Shifting sands
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Changing reimbursement landscape has dermatologists wondering about the future

Accountable care organizations. Value-based payments. Fixed payment models. Outcome-based reimbursement. These phrases and others are swirling around the national conversation relative to health care, but they all point back to one phrase that gives everyone involved pause: Unsustainable spending trajectory.

“Health care spending growth is facing pushback from multiple stakeholders, even as the rates of increase have moderated somewhat in the last year or two,” said Jack S. Resneck Jr., MD, advisor to the American Academy of Dermatology Association’s Council on Government Affairs, Health Policy, and Practice and associate professor and vice chair of dermatology at the University of California San Francisco School of Medicine. “At a time when the federal deficit is getting substantial attention, Medicare and Medicaid are projected to be the primary drivers of increased government spending in decades to come.” But the pressure isn’t just coming from the government, Dr. Resneck added. “On the private side, insurers are facing increasingly stiff pushback from employers who are unwilling to sustain continued year-over-year increases in premiums that dwarf the rate of inflation.” 

Indeed, rising premiums are a threat to American competitiveness in a global economy, according to Rep. Jim Matheson (D-Utah), former co-chair of the Blue Dog Coalition and a member of the House Committee on Energy and Commerce and its Subcommittee on Health. “The fact that we spend about 50 percent more per person on health care than the next highest-spending country in the world creates a competitive disadvantage for us with the rest of the world in terms of how we perform in the business sector,” he said. Add to that the fact that health care spending is the primary driver for increased spending both at the federal level and in the states, where Medicaid is the fastest-growing component of almost every budget, and you find a broad consensus that something has to be done to control spending, Rep. Matheson said. [pagebreak]

“While the causes of rising health care costs are complex, the resistance against continued expansion in health spending is solidifying, and both government and private purchasers and insurers are looking to the medical community to identify and seek consensus on how slower growth can be accomplished,” Dr. Resneck said. As opportunities for savings are sought, he believes that dermatology will be targeted in response to growing spending driven by the skin cancer epidemic and by the availability of new treatments for medical dermatology conditions.

Changes at the RUC

This is an issue that sometimes plays out in the confines of the AMA Relative Value Update Committee, or RUC, according to Brett M. Coldiron, MD, the AADA’s president-elect and one of its representatives at the RUC. (The RUC makes recommendations regarding the relative values of CPT codes, which are translated into relative value units, or RVUs, when the Centers for Medicare and Medicaid Services [CMS] publishes the Medicare fee schedule each year.) The total amount of Medicare reimbursement to physicians is set by statute; the RVUs divide this limited pie. For a variety of reasons, including the addition of more primary care representatives to the RUC, he said, “There’s pressure to reduce the reimbursement for procedures in order to increase reimbursement for primary care.” This, in turn, “is a stressor on dermatology reimbursement because, while many people don’t realize it, procedures done in the office make up 76 percent of dermatologists’ income.”

But of late, the battles within the confines of the RUC have taken a back seat to the way CMS handles the recommendations RUC sends it.

“CMS is trying to show its independence,” Daniel M. Siegel, MD, the AADA’s immediate past president and one of its representatives at the RUC, said. “For the longest time, CMS took about 90 percent of RUC recommendations. In the past year they seem to have started making some arbitrary cuts.” The cuts, Dr. Coldiron added, are made without any explanation. “That’s not good enough; if they’re going to reject a valuation after these huge surveys were done, with hours or days of arguing at the RUC and really honing the practice expense and work that goes into a procedure, they should give more justification than just because,’” he said. Dr. Coldiron suggested that direct-to-CMS lobbying may be necessary alongside the AADA’s continued efforts at the RUC. [pagebreak]

Still, in this environment, some cuts to codes that dermatologists bill frequently may be inevitable.

More scrutiny of reimbursement

The new attitude toward RUC recommendations at CMS is part of a larger shift toward scrutiny, according to Barbara Greenan, senior director of government affairs for the AADA.

“CMS is getting an enormous amount of pressure from the Medicare Payment Advisory Committee (MedPAC) and Congress to much more heavily scrutinize the RUC recommendations and look at the process of how the RVUs are arrived at and how the practice expenses are calculated,” Greenan said. “That’s why you see the Urban Institute and the RAND Corporation contracted to do studies on how the RVUs are established, asking how accurate the time being reported is, especially on the work side, and looking at whether doctors who are being surveyed are being honest  — or if they are driven by outside factors as they come to understand how the surveys work.”

