Massachusetts Medical Society: MMS Comments on Draft SGR Repeal and Medicare Payment Reform Legislation

MMS Comments on Draft SGR Repeal and Medicare Payment Reform Legislation

Comments submitted by the Massachusetts Medical Society to the chairs and ranking members of the House Ways and Means Committee and Senate Finance Committee regarding their draft SGR Repeal and Medicare Payment Reform legislation.

The Massachusetts Medical Society appreciates the opportunity to comment on the SGR Repeal and Medicare Physician Payment Reform Draft. The Massachusetts Medical Society represents over 24,000 physicians, residents and medical students dedicated to improving the health and welfare of the citizens of the Commonwealth. We applaud and share your commitment to repealing the SGR formula  and to creating a new payment methodology  which recognizes and rewards high quality, cost efficient  care- whether through fee for service or alternative payment models. We commend you for continuing this effort, in a bipartisan, bicameral fashion, while the remainder of Congress was at a standstill.

We recognize that new delivery systems may require new payment methodologies and are committed to working with to you to develop a Medicare payment formula that will achieve these goals while ensuring our patient's access to the highest quality health care.

Overall, we believe there are important concepts in this draft which we can support. There are other areas where we will urge refinement. We agree that the fee for service payment methodology needs to be refined not only to account for the quality and value of care, but to also help physicians transition successfully into new delivery systems and/or payment methodologies. At the same time, the new methodology must take into account the real costs of sustaining a medical practice. Stated another way, if the formula does not allow physicians, particularly those in small practices, to maintain their practices while investing in HIT and other resources critical for them to achieve the quality markers required by the new formula, their practices will fail. While there are those who believe that large networks are the only viable model of medical practice for the future, currently and in the foreseeable future, small medical practices will continue to be a major provider of health care in the United States. Even in a state like Massachusetts, with a sophisticated health care environment, 64% of our physicians are in practices with less than 25 physicians. A policy which forces these small practices to close will, without question, cause a worsening of access problems for Medicare beneficiaries.

As the stewards of Medicare it is critical that we methodically implement a new Medicare payment policy to ensure that physicians, particularly those in small practices and rural practices, are able to achieve the goals outlined in this draft. If we fail, the resulting gap in Medicare beneficiaries’ access to care will be on us.

It is also important to underscore that full implementation of the ACA will begin in 2017, exactly the same time when these Medicare changes will take effect. The change in Medicare payment could cause a significant disruption in the availability of physicians, thus impacting newly insured's access to care. We know from our experience in MA, that when people first obtain health insurance, they call to schedule a visit with a doctor, which, of course, is one of the goals of health care reform. In our state existing primary care shortages were exacerbated when our health care law was fully implemented with many of the new insured having to wait for months before they could see a primary care physician. For those of us who support the ACA and access to the health care for all Americans, we believe it is critical that these changes to the Medicare payment policy be phased in carefully and purposefully  to ensure that no practices, large or small, are driven out of the market at precisely at the same time when more Americans will have finally gotten health insurance.

Our specific comments follow.

I. Payment Updates

The discussion draft eliminates automatic payment updates until 2024 when physicians in fee for service would receive a 1% update and physicians in an approved alternative payments methodology would receive a 2% update.

We at the Massachusetts Medical Society are acutely aware of the financial constraints facing Congress and the Committee staff when drafting this proposal. We also understand that the philosophy underlying the bill is to base future Medicare payments on assessments of quality and value. We are concerned that the current draft does not allow physicians any opportunities for positive updates until 2017 when the quality reporting programs begin. Some facts regarding the current financial issues facing physician practices will help put our comments into perspective.

1. Medicare payments for physicians have declined while the costs of practicing medicine have risen

As you are well aware, Medicare reimbursement for physicians has not increased in the last 12 years. From 2001 to 2013, the average annual Medicare physician payment update has been just 0.29 percent-barely above a freeze. At same time the cost of running medical practice has risen by 25% nationally. In essence this means over the past 12 years physicians who see Medicare patients have on average taken a 17 percent cut, when you adjust for inflation. And in states like Massachusetts and California, where there is a domination of managed care, Medicare sets the bar for all other payers.

