Everybody has a budget. Your family does, my practice does, your state has a budget, the ACC has a budget... and so does the country (at least some of the time). This week the president released his 2014 budget and I thought you might like to see some of the proposed provisions that impact cardiology and the practice of medicine as a whole.

Interestingly, there is an assumption that Medicare payments to physicians will not be reduced by the mandated Sustainable Growth Rate (SGR) formula.  This formula is scheduled to cut payments to physicians by 25 percent in 2014, but previous scheduled cuts have been overridden by short-term Congressional action. Perhaps it’s time to just fix it already!

There is also a proposal to reduce payments for the so-called “indirect” costs of graduate medical education (GME) by 10 percent starting in 2014, at a savings of more than $10 billion over 10 years. This is an increasingly important topic that the ACC’s legislative team is following closely.

While it’s important to note that this budget proposal is likely to be dead on arrival given the divided Congress and president, imaging is another area that “we” (the collective ACC) will also be keeping close tabs on this year. The budget proposal includes a provision to mandate prior authorization of advanced imaging (CT, MR, nuclear), as well as a proposal to limit the availability of the in-office ancillary services exception so that advanced imaging services (CT, MR, nuclear) could not be provided if ordered by a physician in that office. (The budget proposal does indicate that the exception could still be available if certain undefined accountability standards are met. But….)

On the brighter side, the budget proposal does contain provisions to increase funding for the FDA, partially by taking advantage of user fee programs authorized last year, previously existing programs for prescription drugs and medical devices, along with the new programs for biosimilars and generic drugs. Also $534 million in user fees are aimed at decreasing use of tobacco products. The National Institutes of Health also gets a small 1.5 percent bump from 2012 levels, for a total of $31 billion. The administration also includes funding for continued investment in health IT implementation and electronic information exchanges, given that current funds from the American Recovery and Reinvestment Act are beginning to expire.

Other proposals include a provision to lower the target growth rate for the Independent Payment Advisory Board so that the board could take binding action even with lower cost growth in health care.  Target growth rate would reduce to GDP plus 0.5 percent.  The IPAB, a major feature of the ACA, has yet to be formed. The budget would also extend funding for a consensus-based entity (likely the National Quality Forum) to focus on performance measures and quality improvement.  Current government funding for NQF expires at the end of 2014.

As I mentioned before, many of the items contained in the budget are unlikely to come to fruition due to the divided Congress and president. However the proposal provides a glimpse at administration priorities for next year. Perhaps we should all make sure to save the date for ACC’s Legislative Conference this September!

The American College of Physicians (ACP) held a webinar last week to release its report, The State of the Nation’s Health Care 2012: How Bad Budget Choices and Broken Politics Are Undermining Progress in Health, And What Should be Done About It. During the webinar, ACP President Virginia Hood and ACP Advocacy SVP Bob Doherty discussed recent progress and current challenges as they see them:

• Health care costs increased at the lowest rate in 50 years, continuing an eight year slow-down, although some of the most recent drop may be due to Americans forgoing needed care.
• Even so, spending on health care has reached an all-time high, and is projected to continue to grow faster than the economy.
• Increased federal spending associated with an aging population and rising costs of health care continue to pose the greatest challenge to the fiscal health of the U.S.
• Health status has improved on several key indicators of population health, including reductions in all five leading causes of death, but disparities continue for many demographic groups and poorer residents.
• The Affordable Care Act has begun to reduce barriers to care for tens of millions of persons, including young adults, children with pre-existing conditions, and seniors, however more than 46 million still went without health insurance.
• Despite a dramatic increase in primary care physicians and other health professionals serving in underserved communities, the U.S. still is facing a projected shortage of more than 40,000 primary care physicians.

The report urges repeal of the Sustainable Growth Rate (SGRrrr) formula and transition to patient-centered payment models; reductions in the costs of defensive medicine; promotion of high-value, cost-conscious care; and more.

All in all, ACC would agree with much of their enumeration of risks and opportunities. I would have liked to have heard more about how registries and systematic quality improvement could help lead the nation out of the rising cost dilemma we are in. What are your thoughts?

