and criticism, with colonoscopy touted as an example of the limitations of the process.11 In the 2014 MPFS Final Rule, CMS accepted only 22% of the RUC’s recommended values for the upper gastrointestinal (GI) endoscopy codes.12 On average, the relative values for the upper GI endoscopy procedures fell 12%, with CMS establishing decreases in some endoscopic procedures by as much as 36%.
The Outpatient Prospective Payment System In 1997, the Federal Balanced Budget Act legislated that CMS create a new “Outpatient Prospective Payment System (OPPS),” and it was implemented in 2000. This payment system is analogous to the DRG system for inpatients. It is relevant to gastroenterology because it covers facility payment for hospital outpatient procedures and ambulatory surgery center procedures. Physician fees are reimbursed via the MPFS. CMS has successfully used payment to advance social change and access to care. For example, CMS required racial desegregation of physician practices, waiting rooms, and hospital floors as a condition of payment.13 It
PRACTICE MANAGEMENT: THE ROAD AHEAD, continued provides incentive payments for physicians to practice in geographic health professional shortage areas and physician scarcity areas so that its beneficiaries in rural locations will have access to care. More recently, it has used payment to ensure quality of the health care delivered to its beneficiaries by providing incentives for achieving certain benchmarks and will take back payment for failure to achieve certain benchmarks (eg, above average hospital readmission rates).
Recent History of Gastroenterology and Medicare Reimbursement The Patient Protection and Affordable Care Act (ACA) signed in to law in 2010 directs CMS to review and identify misvalued codes and make adjustments as deemed appropriate by the agency. Misvalued codes can include procedures with fast growth in the number of procedures performed over several years, substantial change in practice expense, new technologies or services, multiple codes frequently billed together, codes with low relative values, and so-called Harvard-valued codes, which have not been reviewed by the RUC since their values were established in the early 1990s. In the 2012 MPFS Final Rule published in November 2011, CMS identified colonoscopy, esophagogastroduodenoscopy, and other GI endoscopy procedures as being potentially misvalued. This announcement was of profound importance to the GI societies. The American Gastroenterological Association, American Society for Gastrointestinal Endoscopy, and American College of Gastroenterology met with CMS to propose a strategy for the systematic review of 120 endoscopic codes including esophagoscopy, esophagogastroduodenoscopy, endoscopic retrograde cholangiopancreatography, flexible sigmoidoscopy, and colonoscopy.12 The process of revaluing these codes involved an assessment of the coding description by the AMA’s CPT Editorial Panel, a survey of the work required to perform these procedures by practicing physicians, and presentation to the RUC. This process began in September 2012, starting with the esophagoscopy family of the upper GI endoscopy codes, and at least 1 family of codes was presented at each RUC meeting until the process was completed in January 2014 with the colonoscopy family lower GI endoscopy codes.12 The lower GI endoscopy codes (including colonoscopy) were presented to the RUC in January 2014. The results of the RUC meetings are confidential, so they could not be shared after the meeting. However, in anticipation of cuts to these codes, GI society leadership,
Current Procedural Terminology and RUC advisors, and staff met in person with the CMS staff 5 times during 2014 to urge the agency to delay review of the colonoscopy and the lower GI endoscopy codes and reverse the cuts to the upper GI services implemented in the 2014 MPFS rule. During these meetings, the public health value of colonoscopy was highlighted; the societies advocated for implementation of a more transparent revaluation process and provided comprehensive education to CMS staff on the time and intensity of the upper and lower GI endoscopy procedures under consideration. The GI societies launched an advocacy public campaign by enlisting the help of members of Congress. Twelve senators, 47 members of the U.S. House of Representatives, and a diverse coalition of leading medical societies joined the call for a fair and open process in setting reimbursement rates. Rep. Bill Cassidy, R-LA, a gastroenterologist (and now a Senator from Louisiana), was a key advocate, composing a letter to CMS noting that “. current processes are unfair and deeply impact small-business operations and patient care.” Fifty years after its creation, it seemed that CMS would deeply cut the valuation of many GI codes in 2015, the most important of which was colonoscopy. When CMS published the Final Rule in November 2014, it appeared that CMS agreed with the GI societies and the hundreds of members who submitted written comments to the agency. In the rule, CMS stated: We agree with the commenters. In light of the substantial nature of this code revision and its relationship to the policies on moderate sedation, we are delaying revaluation of these codes until CY 2016 when we will be able to include proposals in the proposed rule for their valuation, along with consideration of policies for moderate sedation. Accordingly for CY 2015, we are maintaining the inputs for the lower gastrointestinal endoscopy codes at the CY 2014 levels. This decision by CMS is welcome, but it must be clear that this is only a delay. CMS will revalue the lower GI endoscopy codes (ileoscopy, pouchoscopy, flexible sigmoidoscopy, colonoscopy through stoma, colonoscopy) for calendar year 2016. It is widely expected that GI will see a decrease in the valuation of many of the lower GI codes.
