Repeal of the SGR Brings Some Uncertainty to the Future Practice of Pathology

The Sustainable Growth Rate formula, or SGR, had a trajectory not unlike that of a child actor who offended the wrong director or studio executive. Passed into law in 1997, it broke into the business of regulating Medicare reimbursements to providers at the age of 5. It did not receive favorable reviews. SGR’s mechanistic acting style—based on complex formulas that relied primarily on the overall volume of procedures performed—led to a 4.5 percent reimbursement cut in 2002. That caused an uproar in the provider community. After that, the SGR was permanently sidelined. It was replaced with a series of 17 different payment patches authorized by Congress, which dithered about coming up with a bankable replacement. Had Congress not acted on either a patch or SGR replacement, the Medicare Physician Fee Schedule would have dropped more than 21 percent this year as a result of the SGR formula. But a replacement for the SGR was finally completed last month, after the House and Senate displayed extremely rare bipartisan support by passing a bill containing SGR’s repeal and providing a replacement observers say in the lab sector is fairly vague by comparison. At 18, SGR’s career is now completely over. And there were open celebrations of its demise—President Barack Obama held a ceremony in the White House Rose Garden, inviting leaders of the various physician lobbies to the event. “On behalf of our patients, America’s physicians thank the U.S. House of Representatives and the U.S. Senate for their bipartisan and bicameral successful work to build the stable and sustainable Medicare program that will secure high-quality, cost-effective health care,” said James L. Madara, M.D., chief executive officer of the American Medical Association, in a statement. But now that the celebration of SGR’s demise has come and gone, the focus has shifted to its replacement, the Medicare Access and CHIP Reauthorization Act of 2015, which has quickly acquired the acronym MACRA.
Some Surprise at Repeal That Congress actually acted to replace the SGR after a dozen-year wait took the pathology community by some surprise. “There was some anxiety regarding a sudden 21 percent decrease in Medicare payments, and a certain complacency that it would not happen,” said George Kwass, M.D., laboratory director at the Holy Family Hospital at Merrimack Valley in Haverhill, Mass. Kwass also chairs Council on Government and Professional Affairs for the College of American Pathologists. “But there was much less complacency that the actual repeal would occur. On the whole, this is better than the alternative. People seem to be pleased about that.” Pleased, but apparently uncertain about what the future holds. “It is kind of early in the game,” said Barry Portugal, president of Health Care Development Services, a Florida-based pathology and hospital laboratory consulting firm “We know certain things, and we know we have some time.” That time frame is about five years. Through 2019, providers will receive a modest 0.5 percent annual payment increase, at which point it will be eliminated in 2020. There will then be no automatic increases for the next five years. Although the pay bump is significantly lower than most of the increases that came with the Congressional patches, it provides some certainty for the next several years—until the next portion of MACRA phases in. Physicians—including pathologists—will be encouraged to move into what is known as the Merit-Based Incentive Payment System, or MIPS. It will replace and consolidate three existing programs: The Physician Quality Reporting System, the value-based payment modifier model and Meaningful Use for the deployment of electronic medical records. There are also other payment mechanisms that could be developed in the future. “The MIPS is designed to be a more accurate scorecard of each practice’s actual quality of care, and to relieve physicians from the onerous burden of current requirements,” the AMA said in a fact sheet about MACRA. If the pathology profession had been rattled by the steep cuts in the technical component of CPT code 88305 a couple of years ago, the tiny payment bumps over the next several years—which Portugal believes will not cover the inflation trend inherent in running a pathology practice—and the changeover to MIPS should prove a wakeup call to truly change the way they practice medicine. If doctors don’t participate, they will face future cuts in reimbursement and a large proportion of the mandatory pay increases for Medicare Physician Fee Schedule that will be reinstated starting in 2026. “It will dramatically force pathologists to reassess operational workflow and productivity in both clinical and anatomic pathology,” Portugal said.
MIPS Deployment a Mystery for Now But exactly how MIPS will be deployed in the coming years is a matter for debate. And there are many questions as to the role pathologists would have in creating the more efficient delivery of care. “As far as outcomes go, they are difficult to measure for diagnostic specialties,” Kwass said. As a result, the CAP lobbied successfully to put into MACRA a provision that measures the quality of care delivered by pathologists and other medical specialties that do not interface directly with patients using different guides than other specialties. Kwass noted that how different those actual measures will be will hinge on how the regulations mapping out MACRA are promulgated by the U.S. Department of Health and Human Services over the coming years. “As far as what pathologists can do, there is no one-size-fits-all formula. Every practitioner practices with a certain level of efficiency or not efficiency,” Kwass said. “It becomes a judgment call.” He added that measuring how physicians practice for efficiency and quality can become a self-fulfilling prophecy, wherein those who do the measuring are determined to measure a specific item, while other more subtle factors can be overlooked. In the meantime, MACRA will provide funding for physicians and practices to help with the transition. That includes $100 million for technical assistants for small practices. A significant portion of that sum is likely to go to pathology practices, as two-thirds of them have five or fewer physicians. And while SGR’s career was killed in its adolescence, Portugal believes any pathologist over the age of 50 will have to make some hard decisions in the next decade about what to do next, as its demise is also ushering in the end for fee-for-service medicine. “Can you imagine the craziness in 2026?” Portugal asked, adding that many pathologists will be at a crossroads. “Maybe I am exaggerating, but I think it is going to be terrible and confusing, even though there is a decade between now and then.” Takeaway: It will be a lengthy process to determine how SGR’s replacement will impact the pathology community financially.