In effect physicians have taken some of the biggest cuts in Medicare. We understand and share the concerns about other health care providers having their funds cut to "pay for" the physician payment formula. To Congress's credit it stopped the pending double digit cuts every year. But the focus on stopping and paying for the debt from these cuts has obfuscated the fact that Medicare payments to physicians over the past years have in effect decreased significantly. We believe patients need all health care providers in the system, but to be clear, by no means have physicians been spared the cuts of recent years.

2. Current costs of running a physician practice

In addition to the routine costs of running a business (workforce, rent) physicians are also mandated to implement a number of new technologies.

Electronic Health Records: Implementation costs- $160,000
Maintenance (1 year): $85,000
Lost productivity (Fewer Patients): 20-50% 3- 6 months

The MMS has long supported the role of EMRs and HIT in health care, yet there is no denying there are significant costs associated with these innovations. For example, several studies have shown that implementation costs alone for an electronic health record at a typical multi­ physician practice can reach over $160,000, with $85,000 for first-year maintenance costs alone.

In addition to implementation costs, there are significant lost revenues from the decreased patient schedule physicians implementing an EMR experience. Until they are familiar with the program, physicians, particularly those in smaller private practices, have to significantly decrease the number of the patients they see during the day. One estimate found that it took over 130 hours for physicians to become familiar enough with an EHR to use it comfortably with patients. This can result in physicians seeing up to 50% fewer patients during EHR implementation. Start-up costs, coupled with decreased patient volume, means that the fiscal health of physician practices is seriously impacted by EHR requirements alone. Anecdotal evidence indicated that lost productivity during integration of new systems and features can result in up to 20% fewer patients seen for 3-9 months.

Meaningful Use- EHR Upgrades:18-20% Purchase Price

As Meaningful Use moves to additional stages, EHR companies will be charging for additional functionality and interfaces to various services, patient portals, lab  feeds, government entities, billing clearing houses, quality reporting. System support contracts required to obtain these upgrades typically cost 18-20% of the purchase price of the system on an annual basis.

ICD-10 Conversion: $83,000- $252,000 (depending on practice size)

Conversion to ICD-10 will require all practices to adopt some sort of electronic system in order to bill within the complex rules of ICD-10 coding. United Healthcare estimates $83,000- $252,000 total cost of accommodating the conversion for a 1-3 physician practice, depending on whether the practice has an EHR or not.

Health Information Exchanges: $10,000+

Coordination of Care, ACO, interoperability, and secure communications will bring on the next wave in Health Information Technology. Although MA state HIE is subsidized there will be some cost to build and install interfaces in addition to monthly usage fees. These costs are particularly problematic for small practices. Third-party HIE builds can be quite costly for participants. Interface can cost upward of $10,000 + usage charges in some cases.

Other costs:  

  • Analytical and reporting systems/services to support new quality and payment models
  • Data conversion associated with EHR change- practices joining larger organizations and ACOs, may incur significant data movement  and conversion fees as they merge their patient  records into the new system
  • IT Training, IT Services,project management for all of above.
  • Backup,Disaster Recovery/System Failover systems for on-site EHRs.
  • Cost of medical scribes/alternate data input systems (voice recognition,etc.)
  • Cost of new Internet interchanges

The point is that these technologies are critical not only for physicians to practice medicine but to participate in the quality measurement programs envisioned by the Committee's draft. These are the costs of doing business. But many practices do not have the capital to invest in this technology and maintain these systems. Right now we know that small practices require loans to invest in EMRs, anecdotally we hear that some small practices could not make payroll when they first implement EMRs given the decreased patient schedule. As you know, when SGR cuts were implemented, even for a few months, many small practices had to take out short term loans to make payroll. These practices do not have a deep reserve of funds that they can draw on, not only to implement but to also maintain the new systems that will be required. It is often forgotten that a physician's EHR must work 24/7. For small practices that are not affiliated with a large system, or for those who are affiliated but do not get adequate system support, the cost of maintaining the EHR is significant.