While listening to the President’s third State of the Union (SOTU) address since taking office, it was clear his messaging was very much the start of his campaign for re-election with themes like creating jobs and the economy. But unlike like his previous speeches, which I blogged about here and here, the President only touched on the Affordable Care Act (ACA) a few times, saying “I will not go back to the days when health insurance companies had unchecked power to cancel your policy, deny you coverage or charge women differently from men.” Although the ACA is now in the hands of the Supreme Court, I predict much of what the ACA has already implemented will NOT be undone for powerful political reasons.

The President mentioned innovation and research funding for medical advancements several times, claiming “don’t gut these investments in our budget. Don’t let other countries win the race for the future.” This innovation is something the ACC fully supports and stands behind, as it is innovation that will help combat the number one killer in the U.S.

Although the President didn’t speak of tort reform as he did in last year’s SOTU speech, he did speak of reforming Medicare, “I'm prepared to make more reforms that rein in the long term costs of Medicare and Medicaid, and strengthen Social Security, so long as those programs remain a guarantee of security for seniors.” This is encouraging as we are slowly approaching the deadline to do something about the sustainable growth rate (or SGRrrr expressed as a growl, Medicare’s broken physician payment formula). The profession has been urging Congress to use money from military savings to permanently repeal the SGR, noting it is politically still a long shot.

The President also spoke of putting politics aside to come together as one team to make some real changes. Let’s hope there can be some bipartisan compromise this year to address means of appropriately addressing the deficit reduction to include eliminating the SGR, but also without destroying health care in the process. We need to promote the paradigm shift of policy thinking from “cutting care” to “improving care” in order to address the deficit.

In this last week of Congressional action in 2011, on Saturday it seemed as though Congress at the last second would approve a package funding the government into the next year, and in a parallel last-minute decision, the payroll tax cut extension and the SGRrrr (the un-Sustainable Growth Rate Medicare physician payment formula expressed as a growl) seemed to have been saved by the U.S. Senate for two months (through February 2012).

But unbelievably this afternoon the House rejected the two-month extension since they want a longer extension instead. The Senate has already adjourned for the holidays and it is unlikely an alternative resolution to prevent the pending SGR cuts will be resolved before the Jan. 1 deadline. This is a clear failure by Congress and its impacts will be felt by practices and patients as we head into the new year. Once again physician practices are subjected to financial uncertainty and disruption of business. Most importantly patients' access to life-saving quality health care is on the line.

The Centers for Medicare & Medicaid Services (CMS) announced that if Congress hasn’t acted by the start of the new year it will hold claims until Jan. 17 before they start the automatic Medicare payment cuts.

This circus has played itself out. We are in serious trouble if both parties are unable to abandon partisanship to seek a middle ground to solve the huge problems and risks we face. We’re certainly not the shining example of how democracy should responsibly function for Egypt to emulate, or for mentoring any emerging democratic nation. Our Congress is currently broken. We need the next generation of leaders to work on fixing this never-ending SGR ping pong match.

Last week the members of the Congressional Joint Select Super Committee struck out as expected, sending the stock market back down to levels lower than they were a decade ago (read more about the Super Committee in a previous blog post here).

Under the law that created the bipartisan 12-member panel, the failure of the Super Committee means the government will face an across-the-board $1.2 trillion cut to defense and non-defense spending in 2013.  Medicare provider payments will be reduced by 2 percent in 2013 unless Congress finds substitute reductions.

After the finger pointing behaviors were satisfied, the Super Committee pointed out that no deal is better than a bad deal, which is true. Since the process of the automatic sequestration does not kick in until Jan. 1, 2013, it’s the current craziness on Capitol Hill leading up to the Nov. 2012 election that will ultimately predict where the economy is headed.

Unfortunately, Jan. 1, 2013 has a double whammy attached to it: sequestration if Congress does not come to a deficit reduction plan before then; and the Bush tax cuts automatically expire. Together, these dual automatic actions would reduce deficit development by over $4 trillion annually. Both of these politically charged issues are of concern to both parties -- but rigid differences in how they would address the issues could prevent Congress from acting on them.

Meanwhile, the fate of the looming cuts due to the SGR (or SGRrrr, the un-Sustainable Growth Rate Medicare physician payment formula expressed as a growl), which go into effect on Jan. 1, 2012, remains very tenuous. I predict that Congress will enact a 2-year delay in the next month to avoid having this issue return again on the politically charged Jan. 1, 2013 date; but Congress will also want to prevent disruptions in Medicare access to senior voters before the election. Still, nothing in this fractious environment is easily predictable.

