Congress should replace the flawed Medicare Sustainable Growth Rate (SGR) for physician payment with a system that adequately reimburses physicians over the long haul, AHA President and CEO Rich Umbdenstock Jan. 22 told a House health care panel. But he said the AHA “cannot support any proposal to fix the physician payment problem at the expense of funding for services provided by other caregivers.” 

Umbdenstock testified during the second of two days of House Energy and Commerce Health Subcommittee hearings on how to find a permanent solution to Medicare’s flawed SGR formula for updating physician payments. President Obama last April 1 signed into law legislation that staved off a scheduled 24% cut in physician payments through April 1, 2015. This week’s subcommittee hearings signaled that SGR reform will again be a congressional health care priority.

In his prepared testimony, Umbdenstock commended last year’s bipartisan congressional effort to repeal and replace the SGR formula. The proposal called for a 0.5% payment update for five years under the fee-for-service model as physicians transitioned to a more value-based system and to allow further updates as needed. While the legislation passed the House, disagreements over cost offsets prevented a final bill from passing the Senate passed before the March 31, 2014 expiration date for preventing payment cuts to doctors.

“Congress needs to move away from cutting funding for services provided by other caregivers to pay for the physician fix,” Umbdenstock told the subcommittee. “Offsets should not come from other health care providers, including hospitals, who are themselves working to provide high-quality, innovative and efficient care to beneficiaries in their communities and are being paid less than the cost of providing services to Medicare beneficiaries.”

He said hospitals have faced more than $121 billion in spending cuts since 2010. And he noted that the Medicare Payment Advisory Commission projects that the average hospital will have an overall Medicare margin of negative 9% in 2015. 

Besides, in a health care world of greater hospital-physician alignment, cutting hospital payments hurts physicians too, Umbdenstock told the panel.

Hospitals are “increasingly partnering and aligning with clinicians to help achieve the Triple Aim of enhancing the patient experience, improving the health of populations and reducing the per-capita cost of health care,” Umbdenstock observed. “Reducing hospital payments would “adversely impact the very physicians Congress is trying to help.”

With greater physician-hospital alignment, “providers are able to more aggressively redesign the way health services are delivered to achieve efficient and high-quality patient outcomes,” he added.

In 1997, Congress created the SGR, a system that pegged the amount of money budgeted for Medicare payments to projected growth of the economy. However, within a few years, health-care costs far outpaced economic growth – creating a multibillion dollar shortfall in funding for Medicare payments to physicians.

Since 2003, Congress has approved a raft of temporary “doc fix" bills to avoid cuts in Medicare reimbursement rates for doctors.

Umbdenstock recommended a number of constructive policy changes to bolster Medicare’s finances and pay for a permanent SGR solution. They include combining Medicare Parts A and B with a unified deductible and co-insurance, modifying Medigap coverage, raising income-related premiums under Medicare and simplifying administrative and regulatory processes. These actions would “help to dramatically bend the cost curve, saving billions of dollars for taxpayers,” he said.

In his testimony, Umbdenstock also spoke more broadly about the need to pursue targeted reforms that can improve the delivery of care, slow the growth in health care spending and build a stronger foundation for the future.

He cited a 2012 AHA report, Ensuring a Healthier Tomorrow, which focuses on two interconnected strategies for improving the health care system and ensuring the financial viability of the nation’s health care programs. It lays out steps for promoting and rewarding accountability – to patients, their families and their communities; and using limited health care dollars wisely. The report was attached to Umbdenstock’s testimony. 

For more on Umbdenstock’s testimony, visit www.aha.org/testimony.