AMA Offers Alternatives to Medicare Pay, Including Private Contracting

May 16, 2011

The American Medical Association introduced specific alternatives to the current Medicare reimbursement formula for lawmakers to consider that would test a range of payment models, including full private contracting.

The American Medical Association introduced specific alternatives to the current Medicare reimbursement formula for lawmakers to consider that would test a range of payment models, including full private contracting, according to a report in American Medical News.

Earlier this month, physician groups converged on Capitol Hill to weigh in on solutions to the untenable Medicare physician payment formula. Representatives from the groups, including the AMA, and several lawmakers called for the repeal of the Sustainable Growth Rate (SGR).

The SGR formula ties the rate of Medicare reimbursement pay to the U.S. gross domestic product, which has grown at roughly half the pace of healthcare spending over the last decade. To prevent steep cuts in physician reimbursement rates, lawmakers have repeatedly delayed the implementation of the SGR since 2002, in what has become known as the “doc fix.” If Congress doesn’t make changes to the formula by Jan. 1, 2012 -- or put off dealing with the issue again — physician Medicare reimbursements will be cut by almost 30%.

This week, the AMA released specific suggestions on how to transition away from the current Medicare pay system, and offer an array of payment options for physicians. The American Medical Association made three recommendations to implement the change in the payment formula: Repeal the SGR; base Medicare payments on practice costs over the next five years; and test multiple payment models that would “enhance the coordination, quality and appropriateness of care while addressing cost concerns,” according to American Medical News.

"A replacement for the SGR should not be another one-size-fits-all formula," AMA President Cecil B. Wilson, MD, said in testimony before the Energy and Commerce health subcommittee on May 5. "Instead, a new system should allow physicians to choose from a menu of new payment models, including shared savings, gain-sharing and payment bundling programs across providers and episodes of care."

Among the alternative physician payment models that the AMA recommended lawmakers test were:

Partial capitation: An accountable care organization (ACO) receives a per-patient monthly payment to cover all the costs of care for a group of patients.

Virtual partial capitation: An ACO receives a per-patient budget for a group of patients instead of an upfront fee. Physician payments are adjusted to keep total pay within the budget.

Condition-specific capitation: A group of physicians receives a fixed amount to care for a specific patient condition, such as congestive heart failure.

Accountable medical home: A group of physicians receives upfront resources to restructure the way they deliver primary care. In return, the practice or group commits to reducing hospital admission rates in patients.

Inpatient care warranties: Physicians and hospitals set Medicare payment rates and give warranties for inpatient treatment, agreeing not to charge more for infections and complications.

Mentoring programs: Providing financial and technical support to small physician practices working with regional health improvement collaboratives.

Private contracting: Patients and physicians freely contract for services, allowing them to agree on rates for services without having to forgo Medicare reimbursement.