One thing’s for certain, we need to work to make sure Congress focuses its immediate attention on preventing the SGRrrr cuts before the end of the year!

Join me, ACC President David R. Holmes, Jr., MD, FACC, Advocacy Steering Committee Chair Jerry Kennett, MD, FACC, and ACC Senior VP of Advocacy James Fasules, MD, FACC, for an All-Member Year-End Webinar sponsored by the PINNACLE Network. The webinar will provide valuable information on how the failure of the super committee will impact cardiology and will offer next steps to addressing the SGR crisis leading up to Jan. 1, 2012. The webinar takes place on Thursday, Dec. 1 from 7-8 p.m. EST. Click here to register.

This post was authored by Michael Chernew, PhD, who sits on the Editorial Panel for the ACC/AJMC Community on Payment Innovations and is a MedPAC Commissioner.  Dr. Chernew's views, however, are his own and do not represent those of ACC, AJMC or MedPAC. 

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A lot has been written of late about the Sustainable Growth Rate (SGR) system.  One point of consensus appears to be that the system is not sustainable. It needs to be repealed.  The controversy surrounds what to do after the repeal.  Ideally, the physician payment system of the future would promote beneficiary access to high quality care and be fiscally sustainable. 

The estimated 10 year cost of replacing the SGR with a freeze in physician fees is over 300 billion dollars.  Replacement with a fee schedule that is adjusted for inflation would be even more costly and options to finance the costs are limited.  Debt financing seems impossible given out current fiscal situation.  An increase in taxes is possible, but seems politically infeasible.  Without taxes or deficit spending, funding an SGR fix requires cuts from elsewhere in the budget, including elsewhere in Medicare. 

The recent MedPAC recommendation assumed financing entirely from Medicare, though MedPAC did not necessarily endorse financing exclusively from Medicare.  This exercise illustrates how difficult financing is.  MedPAC was only able to offset a fraction of the 300 billion dollars by accumulating a series of cost saving measures that affect a wide range of providers and beneficiaries.  Because the offsets were incomplete, cuts in physician fees were still needed to avoid increased Medicare spending.  With constraints against raising taxes or debt financing, alternatives are limited.  Tweaks to payment around the fee-for-service framework are unlikely to achieve significant score able savings and unlikely to pave the way to the health care system we deserve. 

Shifting costs to beneficiaries is possible.  In fact, reform of the benefit design to encourage judicious use of care and improve cost consciousness among patients can improve efficiency and help fund an SGR fix.  This benefit redesign should be a part of the solution; however, it is not clear how much could be saved through such redesign and it is unlikely to be the sole foundation of a solution.  Changes to benefit design will certainly raise serious concerns about equity, access and quality depending on how such a shift is implemented.  In the meantime, payment reform must be addressed.

A way out of the world characterized by the grim fee trajectory remains, but it requires a change in business model.  In addition to the payment proposals, MedPAC offered recommendations that support new delivery models.  Even with the recommended fee cuts, the projected payment per beneficiary rises.  If providers can capture the overall revenue, control rising volumes and eliminate waste (which most agree is significant), high quality care can be coupled with financial success.  Clearly, such a transition will not be easy and evidence that providers can be successful is emerging, at best.  The regulations necessary to guide such a system are still being developed and far from perfect.  Yet the alternative, as the MedPAC recommendations illustrate, is not appealing.  Getting on with the task of reforming the whole system seems the only way forward.

Additional Resources:

• Community on Payment Innovations
• How much savings can we wring from Medicare?
• SGR Issue Brief

1. Fix the SGRrrrrrrrrrrrr
2. Implement medical liability reforms
3. Stop additional cuts to medical imaging

There is currently no guarantee or plan that Congress will fix the SGR before the 29 percent cut kicks in on Jan. 1 and with the Super (Duper) Committee seemingly at a stand-still we could see an additional 2 percent cut across the board.  The impact of such a scenario, coupled with any additional cuts in imaging, would go well beyond what happened two years ago with the practice-expense cuts for cardiovascular services.

It would be irresponsible of all of us to let cuts of this magnitude go through without a fight – thus the meetings on Capitol Hill this week. It would also be irresponsible of us not to take advantage of the Super (Duper) Committee discussions to find a middle ground proposal on medical liability reform that makes progress in terms of lowering premiums, reducing frequency of unnecessary filings, and limits the hemorrhaging of precious health care resources into the legal system.

