Fiscal Cliff Impact on Physicians

The House of Representatives late Tuesday approved the Senate's last-minute fiscal cliff package (PDF) that staves off a sharp Medicare physician pay cut by cutting billions from other Medicare providers, including hospitals, pharmacies and dialysis clinics.

Early on New Year's Day, the Senate voted 89-8 to approve the American Taxpayer Relief Act, an amended version of a tax bill that House Ways and Means Chairman Dave Camp (R-Mich.) introduced last summer. House members on Tuesday considered the Senate-passed legislation in meetings during the day and floor debate in the evening. In a vote of 257 to 167, the House passed the measure, which permanently extends middle-class tax cuts and postpones the automatic spending cuts known as the sequester for two months. The legislation also averts the expected 26.5% Medicare physician payment cut and extends current Medicare payment rates for doctors through Dec.31, 2013.

Now that both chambers have approved the package, Congress will send the legislation to President Barack Obama for his signature. Moments after the House vote, the president said in a brief news conference that Tuesday's agreement helps reduce the nation's deficit by raising $620 billion in revenue from the wealthiest households in America. He also noted there will be more deficit reduction as Congress considers how to address the sequester, and he indicated he's open to reforms in the Medicare program.

“As I've demonstrated throughout the past several weeks, I am very open to compromise. I agree with Democrats and Republicans that the aging population and the rising cost of healthcare makes Medicare the biggest contributor to our deficit," the president said. "I believe we've got to find ways to reform that program without hurting seniors who count on it to survive. And I believe that there is further unnecessary spending in government that we can eliminate. But we can't simply cut our way to prosperity."

In a summary of the agreement (PDF)—which Vice President Joe Biden and Senate Minority Leader Mitch McConnell (R-Ky.) hammered out late Monday—the White House said the president “stood firm against Republican proposals to pay for this fix with cuts to the Affordable Care Act or the beneficiaries."

Instead, the bill offsets the cost of a one-year patch to the sustainable growth-rate formula through reductions to other Medicare programs, most of which affect hospitals. For instance, a documentation-and-coding adjustment that seeks to recoup past overpayments to hospitals because of the shift to Medicare Severity Diagnosis Related Groups, or MS-DRGs, would save about $10.5 billion. A measure to re-price end-stage renal disease payments would save about $4.9 billion. That provision comes a few weeks after the Government Accountability Office released a report suggesting the federal government is over-paying for end-stage renal disease treatment. The bill also calls for re-basing Medicaid Disproportionate Share Hospital (DSH) payments, which is estimated to save about $4.2 billion.

Providers criticized the legislation, with Chip Kahn, president and CEO of the Federation of American Hospitals, noting in a statement that it's not in the best interests of patients or caregivers to “rob hospital Peter to pay for fiscal cliff Paul.”

AHA President and CEO Richard Umbdenstock struck a similar note. “While fixing the physician payment formula is essential, it should not be done by jeopardizing hospitals' ability to care for seniors and their communities,” Umbdenstock said in a statement (PDF). “That's why we are very disappointed at the approach taken in this measure.”

Speaking on behalf of the nation's safety net providers, Dr. Bruce Siegel, president and CEO of the National Association of Public Hospitals and Health Systems (PDF), said the agreement will put at risk the essential healthcare needs for the country's most vulnerable citizens. “Solving one side of the provider equation must not come at the expense of the other—particularly the hospitals and health systems that care for a disproportionate share of Medicare and other low-income patients,” Siegel said.

Meanwhile, the nation's community pharmacists are upset by a provision in the bill—estimated to save about $600 million—that would apply a competitive-bidding program to diabetes test strips bought at retail pharmacies. In a statement, the National Association of Community Pharmacists said the measure could force many community pharmacists to stop providing diabetes test supplies to Medicare beneficiaries.

“The bill would do this by applying DTS (diabetes test supplies) reimbursement rates to local pharmacies that are effectively set by large mail order operations,” John Coster, a pharmacist and senior vice president for government affairs at the National Community Pharmacists Association, said in the statement.

The bill also extends several Medicare programs, such as the inpatient hospital payment adjustment for low-volume hospitals through Dec. 31, 2013 and ambulance add-on payments for urban, rural and super-rural providers through June 30, 2013. It also extends the existing floor on the "physician work" index in the Medicare fee schedule. That schedule is adjusted geographically for physician work, practice expense and medical malpractice insurance to account for differences in the cost of resources for physician services. And another measure would extend the current payment exceptions process for outpatient therapy services. Under current law, there is an annual per-beneficiary payment limit of $1,880 for all outpatient therapy services that are provided by non-hospital providers with exceptions for cases where additional therapy services are medically necessary. The bill would extend this exceptions process through Dec. 31, 2013.

The White House noted in its summary that the agreement saves about $24 billion, with half coming from revenue and the remaining half from spending cuts that are divided equally between defense and non-defense programs to delay the sequester. The move is intended to give Congress more time to permanently end the sequester.

“Although Congress again averted another massive Medicare physician payment cut at the 11th hour, this action only perpetuates another year of uncertainty for physician practices forced to continue their work under the dark cloud of looming SGR cuts and the new threat of sequestration cuts scheduled for March,” Dr. Susan Turney, president and CEO of MGMA-ACMPE, said in a statement that was released moments after the House passed the legislation. “Without action to permanently repeal the sustainable growth rate formula, Congress will replay this fiscally irresponsible scenario again and again, with even larger cuts awaiting practices in the near future.”

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