Centers for Medicare and Medicaid Service Payment Models in the Future There are substantial financial challenges to the viability of CMS as the population ages, the elderly live longer, and the cost of end-of-life care increases. In 2010 1039
PRACTICE MANAGEMENT: THE ROAD AHEAD, continued under the leadership of President Barack Obama, the ACA was passed by Congress and signed into law. Much of this legislation will affect our practices. There is now a legislated transition from fee-for-service models to value-based reimbursement that incentivizes quality and efficiency. State and federal insurance exchanges (marketplaces), which allow patients to shop for health insurance coverage, have been formed. Large integrated delivery networks are beginning to emerge because of a section of the ACA that facilitates the creation of accountable care organizations (ACOs). ACOs contract for the total cost of care for defined populations of patients. During the past decade, CMS has made it clear that payment will incentivize quality of care and efficiency. There are a number of mechanisms in place to accomplish this, including bundled payments, ACOs, the physician quality reporting system (PQRS), value based purchasing, and meaningful use.
The Outpatient Setting With the recognition that CMS will pursue bundled payments in the outpatient setting, the American Gastroenterological Association convened a physician work group in 2012 to explore prospective payment, or bundling, of gastroenterology services. Several services were explored, and colonoscopy (screening, diagnostic, and surveillance) was identified as a natural starting point. The bundle would include the pre-procedure period (pre-procedure consult and instructions on bowel preparation), procedure (professional fees, medications, monitoring, facility fees), and the postprocedural period (communication of results and recommendations and repeated procedures for poor bowel preparation or inability to intubate the cecum).14 The point of this evaluation was not necessarily to come up with the right payment but to determine whether such a model was feasible so that the professional societies can prepare gastroenterologists for these types of payment models.
Expanding Quality Measurement and Clinical Effectiveness The PQRS is a voluntary reporting program that incentivizes providers (by payment or penalty) to measure and report a number of quality measurements for Medicare Part B by using claims data, electronic health record, or a qualified registry. Initially (for 2013), providers received an incentive of 0.5% bonus payment for participating. In 2015, providers who do not participate 1040
will incur a 1.5% cut in Medicare reimbursement, and that cut will increase to 2% in 2016. Current PQRS measures include treatment and management of inflammatory bowel disease, hepatitis C, colon cancer screening rates, and surveillance rates after removal of a colonic adenoma. On the basis of outcome measures reported through the PQRS, CMS will calculate a quality composite score and assign practices to quality and cost tiers that affect reimbursement rates known as the value based payment modifier (VBPM). In 2015, the VBPM is relevant for practices with 100 or more providers (or eligible professionals) that is based on their performance in calendar year 2013. The program will broaden in 2016 and encompass groups with 10–99 eligible professionals (reporting in 2014). All physicians participating in the MPFS will be subject to the VBPM in 2017 for their performance in 2015.15
Accountable Care Organizations U.S. health care is fragmented, but there are organizations within it that provide coordinated and longitudinal care and are held accountable for clinical outcomes and cost. There is evidence that these practices provide care at equal or lower costs with better outcome.16 ACOs were developed on the basis of this evidence. ACOs integrate groups of health care providers to jointly take responsibility for the quality and cost of all care delivered in a distinct population. Section 3022 of the ACA has specifications for ACOs: they must care for at least 5000 Medicare beneficiaries; have legal, leadership, and management structures; use predetermined processes to measure and report quality and cost data; achieve specific patient-centeredness criteria; encourage the practice of evidence-based medicine and coordinate care. To summarize, most health care policy experts agree that there are some prominent trends in health care reform,17–19 led by the CMS, for which health care providers and organizations should prepare: Fee-for-service models of payment will diminish and will be replaced by prospective payment systems that incentivize quality and efficiency. Providers and organizations will need to measure outcomes that demonstrate their value to patients, health systems, and payors. Practice will need to demonstrate improvement in health at a population level as demand increases to share risk across populations such as total cost of care contracts with regional health systems.
PRACTICE MANAGEMENT: THE ROAD AHEAD, continued Increasing numbers of providers will become employees of large integrated delivery networks as provider networks decline and the cost of independent practice increases.
