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Killing the SGR and therapy caps

December 19, 2013
by Bob Gatty
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Congress appears ready to finally kill off the sustainable growth rate formula (SGR) and fix the difficult physician fee schedule situation that has plagued Medicare physicians for a decade, with a three-month extension of current rates included in a new budget agreement and bills permanently repealing the SGR ready for final action before the extension runs out.

The House of Representatives approved the three-month extension December 12 and the Senate followed suit December 18. The deal also includes a three-month extension of Medicare therapy cap exceptions. On the downside, it extends the 2 percent sequestration cut for Medicare providers through 2023.

Legislation to repeal the SGR was passed by key House and Senate committees in late December, replacing the formula that has been responsible for threatened yearly cuts in Medicare provider fees with alternative payment models and quality incentive programs, which will be used to set payment rates for Medicare healthcare services in the future.

While the complex bipartisan proposal originally would have frozen fee schedule rates for the next 10 years, lawmakers in both chambers provided a four-year period of 0.5 percent payment increases, to be followed by stable payments through 2023. The action will avert the 24.4 percent overall Medicare physician fee cut that had been scheduled for 2014 under the SGR.

While that is good news for the long-term care industry and physicians, it does not come without danger. To eliminate the SGR, lawmakers will need to find ways to offset the cost, and the nursing home industry is bracing for potential attack.

“The three-month extension will give lawmakers time to hash out a permanent doc fix and permanent lifting of the therapy caps,” said Greg Crist, senior vice president of public affairs at the American Health Care Association (AHCA). “Our charge for the next several weeks is to continue to make the case that random, arbitrary cuts to skilled nursing to pay for SGR reform is unwise.”

Legislation approved by the Senate Finance Committee would require the Centers for Medicare & Medicaid Services (CMS) to replace the therapy caps by 2015 with a system of prior authorization medical review (PAMR), designed around such factors as setting, services, provider practices and dollar thresholds. The legislation makes no changes to the current Manual Medical Review (MMR) process for 2014, but repeals it at the end of 2014 so the new PAMR process can begin.

Additionally, CMS would be required to develop a new standardized data element collection process, presumably to replace the current claims-based functional limitations data collection (g-codes) process, which would sunset when the new system begins. Beginning January 1, 2015, each claim would need to indicate if a therapy assistant provided the therapy service. CMS also would need to design a new outpatient therapy system.

The House Ways & Means Committee’s bill, which was approved by the House Energy & Commerce Committee, does not contain therapy provisions. So early in 2014, those issues will need to be resolved by Congress when it reaches its final decisions on ending the SGR and, perhaps, the Medicare therapy caps as well.

The industry has put forth solid alternatives in its effort to avoid arbitrary reductions to be used as an SGR “pay-for,” Crist says. “We have spent several months developing alternatives that get us both where we need to be—to accrue the needed savings—and help us continue our progress and provide the care our patients need.”

Crist reports positive reactions to AHCA’s initiative from lawmakers of both political parties and both chambers of Congress. “Congress can address this once and for all so we as a profession are not on the table year in and year out,” he said. “We have viable policy alternatives with substance laden alternatives should the need arise. We don’t think we should be a ‘pay-for,’ but if so, we have some answers there. This looks like a good climate for permanent repeal and for us to avoid being cut.”

Regarding the therapy cap, Crist pointed out that the industry has made the case to Congress that the need for therapy does not end at a pre-set point. “We’d love for them to look at all of this,” he said. “The MMR process has gummed up the system. We are hopeful that if we can address that permanently, some of the other complications will work themselves out.”

So, for the next few months, Crist and his industry colleagues will be working to educate lawmakers so they have a solid understanding of the issues at stake when all of this comes before them next year. “Lawmakers, this year, have been distracted by other issues. We have to redouble our efforts to make sure lawmakers understand.”