While all of us vary greatly in our views on political policy and strategy, there is no question that we wield political power when we can come together around common causes. Health care is the biggest sector of the American economy and as providers on the ground level our voices matter. Now more than ever before, we need to let Congress know that fixing the SGR needs to be a priority. At the same time we need to be honest with them about the consequences (both to our practices and our patients) if they don’t act.  We also need to weigh in on new opportunities, such as basic liability reforms or ensuring appropriate use of imaging, that can rise above the partisan gridlock and start moving us toward a better, more economically stable, health care future.  

Now is the time to act! To quote Dr. Seuss: “Unless someone like you cares a whole awful lot, nothing is going to get better. It's not.” Come Jan. 1, 2012 I hope that our combined actions successfully averted devastating cuts to cardiovascular care. At the very least, if we’re not successful, it won’t be for lack of trying! Now hit those phones! 

For more information on the federal budget and the Super Committee timeline go to CardioSource.org/Budget. ACC members in the U.S. can also learn more about the ACC Political Action Committee at www.accpacweb.org (log-in required).

The College’s goals are three-fold:

1. Permanently repeal the sustainable growth rate (SGR) formula as part of any deficit reduction plan
2. Include medical liability reforms in any deficit reduction plan
3. Protect medical imaging from any further cuts

When it comes to the SGR, time constraints and the diminishing pool of spending offsets makes the Super Committee the only viable vehicle for addressing the flawed formulas this year. For every year that Congress postpones fixing the SGR, the cost grows. The American Medical Association (AMA) estimates that by 2016 the cost of permanent repeal would be $600 billion – a significant increase from the roughly $50 billion it would have cost in 2005. If we’re talking about reducing costs, then the SGR should be on the table.

Protecting medical imaging from additional cuts is also crucial. Imaging has been the focus of numerous drastic cuts over the past five years and continues to remain a target by Congress and regulators for potential payment reductions. Additional payment cuts and restrictions on imaging services cannot be absorbed by physician practices without impacting quality and access to high quality care. We cannot stress this enough to our members of Congress.

While at the end of the day we might not like all of the recommendations made by the Super Committee, now is our chance to stand together and at the very least educate members of Congress about the long-term ramifications if our requests are ignored. For those who think this is futile, I’ll leave you with an email that a fellow ACC governor just forwarded; he had received it from his congressman's legislative director. The governor had met with the congressional staff during the Legislative Conference. He received the email as he was about to respond to an ACC alert asking for help in generating support for a sign-on letter to repeal the SGR in the House. The email he received said: “Since we were just talking about the SGR, I wanted to let you know that my boss agreed to sign on to the letter below to the Super committee asking that they include a permanent solution to the SGR.” In the letter, the congressman stated the following important facts: "We are presented with an important choice: continue to distort the picture of our nation’s fiscal status with another short-term solution or restore fiscal transparency to the Medicare program by eliminating the $300 billion debt that has accumulated as a result of the SGR". 

Now that’s what I call Advocacy in action. OK, y'all, let’s hit the phones!

The ACC partnered with hospitals (AHA), insurers (AHIP), AARP, AMA and others on a study on the impacts of the various proposals out there to cap Medicare premiums and/or propose across-the-board Medicare and Medicaid spending cuts. These proposals do not fairly estimate the downstream impacts that will occur to everyday citizens and to health care. We selected the Lewin Group (I can obviously get a family discount there). The study was released to members of Congress and the public. It’s a necessary part of this necessary discussion on how to reduce the national deficit. But let’s do it with eyes wide open and with an objective understanding of the impacts of various proposals -- and new ones pop up every day.

A call for across-the-board spending cuts is imminent. We asked the The Lewin Group to specifically examine the Commitment to American Prosperity (CAP) Act -- since it passed the House -- even though we recognize that deficit reduction is a process, and that the CAP Act is unlikely to be the final piece of legislation brought to a vote. We think similar consequences would result from any across-the-board measure that limits spending. Recognizing and supporting the need for deficit reduction for the nation’s well being, the report calls for payment reform and other approaches. We think this is the right approach.

