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Medicare Connects the SGR Fix to EHRs


Get Ready for More Emphasis on Merit-Based Payments

By Ron Sterling

On February 6, 2014, members of Congress introduced a bill to "fix" the Medicare Sustainable Growth Rate (SGR) by changing a number of Medicare payment aspects and focusing on quality. The SGR is a calculated "take-back" that has accumulated to 24 percent from 2002 to 2014. Medicare would have reduced provider payments by 24 percent if Congress did not approve another SGR patch. Surprisingly, Congress has been pushing the SGR forward over the past 12 years. On April 1, Congress passed another extension until April 1, 2015, and basically failed to act. However, the proposed SGR fix that was not passed is still under consideration and has substantial support. The original proposed SGR fix will be seriously considered over the next few months and could impact your business if it does pass by 2015.

These ongoing patches underscore just one of the many discussions that have occurred around the SGR in recent years, all of which are important components in how we do business in the medical billing and management industry. The fix would affect the use of electronic health records (EHRs) by your clients and even the nature of your billing business for years to come. Due to the nature of this bill, as well as the services of your organization, you need to prepare to operate in a dramatically different business environment for your provider clients and for yourself.

The strategic issue is that the fix directly connects Medicare payments to healthcare quality for up to 75 percent of the business of any provider that receives Medicare. Much like Meaningful Use, the proposal's quality performance incentive will be based on quality for all patients, not just Medicare beneficiaries. Indeed, the bill will dramatically affect compensation and care strategies for the healthcare market and push providers into payment models that are based on quality, resource use, clinical improvement, and – you got it – EHRs.

Here are the key issues with this fix: 

  1. The SGR adjustment is eliminated, but the Conversion Factor for Medicare increase by 0.5 percent will extend through the end of 2014. Any other improvement to payments will require practices to meet better-than-average quality standards or participate in alternative payment models (APMs).
  2. The original proposed fix extended the annual 0.5 percent increase for five years. Note that your providers will not be happy with 0.5 percent increases for the next few years, but other aspects of the proposed fix will dramatically change your business and client.
  3. Medicare payments will be adjusted and the foundation will be a merit-based incentive payment system. This system measures quality, resources, clinical improvement, and use of EHRs to determine if the provider is above or below average. Better-than-average providers will receive additional payments, and below-average providers will be penalized.
  4. Healthcare organizations and providers have a significant incentive to support APMs, which entail quality measures and risk management. The bill requires moving 25 percent of Medicare patients to APMs by 2018. This measure increases to 75 percent of all patients in APMs by 2022 to earn a 5 percent incentive. This is a massive move of patients to a risk-based service model in a short period of time.

In order to meet this schedule, providers would have to spend the next two years organizing their strategy, developing the appropriate tools and policies, and changing their staffing and service models to operate in a risk-based service environment. In this case, third-party billing companies would need to develop better analytical tools to measure performance, support quality tracking, and work more effectively with EHR products. Just as important, clients without an EHR would need to move quickly to have any hope of catching up with the Medicare "fix" in time. Additionally, many practices are not using EHRs in a manner that would meet quality or clinical improvement standards.

In order to meet the 2018 deadline for the incentive, doctors would have to test their service strategy and tools for APMs by the end of 2015 and work up to the 25 percent Medicare patient base in APMs by the end of 2017.

Although there will be changes to the bill and regulations written after passage, the key issue is that there would be serious money put behind patient service and quality through the proposed fix, along with higher clinical treatment standards that would be publicly acknowledged. 

 This fix is a game changer that will create a clear connection between the concept of quality care and the use of EHRs. This connection is one your clients and your billing organizations need to address. Changing the culture, business strategy, and patient service delivery strategy is not something that will happen quickly or by itself. It presents either a significant opportunity for your organization or an insurmountable challenge for practices that continue to focus on a fee-for-service model.

This bill is further proof that Meaningful Use and the EHR incentives were not an end unto themselves. Rather, they were an enabling strategy to force healthcare organizations to not only use EHRs to qualify for some incentives but also to use EHRs to improve patient service, facilitate provider collaboration, and save money. Physicians and billing organizations that fail to attain these challenges will not meet the needs of the "fixed" healthcare industry.

Ron Sterling is a nationally recognized thought leader on EHRs. To learn more about Ron, visit his website at Ron can be reached at 800-967-3028.

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