Fifty Years of Medicare Since Medicare was created 50 years ago, its impact on the practice of medicine in the United States cannot be understated. Essentially, the creation of Medicare took health care from “private” to “public” law and placed Congress and the courts in the center of health care policy and delivery. CMS has a limited amount of money to spend on an elderly population that is growing in numbers and years and who consume a great deal of health care. As such, CMS is in the precarious situation of maintaining the viability of the program, while maintaining access to health care for its beneficiaries. These requirements of CMS have led to decisions that often result in a decrease in payment for some sectors in the health care industry; thus, the organization is often at odds with the industry that it partially funds. Providers often feel that pain first and most acutely, which at times has led to the demonization of Medicare. CMS is a steward of public funds and has the public’s trust at stake. In 50 years, the balance of power in medicine has shifted from independent hospitals and providers to the federal government, for better or for worse. As much as the CMS has been criticized, the agency has often used its power, the power of payment, to enforce change on a system that was not self-regulated in many respects. As an example, one of the first changes it made was to desegregate a previously racially segregated health care system. It promoted payment equality as it instituted standard payments for same diagnoses across regions and practice settings. It has (more often than not) worked with physicians and their representative organizations, such as the AMA, to determine payment. It has encouraged providers to practice in underserved areas to maintain access to its beneficiaries. It has enforced quality and efficiency of care on a system that had rewarded quantity of care without evidence of benefit. Although we may not like or agree with every decision made by the CMS, the profound impact Medicare has made on our health care delivery (and its improvement) during the past 50 years must be acknowledged and understood by all physicians. Happy 50th, Medicare.
References 1. Updegrove M. Making Harry Truman’s dream come true. New York: Crown Publishing, 2012.
2. Kaiser Family Foundation, . A primer on Medicare financing. San Francisco: Kaiser Family Foundation, 2011. 3. Available at: www.medicare.gov. Accessed October 28, 2014. 4. Available at: www.cms.gov. Accessed October 13, 2014. 5. Kaiser Family Foundation. Available at: http://kff.org/medicare/ fact-sheet/medicare-spending-and-financing-fact-sheet/. Accessed October 23, 2014. 6. Fetter RB, Shin Y, Freeman JL, et al. Case mix definition by diagnosis related groups. Medical Care 1980;18:1–53. 7. Mayes R. The origins, development and passage of Medicare’s revolutionary prospective payment system. J Hist Med Allied Sci 2007;62:21–55. 8. Hsiao WC, Braun P, Dunn D, et al. Results and policy implications of the resource-based relative-value study. N Engl J Med 1988;319:835–841. 9. Laugesen MJ, Wada R, Chen EM. In setting doctors’ Medicare fees, CMS almost always accepts the relative value update panel’s advice on work values. Health Affairs 2012;31:965–972. 10. American Medical Association. Available at: http://www.amaassn.org/resources/doc/washington/2014-medicare-physicianfee-schedule-final-rule-summary.pdf. Accessed October 20, 2014. 11. Whoriskey P, Keating D. How a secretive panel uses data that distort doctors’ pay. Washington Post. July 20, 2013:A1. 12. Mehta S, Brill J. What is the RUC and how does it impact gastroenterology. Clin Gastroenterol Hepatol 2014;147: 498–501. 13. Vladeck BC, Van de Water PN, Eichner J, eds. Available at: http://www.nasi.org/research/2006/strengthening-medicaresrole-reducing-racial-ethnic-health. Accessed October 20, 2014. 14. Brill JV, Jain R, Margolis PS, et al. A bundled payment framework for colonoscopy performed for colorectal cancer screening or surveillance. Clin Gastroenterol Hepatol 2014;12:849–853. 15. Available at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/PhysicianFeeSched/PFS-Federal-RegulationNotices-Items/CMS1253669.html. Accessed October 23, 2014. 16. Shortell SM, Casalino LP, Fisher ES. Achieving the vision: structural change. In: Tollen LA, Crosson FJ, eds. Partners in health: how physicians and hospitals can be accountable together. San Francisco: Jossey-Bass, 2010. 17. Sheen E, Dorn SD, Brill JV, et al. Health care reform and the road ahead for gastroenterology. Clin Gastroenterol Hepatol 2013; 11:1062–1066. 18. Taylor IL, Clinchy RM. The affordable care act and academic medical centers. Clin Gastroenterol Hepatol 2012;10:828–830. 19. Allen JI. Health care reform 3.0: the road gets bumpy. Clin Gastroenterol Hepatol 2013;11:1527–1528.
Reprint requests Address requests for reprints to: Dawn L. Francis, MD, MHS, Division of Gastroenterology and Hepatology, Mayo Clinic, Jacksonville, Florida 32225. e-mail: [email protected]; fax: (904) 953-6225. Conflicts of interest The author discloses no conflicts.
