In Testimony Today, MGMA Says Remove Medicare Part B Drugs From Sustainable Growth Rate (SGR) Calculation

The Medical Group Management Association is scheduled to testify today before the U.S. House Ways and Means Subcommittee on Health. In the testimony, William F. Jessee, MD, FACMPE, president and CEO of

MGMA, will thank Chairman Nancy Johnson (R-Conn.), and the committee for holding a hearing on the looming cuts in Medicare physician reimbursement so early in the 109th Congress.

The testimony features data from the MGMA “Cost Survey: 2004 Report

Based on 2003 Data” to demonstrate how the cost of caring for patients

has grown 48 percent in the last 10 years, while physician group

practices face projected Medicare reimbursement cuts of more than 30

percent between 2006 and 2012. Jessee's testimony asserts that the

time is now to correct the flawed reimbursement system.

To read the testimony, visit

http://www.mgma.com/medicaredrugsSGR_10Feb05.cfm

Statement for the record of WILLIAM F. JESSEE, MD, FACMPE

PRESIDENT AND CEO MEDICAL GROUP MANAGEMENT ASSOCIATION Before the HOUSE WAYS AND MEANS SUBCOMMITTEE ON HEALTH

February 10, 2005

Madam Chairman, Congressman Stark, and distinguished members of the Subcommittee, thank you for your leadership on an issue that dramatically impacts the ability of physician practices to continue providing high quality care to patients, and especially for steps taken by this Subcommittee to guarantee a minimum 1.5 percent increase in physician reimbursement rates for 2004 and 2005. That stopgap measure has provided the time we now have to help ensure access for Medicare and non-Medicare patients.

Medical Group Management Association (MGMA) data show that the cost of caring for patients has risen 48 percent over the last 10 years. However, according to the Medicare Trustees 2004 report, under current law Medicare physician reimbursements will be cut by more than 30 percent between 2006 and 2012, as costs continue to escalate. These two diverging trajectories represent an unsustainable future for patients and the providers who care for them, and a looming crisis for the American health care system.

Escalating costs, declining reimbursements

MGMA, founded in 1926, is the nation's principal voice for medical group practice. MGMA's 19,500 members manage and lead some 11,500 health care organizations in which more than 240,000 physicians practice. MGMA leads the industry with its research into practice costs. In fact, MGMA has conducted extensive surveys of medical practice costs for more than 50 years, and our data are widely respected as accurate benchmarks of the expenses associated with caring for patients. MGMA-collected data indicate that the cost of operating a group practice rose by an average 4.8 percent per year over the last 10 years. In fact, between 2001 and 2003, MGMA data show that operating costs increased nearly 11 percent.

Such escalating costs should come as no surprise. We are all familiar with skyrocketing professional liability premiums. Additionally, advancements in medical technologies have transformed the way we practice medicine, and hold great promise for future improvements. MGMA has long supported enhancing quality of care while reducing administrative burdens on physician practices. Information technology (IT), in particular, holds great promise in this area. However, the initial investment required to establish, for example, a fully interoperable electronic health record system, is prohibitive for many group practices. Moreover, while it seems intuitive that IT should help to restrain escalating costs by generating administrative savings, the vast majority of such savings will accrue to payers and others within the system, not to the physician group practices that provide the initial investment. Despite their desire to improve quality, physician group practices are largely unable to commit significant financial resources to IT because the investment seems unlikely to pay for itself in the foreseeable future. The projected Medicare reimbursement cuts also create an unstable economic environment, making it virtually impossible for many group practices to pursue the types of expensive technologies that hold great promise for improving patient care and generate administrative savings.

Unfortunately, even before the projected cuts may begin taking effect, Medicare reimbursement rates for physician services have fallen far short of the increased cost of delivering quality services to Medicare patients. And as you know, Medicare generally serves as the standard on which private payers base their reimbursement rates. With escalating costs as shown by MGMA data, projected Medicare cuts of more than 30 percent and private payers sure to follow, there is no question that some group practices will be unable to afford continued care for patients under current law. It is absolutely crucial that policymakers address this concern now. The timing of this hearing, so early in the 109th Congress, strongly emphasizes your recognition of the critical need to address this problem. Thank you again for your leadership. While MGMA recognizes that any solution will involve an investment by the taxpayers, it is necessary to protect some of the nation’s most vulnerable citizens, the elderly and disabled, beginning as soon as next year.

Removing drugs from the Sustainable Growth Rate

There is a relatively easy way to begin improving the Medicare physician reimbursement system. The Centers for Medicare & Medicaid Services (CMS) should remove Part B covered drugs from the calculation used to determine Medicare physician updates beginning with the base year. This administrative action would help to mitigate the impact of the projected cuts and facilitate your efforts to establish long-term improvements to this broken reimbursement system. Such administrative change also represents the right thing to do from a policy perspective.

The definition used by CMS for “physician services” in the sustainable growth rate (SGR) formula inappropriately includes the cost of physician administered outpatient prescription drugs. Medicare’s coverage of costly prescription drugs administered in the physician’s office has been a significant factor in the growth of Medicare expenditures. Since 1996 (the SGR base year), SGR spending for physician-administered drugs has more than doubled. These expenses reflect patient acquisition of products rather than services rendered by a medical professional and therefore are different than “physician services.” These drugs are not even reimbursed under the physician fee schedule, but under a completely different system. Their inclusion in the definition of physician services runs counter to CMS’ stated goal of paying appropriately for drugs and physician services.

A separate definition of physician services clearly distinguishes physician administered outpatient prescription drugs from services rendered by physicians. CMS adopted this definition in the December 12, 2002, “Inherent Reasonableness” rule (67 FR 76684). The definition of physician services must be applied consistently for fair and equitable administration of the Medicare program. Furthermore, the recent rule reforming the payment system for physician-administered prescription drugs refines a separate venue to address the utilization and cost of drugs. MGMA has strongly urged CMS to remove prescription drug expenditures from the definition of “physician services” used to calculate the physician reimbursement update, beginning with the 1996 base year. Although this would not retroactively impact reimbursements between the base year and 2005, it would appropriately correct the figures on which future updates are based and represent better Medicare policy.

Conclusion

MGMA is extremely concerned about the negative impact on Medicare beneficiaries, non-Medicare patients, and physician group practices that would result from the current physician reimbursement system. I strongly urge you to encourage CMS to remove Part B drugs from the SGR calculation beginning with the base year. Please let me know how we can help you to develop a long-term legislative solution to the flawed Medicare physician reimbursement system. Thank you again for your efforts to address the projected cuts of more than 30 percent in Medicare physician reimbursement rates, and for the opportunity to comment on this important issue.

William F. Jessee, MD, FACMPE, FACPM

President and Chief Executive Officer

Medical Group Management Association

Source: MGMA