Physicians will need some positive funding to help them invest in the systems that will allow them to participate successfully in the performance based programs which are the basis of the new formula. The current proposal offers no opportunity for positive updates until 2017.

Recommendation: We urge the Committee to include at least a 0.5% update from 2014 until the new quality measurements programs are enacted.

II. Provisions Impacting Small Practices

Many of our concerns are directed at the impact of this draft on small practices. It is important to emphasize that we are not trying to exempt these practices from the potential new requirements, but to create a system which gives them a realistic chance to succeed and to continue to provide quality health care for their patients. In addition to resources, the smaller practices will need more time to implement the systems required by this draft. We cannot understate, even in our state, the huge chasm that exists between the large system practices supported by networks and smaller physicians' practices that are just beginning to implement some of these new technologies and programs. For these practices money and time are the two of the biggest factors that will enable them to continue to practice and provide care to their patients.

In Massachusetts, as in other states, the challenges facing large groups vs. smaller practices are distinct. Quality assessment that is driven by extraction of data from EMR's, such as that envisioned in your draft is pushing the development of software in larger health care networks that can pull data from multiple EMR systems. These large networks are trying to simplify the process by getting most practices on one or two software options. This effort is extraordinarily expensive at this point and only available to large well capitalized health care systems. We are seeing negative early returns from some Pioneer ACO's who invested heavily in expensive EMR systems. Their ROI is negative at this point because the cost of these systems and associated infrastructure is "front loaded." Absorbing these costs up front is difficult if not impossible for a smaller business. 

A more feasible solution for a small practice may come from information entered into quality measurement software at the patient visit with or without an EMR system installed. This is less sophisticated but much less expensive than the systems described above. It may harvest most of the "core measure" information needed to assess quality in a fee for service environment. In other words, it is a more basic assessment which still gets the critical data for quality measurement.

The new Medicare formula should include incentives that would allow small practices to purchase this type of software and qualify for updates if they so choose. A Bentley and a Yugo are both automobiles with transportation supposedly the focus. One is a more elegant solution than the other, but clearly not necessary for basic transportation. It would be helpful if the Federal government pushed for standards and the ability to certify these systems to make sure they are compatible with PQRS reporting and the other measurements that will be required as part of the Value Based Performance Purchasing Program. This is critical because practice patterns vary across the country, particularly in rural areas where medical practices have not been consolidated.

We are pleased the current draft provides additional funding for physicians practicing in a rural or Health Professional Shortage area and provides$ 50 million to help these practices. For the reasons cited above we urge the Committee to expand the definition of eligible practices beyond HPSAs and rural areas to include small practices. While MA has a significant number of small practices, we have limited HPSA designations and even fewer "rural “areas. These are the practices that will need the most help in achieving the goals in this draft. While the current definition of small practice is 10 or fewer FTE's, which includes administrative and other staff, we believe a more accurate assessment of a small practice should be based on a percentage of health care providers in the practice.

For these practices the Secretary should also be required to help develop the infrastructure they will need including such concepts as virtual networks, or group purchasing organizations to achieve economies of scale.


1. Expand the HPSA/Rural Small Practice Assistance Program to include small practice physicians. Current Government definition of a small practice is 10 or under FTE. Consider definition that is a percentage of health care providers in a medical practice. Additional funding would be necessary.

2. Delay mandated implementation of the Value Based Performance System and the Alternative Payment Models for small practices until 2018. Keep .5% automatic updates in place for those who do not participate until 2018.

3. Establish codes and payment for the following services related to the clinical improvement activities for small practices. For example:

a)  Expanded Practice Access: Pay for phone calls and email for after- hours access to clinical advice.

b) Population Management: Establish codes and pay for population management, tracking and intervention.

c) Care Coordination: Expand the number of codes and new payment for such services.

d)  Beneficiary Engagement:  Establish codes and pay for services to train patients to self manages.