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Fifty Years of Medicare Dawn L. Francis Division of Gastroenterology and Hepatology, Mayo Clinic, Jacksonville, Florida
In 2006, I wrote an article for AGA Perspectives entitled “Medicare Basics: An enigma wrapped in a mystery.” Understanding what Medicare is (and will become) remains complex but it is critical for gastroenterologists to realize how it is changing and has become more of a driver of health care delivery reform than any time in its history. In a recent New England Journal of Medicine Perspective article (http://www.nejm.org/doi/pdf/10. 1056/NEJMp1500445), Sylvia M. Burwell (US Secretary of Health and Human Services) stated that by 2018, 90% of Medicare reimbursement will be linked to quality or value and 50% of payments will occur through alternative (to fee for service) models such as bundles or episodes of care. The American Gastroenterological Association has led our specialty in helping define how such models might be structured. This month, Dawn L. Francis, MD, MHS, takes us through the 50 year history of Medicare and helps us understand at least part of the enigma. John I. Allen, MD, MBA, AGAF Special Section Editor uring the first decades of the twentieth century, modern medicine was making huge strides with the advent of antibiotics, anesthesia, and aseptic techniques in the operating room. The role of the doctor evolved from prognosticator to reliable healer. However, with this evolution, it was clear that our nation had a problem paying for health care. People were living longer, and less than 50% of those older than 65 had health insurance. Coverage was simply unavailable or unaffordable to the rest, because the elderly paid more than 3 times as much for health insurance compared
D
Resources for Practical Application To view additional online resources about this topic and to access our Coding Corner, visit www.cghjournal.org/content/ practice_management.
Clinical Gastroenterology and Hepatology 2015;13:1036–1041
with their youthful counterparts. Our elderly faced the conundrum of more costly services at a time in their life when they could least afford it. As early as the 1940s, various national health insurance plans were introduced to Congress. The national debate on this topic was long and fierce, spanning nearly 25 years. Three presidents had introduced a Medicare bill (Presidents Roosevelt, Truman, and Kennedy) but had failed. Their failure was due in part to an opposing coalition led by the American Medical Association (AMA) who had labeled the bill as an attempt to legislate “socialized medicine.”1 President Lyndon Johnson successfully championed the Social Security Amendments bill to create Medicare under Title XVIII and signed it into law on July 30, 1965 (Figure 1). The amendments provided for 2 separate health plans for those aged 65 or older, the required hospital insurance program (Part A) and a voluntary supplementary medical insurance (Part B) for outpatient care. These programs were derived from earlier bills proposed by Democrats and Republicans, respectively. Democrats had pushed for a “social insurance” bill paid for by a broad tax (this became Part A), whereas the Republicans advocated a voluntary premium support program administered through private insurers (an iteration of this idea became Part B). The Tax Equity and Fiscal Responsibility Act passed in 1982 authorized Medicare to contract with risk-based private health plans for the costs of their enrollees’ care in exchange for a prospective, monthly, per-enrollee payment. This created Medicare Part C, also known as the Medicare Advantage program. Beneficiaries continue to pay premiums directly to Medicare for Part B for physicians’ services and, if they choose it, Part D for drug coverage. Different from Parts A and B, they receive health insurance for all services through their Medicare
Abbreviations used in this paper: ACA, Patient Protection and Affordable Care Act; ACO, accountable care organization; AMA, American Medical Association; CMS, Centers for Medicare and Medicaid Services; DRG, diagnosis-related group; GI, gastrointestinal; MPFS, Medicare Physician Fee Schedule; PQRS, physician quality reporting system; RUC, AMA/ Specialty Society Relative Value Scale Update Committee; RVU, relative value unit; VBPM, value based payment modifier. © 2015 by the AGA Institute 1542-3565/$36.00 http://dx.doi.org/10.1016/j.cgh.2015.03.026
PRACTICE MANAGEMENT: THE ROAD AHEAD, continued
Figure 1. Milestones in CMS payment policy as it relates to the practice of gastroenterology.
Advantage plan. For beneficiaries this may mean that they have more services fully covered, and out-of-pocket costs are less. However, they lose choice in providers because they have to stay within the Medicare Advantage program in which they have enrolled. The programs are administered by the Centers for Medicare and Medicaid Services (CMS), which also has jurisdiction over Medicaid and the Children’s Health Insurance Program. CMS is a component of the Department of Health and Human Services. Medicare provides health insurance for Americans aged 65 or older and people with end-stage renal disease, amyotrophic lateral sclerosis, or other long-term disabilities. In 1966, Medicare enrolled 19.1 million people; in 2013 around 52 million were enrolled.2 For Medicare beneficiaries, Medicare covers roughly half of their health care charges.2 The other half may be covered with supplemental insurance (Medicare supplement or Medigap) or out-of-pocket expense such as long-term care, dental, hearing, and vision care. Over the years there have been important expansions of coverage. In 1972, the program expanded to include benefits to speech, physical, and chiropractic therapy. The option of payments to health maintenance organizations was also added. Eligibility was expanded to include younger people with permanent disabilities and those who have end-stage renal disease. Hospice benefits were added in 1982. In 2001, Congress expanded Medicare to cover younger people with amyotrophic lateral sclerosis.