President Obama and VP Joe Biden and Senate Minority Leader Mitch McConnell (R-Ky.) are now trying to wrestle out a plan before the debt ceiling default hits in another month. If there are no additional revenues proposed, the Lewin Group projected that the CAP act or similar across the board cuts would produce:

• Cuts by nearly 20 percent over ten years to Social Security benefits;
• Cuts to Social Security and other income support programs that would force 3.8 million people into poverty -- 2.1 million of them seniors, a 45% increase;
• Lost health insurance for 5.1 million individuals;
• Cuts to hospitals that could force most to operate in the red, jeopardizing access to care;
• Dramatic reductions in fees for physicians that would lead to fewer physicians participating in Medicare;
• Lost jobs for up to 1.3 million health care workers; and
• A nearly 5% increase in health insurance premiums due to cost-shifting of federal payment shortfalls to private employers.

The message to Congress should not be to avoid making cuts to balance the budget and eliminate the deficit over the next decade or so. That needs to happen. But, without additional revenues, the consequences to medicine, patients, and health care will much more grim than anyone’s talking about.

More coverage: "Doc Groups Get Figures on Feds' Spending Cut Plans," MedPage Today

Managing a physician practice, hospital, academic institution, health insurance company, or any other health sector business is going to be tougher in some ways than perhaps ever in history over the next decade. Why? Because health care of necessity will undergo unprecedented change, and much of how it will shake out is uncertain. The ongoing explosive increase in knowledge and science is itself a blessing and unprecedented challenge. But it’s the economics and financing of health care that generates the most uncertainty in terms of how to position for success and excellence.

Who can guess what the Supreme Court will do when they (most certainly) review the constitutionality of the Affordable Care Act? It is uncertain. How will the solution to the debt ceiling affect health care funding? It is uncertain. But, because the “bullish forces” which underlie health care reform -- pressures to reduce costs; improve consistency of quality; move away from volume-based fee-for-service reimbursement; focus on population-based health improvement; greatly promote integration/mergers of physicians, hospitals and insurers; and get more uninsured people into coverage -- are unrelenting, major shifts in financing, payment systems and delivery models are inevitable. To what extent will changes manifest, how fast, and in what directions? Who knows? There is a lot of uncertainty!

For example:

• Shifts in amount and type of reimbursement: What will happen with reimbursement and payment reform? How much average funding will be available per person? McKinsey & Company believe millions more people will be covered with more overall dollars added to the system in five years, but that the per capita funding -- across public and private payers -- will drop, regardless of the ACA.  How does that affect practice? It ain’t positive, gang. New forms of reimbursement are already developing -- to what extent will these developments plus regulatory change affect the viability of private practices?
  
  
• Changes to Medicare (and Medicaid): Federal budget pressures could produce unexpected crises in funding. The debt ceiling discussions could create some really big nightmares if drastic cuts are enacted or created through poor public policy. How do we plan for the future -- will private practice survive if massive cuts occur? Can payment reforms head off draconian changes that may be imminent?
  
  
• The future of integration: Will accountable care organizations work and become a common phenomenon? Will hospitals or physicians or insurers dominate them?
  
  
• The future of CV technology and imaging and innovation: CV technology and imaging has been under financial assault for a decade as its use and contribution of costs has increased dramatically -- largely due to new diagnostic and therapeutic benefits conferred. But will these economic assaults continue, or will new scientific evidence actually promote increased investment in and appropriate use of imaging and new technology? Will these technologies now spread hugely across the developing world, versus primary prevention -- or will both things occur?

Managing in uncertainty will require that we depart from traditional strategic planning to instead develop an array of scenarios of possible developments and have action plans to apply to the various scenarios that we could face. That’s not how most of us are approaching the uncertainties of the next 5-10 years. There will be spectacular winners and big losers in this era. But, we cannot approach this future with a status quo, ‘business as usual’ philosophy, folks.

I was fortunate to get some consultant folks to visit Heart House from McKinsey this week to talk with ACC senior staff about the importance of starting to model scenarios around the many uncertain variables we face in cardiology and CV care -- to be ready for likely discontinuities and/or crises -- and to take advantage of possible opportunities for members and the patients they care for.  It was fascinating. It made me aware of how important it is to get this kind of management and leadership education to our board and other physician leaders as well. In fact, all of medicine needs to begin to think about how to prepare to be nimbly able to respond to the irony of certain change in the face of uncertainty.