4. Provide physicians infrastructure assistance.

5. Continue the expiring Stark exemption for the ehealth partnership EHR subsidy program that allows hospitals to help small practice physicians with EHR implementation.

III. Value Based Performance Program

There are four components to the value based performance program in the discussion draft: the value based modifier, PQRS, meaningful use and clinical improvement activities. We are pleased the discussion draft eliminates the existing penalty programs for PQRS, Meaningful Use and consolidates existing and new programs to avoid duplication.

The MMS has extensive experience and policy on the development of quality measurement programs which we have appended to this draft. In general we believe it is critical that quality measurement programs are risk adjusted and adjusted for geographic practice expense variations. During the debate on the ACA the MMS expressed significant opposition to the Value Based modifier. We are pleased that Congress, in response to our advocacy, added language to ensure that the measures were risk adjusted and reflective of geographic variations. Nevertheless we still have significant concerns about the implementation of the modifier at the individual and small group practice level. Serious questions remain about the accuracy of the data, the appropriateness of the data, the attribution methodology and whether CMS can implement such a complex program. We believe a more relevant and feasible approach would be to make the modifier condition specific rather than an assessment of all individual physician Medicare expenditures. Similar to the quality measurement program, each national specialty society would be tasked with submitting 1-3 conditions that could be applied to the VBM bonuses or penalties. This approach would be less complex for CMS to administer, provide more useful and relevant information for patient  care and establish the foundation for an ultimate transition to analyzing aggregate spending, should that be useful. It is also critical that the VBM continue to be risk-adjusted for illness severity and cost-adjusted for geographic differences in practice costs. Based on the experience of our colleagues in California, it must be drilled-down to the physician's subspecialty for expenditure comparison purposes. We also believe that the quality measure component of the current Value Based Modifier be eliminated since it is duplicative of the PQRS part of the Value Based Performance Program.

We also have concerns about the implementation of the Clinical Improvement Activities components of the VBPP. Many small practices will not have the capacity to perform these activities as envisioned by the draft. In keeping with the concept of using the payment formula to help physicians transition, we encourage the Committee to consider paying physicians for some of the activities required by the Clinical Improvement Activities programs as the foundation for their full participation and ultimate grading as part of the VBPP. This modification would be particularly important to the help physicians who are in rural and underserved areas, who provide health care to a significant percentage of Medicaid patients.


1. Refine the Value Based Modifier to be condition specific and only applied to 1-3 conditions initially rather than applied to all individual physician expenditures. Appropriate conditions would be identified by the national specialty societies.

2. Request the duplicative quality measure component of the current Value Based Modifier be eliminated

3. Ensure that the Value Based Modifier is risk-adjusted for illness severity and cost-adjusted for differences in geographic practice costs and those subspecialties are identified.

4. Delay participation in the Clinical Improvement Activities Category from the Value-Based Performance Payment Program until 2018 for small practices and/or establish codes and payment for the following services related to the clinical improvement activities:

a)  Expanded Practice Access: Pay for phone calls and email for after- hours access to clinical advice.

b)  Population Management: Establish codes and pay for population management, tracking and intervention.

c)  Care Coordination: Expand the number of codes and new payment for such services.

d)  Beneficiary Engagement:  Establish codes and pay for services to train patients to self­-manage.

IV. Alternative Payment Models and Risk

The list of possible alternative payment programs in the discussion draft is limited. We urge the ommittee to allow the Secretary to approve a number of different models that would meet the goals of quality and efficiency. We also believe it is critically important that there be models with varying degrees of risk, i.e., not all the alternative payment models should require two sided risk. It is our understanding the medical homes model do not need to assume risk. CMS quickly learned the importance of this principle by expanding its demonstrations to include different types of risk models. The MMS obviously does not oppose physicians accepting risk, many will have to transition to such a model as they gain the expertise in managing global budgets. It would be preferable to help physicians start to participate in different payment models1 some of which involve risk and others that do not. Risk requires a more sophisticated infrastructure and the time to develop it over a number of years. Over time, physicians could accept additional financial risk, rather than full risk.