Financing Medicare Part A is funded mostly from revenue generated by the 2.9% payroll tax (typically the
employer pays 1.45% and employee pays 1.45%). Starting in 2013, the Part A tax applies to the first $200,000 of income for individuals or $250,000 for couples; income above those limits is taxed at 3.8%.3 Medicare Parts B and D are funded in part by Medicare enrollee premiums and general fund revenue. A surtax was added to Part B premiums in 2006 for higher income seniors to assist with funding Medicare Part D. The original annual price tag for Medicare was $900 million. The amount of Medicare expenditures in 2012 was $572.5 billion.4 Currently, Medicare spending accounts for about 14% of the federal budget.5 The Baby Boom generation (those born between 1946 and 1964) started retiring in 2011 and will be fully retired by 2030. In addition, the portion of Medicare costs from disability has been rising at a rate that outpaces the increase in retirement-age individuals. These 2 factors combined result in a projected increase in Medicare enrollment from around $48 million to more than $80 million by 2030. The number of workers per Medicare beneficiary will decline from 3.7 to around 2.4.2 The decline in workers supporting Medicare and the overall increase in health care costs both result in significant challenges to the financial solvency of the program.
Centers for Medicare and Medicaid Services and Payment Currently, CMS uses several different and complicated methodologies to determine payment that are based on the type of service and where it is being provided (eg, hospital vs outpatient environment). Before the early 1980s, CMS had a charge-based fee-for-service 1037
PRACTICE MANAGEMENT: THE ROAD AHEAD, continued model where payment was linked to hospitals and provider charges within specific regions. Originally, payments were administered through Blue Cross and Blue Shield to make physicians more comfortable with “government” payments for medical services. As one may imagine, this model resulted in wide variations in payment for similar services among different hospitals and providers. In addition to medical inflation and the economic crises of the late 1970s, this compelled legislators to reform Medicare payment to preserve the program’s viability.
Diagnosis-related Groups When legislators in the 1970s began considering alternatives to fee-for-service reimbursement, the payment system that had been best evaluated (and successfully implemented in New Jersey) was a prospective payment system that was based on diagnosis-related groups (DRGs).6 This model that is termed the prospective payment system has been called the “single most influential postwar innovation in medical financing.”7 It is termed prospective because payment is determined at the beginning of an episode of care that is based on a patient’s diagnosis rather than at the end of an episode of care that is based on the services that have been rendered. For example, all hospitals will get a set amount for a hospitalization and surgery for appendicitis with a DRG of “appendectomy without complication.” The introduction of the DRG model of payment in 1982 was the first in a series of changes in payment models that “bundle” services together and revolutionized the way health care was administered by changing the motivation of providers from delivering high quantities of care to deliver high-quality efficient care. Perhaps most important is that this change in payment shifted the balance of power in the medical industry from hospitals and physicians to the federal government. Seven years after the implementation of the DRG payment model in 1982, Congress enacted the Medicare Physician Fee Schedule (MPFS) as part of the Omnibus Budget Reconciliation Act of 1989. Omnibus Budget Reconciliation Act directed a Resource Based Relative Value Scale for reforming physician payment under Medicare. The Resource Based Relative Value Scale methodology created a numerical weight termed a relative value unit (RVU) for around 7500 Current Procedural Terminology codes. The formula to create the “value” of an RVU accounts for the complexity, time, training, and resources used to perform a procedure or 1038
provide a service.8 The total RVU for a service has 3 components: the physician work to perform the service, the practice expense associated with the service, and the professional liability expense for the provision of the service.
Formation of the American Medical Association/Specialty Society Relative Value Scale Update Committee In response to this change in payment methodology, the AMA formed the AMA/Specialty Society Relative Value Scale Update Committee (RUC) in 1991 to act as an expert panel to provide relative value recommendations to CMS. To be clear, the RUC is not part of the CMS and is not mandated by any legislation. It works on behalf of the health care providers it represents by exercising its First Amendment right to petition the federal government. Although the RUC is not directly responsible for setting the reimbursement rates for Medicare, it heavily influences the process by which rates are initially set and subsequently reviewed with CMS by using the RUC’s recommendations approximately 90% of the time during the last decade,9 although that percentage has been declining in recent years.10 During the past several years, this process has been the subject of intense public scrutiny and criticism, with colonoscopy touted as an example of the limitations of the process.11 In the 2014 MPFS Final Rule, CMS accepted only 22% of the RUC’s recommended values for the upper gastrointestinal (GI) endoscopy codes.12 On average, the relative values for the upper GI endoscopy procedures fell 12%, with CMS establishing decreases in some endoscopic procedures by as much as 36%.
