Developing A Viable Alternative To Medicare's Physician Payment Strategy

Since 1992 Medicare has reimbursed physicians on a fee-for-service basis that weights physician services according to the effort and expense of providing those services and converts the weights to dollars using a conversion factor. In 1997 Congress replaced an existing spending constraint with the Sustainable Growth Rate (SGR) to reduce reimbursements if overall physician spending exceeded the growth in the economy. Congress, however, has routinely overridden the SGR because of concerns that reduced payments to physicians would limit patients' access to care. Under continued pressure to override scheduled fee reductions or eliminate the SGR altogether, Congress is now considering legislation that would reimburse physicians to improve quality and lower costs-two things that the current system does not do. This article reviews several promising models, including patient-centered medical homes, accountable care organizations, and various payment bundling pilots, that could offer lessons for a larger reform of physician payment. Pilot projects that focus exclusively on alternative ways to reimburse physicians apart from payments to hospitals, such as payments for episodes of care, are also needed. Most promising, Congress is now showing bipartisan, bicameral interest in revising how Medicare reimburses physicians.