It is also critically important that the Committee encourage the Secretary to approve models that are physician led. With seismic changes going on at the state Ievel, those with the biggest and deepest pockets are taking charge by creating large new entities. We believe it is critical that the Secretary also foster physicians led and potentially smaller systems which could have both positive quality and cost considerations. Again, if our goal is to help physicians transition into the new payment methodology we must offer them a series of models and options along the continuum which will help them learn how to manage risk and most importantly, provide their patients high quality care. We also strongly believe that physician led organizations are in the best qualified to implement and enforce successfully a system which values both high quality and cost efficient care.


Require CMS to allow multiple alternative payment models to be implemented, beyond those in the discussion draft, that are led and developed by physicians and include varying degrees of risk.

V. Establishes New Codes to Allow Payment for Complex Chronic Care Management Services

Starting in 2015 physicians practicing in patient-centered medical homes or specialists meeting certain criteria would be eligible to receive payment for these new codes. The MMS supports payment for managing patients with chronic medical conditions, particularly through the patient centered medical home. We are pleased the discussion draft recognizes the role of primary care and specialists in this model.


Support New Codes for Payment for Complex Chronic Care Management and Services

VI. Physician Compare Website

There is too much danger, and no advantage to publicly releasing unverified data to the public. The Massachusetts Medical Society has extensive experience with the irreparable harm that such a program can inflict on physicians reputations. While we strongly support transparency, the information provided must be scientifically based, verified and released in a meaningful fashion for it to be useful to patients. We have no reason to believe that CMS has the capacity to undertake the necessary steps and safeguards to ensure the accuracy of the vast amounts of information that they would be required to manage and vet. If these principles are not adhered to, we believe the information will not only potentially harm physicians reputations but will be misleading and of no use to patients or improving patient care.


Eliminate the additional information to be reported on the public Physician Compare Website until the accuracy of individual physician level data is verified and safeguards are in place.

VII. Access to Data

One of the most crucial amendments to ensuring that alternative payment models  cover the costs to provide care and improve access to care, is to require Medicare to provide  "total cost of care" data to physicians. Physicians need to know the current utilization and costs for their patients to determine whether certain payment models are appropriate and will cover the costs of providing care to their patients. Historically this data has been very difficult to obtain and has put physicians at an extreme disadvantaged both in managing the cost of the care provided and in negotiating with private payers. CMS has historical data on both the utilization and costs of caring for Medicare beneficiaries. This information should be easily accessible to physicians. Total costs should include all services incurred by the beneficiary in the Medicare system, not just those billed to Part B.


Require Medicare to release "total cost of care" data to all Medicare physicians to help physicians accurately assess their patient care costs which would allow them to effectively participate in alternative payment models.

VIII. Retiring Physicians

Unlike our position on small practices, we do believe retiring physicians should be exempted from the new payment requirements. Simply put they should not be mandated to invest the time and money into their practices that would be required by these programs if they are going to retire within 5 years. Pragmatically is important to underscore the following factors impacting these physicians:

1) The high cost of EMR software for practices with a low number of EMR users

2)The disruption of the work flow and the high cost of implementation and compliance with Meaningful USE even when the software is free

3)  The useful life of medical software is 4 to 5 years.

This means that a practitioner with five years of retirement would be unlikely to commit large amounts of time and money to EMR purchase and implementation. Penalties plus Federal incentives would not justify the large investment in time and money required to meet Meaningful Use. There is no return on investment in this situation, thus the justification for a five year hardship period.

We are concerned if they are not exempted these physicians will leave the market even sooner than planned with the resulting problems with access to care for Medicare Beneficiaries. Physicians who do no retire in the specified time frame, and who do not comply with the requirements, would incur the resulting penalties associated.

On behalf our members, I want to thank you for your commitment to advancing a SGR reform bill this year and for sharing this draft for comment. We are committed working with you to make this goal a reality.

Sincerely yours,
Ronald W. Dunlap, M.D., F.A.C.C 
President, Massachusetts Medical Society

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