The Outpatient Prospective Payment System In 1997, the Federal Balanced Budget Act legislated that CMS create a new “Outpatient Prospective Payment System (OPPS),” and it was implemented in 2000. This payment system is analogous to the DRG system for inpatients. It is relevant to gastroenterology because it covers facility payment for hospital outpatient procedures and ambulatory surgery center procedures. Physician fees are reimbursed via the MPFS. CMS has successfully used payment to advance social change and access to care. For example, CMS required racial desegregation of physician practices, waiting rooms, and hospital floors as a condition of payment.13 It
PRACTICE MANAGEMENT: THE ROAD AHEAD, continued provides incentive payments for physicians to practice in geographic health professional shortage areas and physician scarcity areas so that its beneficiaries in rural locations will have access to care. More recently, it has used payment to ensure quality of the health care delivered to its beneficiaries by providing incentives for achieving certain benchmarks and will take back payment for failure to achieve certain benchmarks (eg, above average hospital readmission rates).
Recent History of Gastroenterology and Medicare Reimbursement The Patient Protection and Affordable Care Act (ACA) signed in to law in 2010 directs CMS to review and identify misvalued codes and make adjustments as deemed appropriate by the agency. Misvalued codes can include procedures with fast growth in the number of procedures performed over several years, substantial change in practice expense, new technologies or services, multiple codes frequently billed together, codes with low relative values, and so-called Harvard-valued codes, which have not been reviewed by the RUC since their values were established in the early 1990s. In the 2012 MPFS Final Rule published in November 2011, CMS identified colonoscopy, esophagogastroduodenoscopy, and other GI endoscopy procedures as being potentially misvalued. This announcement was of profound importance to the GI societies. The American Gastroenterological Association, American Society for Gastrointestinal Endoscopy, and American College of Gastroenterology met with CMS to propose a strategy for the systematic review of 120 endoscopic codes including esophagoscopy, esophagogastroduodenoscopy, endoscopic retrograde cholangiopancreatography, flexible sigmoidoscopy, and colonoscopy.12 The process of revaluing these codes involved an assessment of the coding description by the AMA’s CPT Editorial Panel, a survey of the work required to perform these procedures by practicing physicians, and presentation to the RUC. This process began in September 2012, starting with the esophagoscopy family of the upper GI endoscopy codes, and at least 1 family of codes was presented at each RUC meeting until the process was completed in January 2014 with the colonoscopy family lower GI endoscopy codes.12 The lower GI endoscopy codes (including colonoscopy) were presented to the RUC in January 2014. The results of the RUC meetings are confidential, so they could not be shared after the meeting. However, in anticipation of cuts to these codes, GI society leadership,
Current Procedural Terminology and RUC advisors, and staff met in person with the CMS staff 5 times during 2014 to urge the agency to delay review of the colonoscopy and the lower GI endoscopy codes and reverse the cuts to the upper GI services implemented in the 2014 MPFS rule. During these meetings, the public health value of colonoscopy was highlighted; the societies advocated for implementation of a more transparent revaluation process and provided comprehensive education to CMS staff on the time and intensity of the upper and lower GI endoscopy procedures under consideration. The GI societies launched an advocacy public campaign by enlisting the help of members of Congress. Twelve senators, 47 members of the U.S. House of Representatives, and a diverse coalition of leading medical societies joined the call for a fair and open process in setting reimbursement rates. Rep. Bill Cassidy, R-LA, a gastroenterologist (and now a Senator from Louisiana), was a key advocate, composing a letter to CMS noting that “. current processes are unfair and deeply impact small-business operations and patient care.” Fifty years after its creation, it seemed that CMS would deeply cut the valuation of many GI codes in 2015, the most important of which was colonoscopy. When CMS published the Final Rule in November 2014, it appeared that CMS agreed with the GI societies and the hundreds of members who submitted written comments to the agency. In the rule, CMS stated: We agree with the commenters. In light of the substantial nature of this code revision and its relationship to the policies on moderate sedation, we are delaying revaluation of these codes until CY 2016 when we will be able to include proposals in the proposed rule for their valuation, along with consideration of policies for moderate sedation. Accordingly for CY 2015, we are maintaining the inputs for the lower gastrointestinal endoscopy codes at the CY 2014 levels. This decision by CMS is welcome, but it must be clear that this is only a delay. CMS will revalue the lower GI endoscopy codes (ileoscopy, pouchoscopy, flexible sigmoidoscopy, colonoscopy through stoma, colonoscopy) for calendar year 2016. It is widely expected that GI will see a decrease in the valuation of many of the lower GI codes.
Centers for Medicare and Medicaid Service Payment Models in the Future There are substantial financial challenges to the viability of CMS as the population ages, the elderly live longer, and the cost of end-of-life care increases. In 2010 1039
PRACTICE MANAGEMENT: THE ROAD AHEAD, continued under the leadership of President Barack Obama, the ACA was passed by Congress and signed into law. Much of this legislation will affect our practices. There is now a legislated transition from fee-for-service models to value-based reimbursement that incentivizes quality and efficiency. State and federal insurance exchanges (marketplaces), which allow patients to shop for health insurance coverage, have been formed. Large integrated delivery networks are beginning to emerge because of a section of the ACA that facilitates the creation of accountable care organizations (ACOs). ACOs contract for the total cost of care for defined populations of patients. During the past decade, CMS has made it clear that payment will incentivize quality of care and efficiency. There are a number of mechanisms in place to accomplish this, including bundled payments, ACOs, the physician quality reporting system (PQRS), value based purchasing, and meaningful use.
The Outpatient Setting With the recognition that CMS will pursue bundled payments in the outpatient setting, the American Gastroenterological Association convened a physician work group in 2012 to explore prospective payment, or bundling, of gastroenterology services. Several services were explored, and colonoscopy (screening, diagnostic, and surveillance) was identified as a natural starting point. The bundle would include the pre-procedure period (pre-procedure consult and instructions on bowel preparation), procedure (professional fees, medications, monitoring, facility fees), and the postprocedural period (communication of results and recommendations and repeated procedures for poor bowel preparation or inability to intubate the cecum).14 The point of this evaluation was not necessarily to come up with the right payment but to determine whether such a model was feasible so that the professional societies can prepare gastroenterologists for these types of payment models.
Expanding Quality Measurement and Clinical Effectiveness The PQRS is a voluntary reporting program that incentivizes providers (by payment or penalty) to measure and report a number of quality measurements for Medicare Part B by using claims data, electronic health record, or a qualified registry. Initially (for 2013), providers received an incentive of 0.5% bonus payment for participating. In 2015, providers who do not participate 1040
will incur a 1.5% cut in Medicare reimbursement, and that cut will increase to 2% in 2016. Current PQRS measures include treatment and management of inflammatory bowel disease, hepatitis C, colon cancer screening rates, and surveillance rates after removal of a colonic adenoma. On the basis of outcome measures reported through the PQRS, CMS will calculate a quality composite score and assign practices to quality and cost tiers that affect reimbursement rates known as the value based payment modifier (VBPM). In 2015, the VBPM is relevant for practices with 100 or more providers (or eligible professionals) that is based on their performance in calendar year 2013. The program will broaden in 2016 and encompass groups with 10–99 eligible professionals (reporting in 2014). All physicians participating in the MPFS will be subject to the VBPM in 2017 for their performance in 2015.15
Accountable Care Organizations U.S. health care is fragmented, but there are organizations within it that provide coordinated and longitudinal care and are held accountable for clinical outcomes and cost. There is evidence that these practices provide care at equal or lower costs with better outcome.16 ACOs were developed on the basis of this evidence. ACOs integrate groups of health care providers to jointly take responsibility for the quality and cost of all care delivered in a distinct population. Section 3022 of the ACA has specifications for ACOs: they must care for at least 5000 Medicare beneficiaries; have legal, leadership, and management structures; use predetermined processes to measure and report quality and cost data; achieve specific patient-centeredness criteria; encourage the practice of evidence-based medicine and coordinate care. To summarize, most health care policy experts agree that there are some prominent trends in health care reform,17–19 led by the CMS, for which health care providers and organizations should prepare: Fee-for-service models of payment will diminish and will be replaced by prospective payment systems that incentivize quality and efficiency. Providers and organizations will need to measure outcomes that demonstrate their value to patients, health systems, and payors. Practice will need to demonstrate improvement in health at a population level as demand increases to share risk across populations such as total cost of care contracts with regional health systems.
PRACTICE MANAGEMENT: THE ROAD AHEAD, continued Increasing numbers of providers will become employees of large integrated delivery networks as provider networks decline and the cost of independent practice increases.
Fifty Years of Medicare Since Medicare was created 50 years ago, its impact on the practice of medicine in the United States cannot be understated. Essentially, the creation of Medicare took health care from “private” to “public” law and placed Congress and the courts in the center of health care policy and delivery. CMS has a limited amount of money to spend on an elderly population that is growing in numbers and years and who consume a great deal of health care. As such, CMS is in the precarious situation of maintaining the viability of the program, while maintaining access to health care for its beneficiaries. These requirements of CMS have led to decisions that often result in a decrease in payment for some sectors in the health care industry; thus, the organization is often at odds with the industry that it partially funds. Providers often feel that pain first and most acutely, which at times has led to the demonization of Medicare. CMS is a steward of public funds and has the public’s trust at stake. In 50 years, the balance of power in medicine has shifted from independent hospitals and providers to the federal government, for better or for worse. As much as the CMS has been criticized, the agency has often used its power, the power of payment, to enforce change on a system that was not self-regulated in many respects. As an example, one of the first changes it made was to desegregate a previously racially segregated health care system. It promoted payment equality as it instituted standard payments for same diagnoses across regions and practice settings. It has (more often than not) worked with physicians and their representative organizations, such as the AMA, to determine payment. It has encouraged providers to practice in underserved areas to maintain access to its beneficiaries. It has enforced quality and efficiency of care on a system that had rewarded quantity of care without evidence of benefit. Although we may not like or agree with every decision made by the CMS, the profound impact Medicare has made on our health care delivery (and its improvement) during the past 50 years must be acknowledged and understood by all physicians. Happy 50th, Medicare.
References 1. Updegrove M. Making Harry Truman’s dream come true. New York: Crown Publishing, 2012.
2. Kaiser Family Foundation, . A primer on Medicare financing. San Francisco: Kaiser Family Foundation, 2011. 3. Available at: www.medicare.gov. Accessed October 28, 2014. 4. Available at: www.cms.gov. Accessed October 13, 2014. 5. Kaiser Family Foundation. Available at: http://kff.org/medicare/ fact-sheet/medicare-spending-and-financing-fact-sheet/. Accessed October 23, 2014. 6. Fetter RB, Shin Y, Freeman JL, et al. Case mix definition by diagnosis related groups. Medical Care 1980;18:1–53. 7. Mayes R. The origins, development and passage of Medicare’s revolutionary prospective payment system. J Hist Med Allied Sci 2007;62:21–55. 8. Hsiao WC, Braun P, Dunn D, et al. Results and policy implications of the resource-based relative-value study. N Engl J Med 1988;319:835–841. 9. Laugesen MJ, Wada R, Chen EM. In setting doctors’ Medicare fees, CMS almost always accepts the relative value update panel’s advice on work values. Health Affairs 2012;31:965–972. 10. American Medical Association. Available at: http://www.amaassn.org/resources/doc/washington/2014-medicare-physicianfee-schedule-final-rule-summary.pdf. Accessed October 20, 2014. 11. Whoriskey P, Keating D. How a secretive panel uses data that distort doctors’ pay. Washington Post. July 20, 2013:A1. 12. Mehta S, Brill J. What is the RUC and how does it impact gastroenterology. Clin Gastroenterol Hepatol 2014;147: 498–501. 13. Vladeck BC, Van de Water PN, Eichner J, eds. Available at: http://www.nasi.org/research/2006/strengthening-medicaresrole-reducing-racial-ethnic-health. Accessed October 20, 2014. 14. Brill JV, Jain R, Margolis PS, et al. A bundled payment framework for colonoscopy performed for colorectal cancer screening or surveillance. Clin Gastroenterol Hepatol 2014;12:849–853. 15. Available at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/PhysicianFeeSched/PFS-Federal-RegulationNotices-Items/CMS1253669.html. Accessed October 23, 2014. 16. Shortell SM, Casalino LP, Fisher ES. Achieving the vision: structural change. In: Tollen LA, Crosson FJ, eds. Partners in health: how physicians and hospitals can be accountable together. San Francisco: Jossey-Bass, 2010. 17. Sheen E, Dorn SD, Brill JV, et al. Health care reform and the road ahead for gastroenterology. Clin Gastroenterol Hepatol 2013; 11:1062–1066. 18. Taylor IL, Clinchy RM. The affordable care act and academic medical centers. Clin Gastroenterol Hepatol 2012;10:828–830. 19. Allen JI. Health care reform 3.0: the road gets bumpy. Clin Gastroenterol Hepatol 2013;11:1527–1528.
Reprint requests Address requests for reprints to: Dawn L. Francis, MD, MHS, Division of Gastroenterology and Hepatology, Mayo Clinic, Jacksonville, Florida 32225. e-mail: [email protected]; fax: (904) 953-6225. Conflicts of interest The author discloses no conflicts.
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