The RAND project, set to last two years, will build a model to validate the work RVUs, a requirement established in the Patient Protection and Affordable Care Act (ACA). The project overview hints at the rationale for this, noting that “systematic over- or underpricing of procedures furnished by particular specialties can distort overall compensation levels and affect the specialty choices made by new physicians.” Meanwhile, the Urban Institute will use a variety of data sources to develop alternative estimates of service-level time and compare the results with the time values that appear in the fee schedule. While the project will focus on only 100 services, the results will be reviewed for their potential applicability across similar services and have the potential to refine valuations across the fee schedule. [pagebreak]

While it’s tempting to look for someone to blame, the reason for the high degree of scrutiny isn’t a particular entity, whether CMS or MedPAC or Congress, Greenan said. “It’s an overall environment of concern about escalating health care costs that is creating this squeeze on dermatology reimbursement.”

The real problem: Demographics

He may not agree with the way the ACA seeks to address the problem, but Rep. Tom Price, MD (R-Ga.), vice chair of the House Budget Committee, said that fundamental reform is necessary to address costs in health care (and has introduced a Republican version of such reform, the Empowering Patients First Act, in each Congress since the ACA was introduced). “The increasing costs are driven not just by increasing technology and the increasing costs of health care itself, but also to a larger degree by the changing demographics of our society,” Dr. Price said. “There are 10,000 Baby Boomers reaching retirement age every day. Right now there are 48 million individuals in Medicare; 78 million individuals will be joining it over the next 18 years. For them to be absorbed into the system requires significant changes to control the cost.”

Just what those changes will look like, though, is a sticking point.

Some cost containment could come through reducing overutilization of services, Rep. Matheson said — particularly related to defensive medicine. “We should pursue a broad malpractice reform agenda that creates a safe harbor provision for people in the medical delivery system who operate within a defined standard of care,” he said. “That would go a long way toward reducing unnecessary tests and procedures that are only being done now to prevent a lawsuit.” Administrative simplification would also cut costs, he said. “Government policies and regulations that may each have been well-intended when they were implemented should be looked at as a whole and assessed as to whether they are structured in the most efficient way. I suspect they are not.” [pagebreak]

Neither of those issues is likely to be addressed quickly, though. In the short term, Dr. Resneck said, members of Congress on both sides of the aisle agree that the sustainable growth rate formula, which annually threatens to slash physician payments (this year’s scheduled cut is 24 percent), has to be repealed. (Efforts to do so garnered headlines in the medical press this summer, but a repeal bill has not yet passed.) “There is, however, equally strong bipartisan agreement that any SGR repeal must be accompanied by a transition to a new payment system’ that rewards value rather than volume,” Dr. Resneck said. Indeed, a report in the New England Journal of Medicine this spring from the National Commission on Physician Payment Reform, under the byline of Republican and former Senate Majority Leader Bill Frist, MD, as well as former Robert Wood Johnson Foundation CEO Steven A. Schroeder, MD, laid out a dozen recommendations for reform, including significant changes to the RUC process, the inclusion of a pay-for-quality component in all contracts, and a move to fixed payments for many episodes of care under the title “Phasing Out Fee-for-Service Payment” (368;21).

The details of such a phase-out and transition to a new system, if it occurs, would fall to Congress. The problem, Dr. Resneck said, is that “Congress doesn’t know how to create such a system, but both political parties are determined to do so, and are looking to the medical community to design something. They understand that a single model won’t work for all specialties, but they’ve expressed little patience for specialties that are unwilling or unable to define quality and value for themselves.”

Data demands

Indeed, Rep. Larry Bucshon, MD (R-Ind.), a member of the House Committee on Education and the Workforce’s Subcommittee on Health, Employment, Labor, and Pensions, said that whether the system is consumer-driven (his preference) or government-run, “ultimately, the combination of price and quality, or value, will be rewarded financially.” The issue, in that eventuality, is where the data comes from. “I want your members to be the ones providing the data on what constitutes quality dermatologic care,” he said. “I don’t want the government or the insurance companies providing their opinions. I want the specialty to do it.” (Dr. Bucshon, a thoracic surgeon, noted that the Society of Thoracic Surgeons maintains a voluntary database regarding quality in his specialty.) “If you have CMS utilizing data on what constitutes quality medical care, you want it to come from you, not Medicare or the insurance companies,” he said. [pagebreak]

The AADA is working on the data issue, according to Kathryn Schwarzenberger, MD, who serves as Amonette-Rosenberg Professor and Chair of the University of Tennessee dermatology department and chair of the Academy’s Workgroup on Innovative Payment and Delivery. “We’re aware of the need, in order to justify our piece of the pie, to demonstrate the quality and the cost-effectiveness of the work we provide.” Dermatology, as a specialty, has historically had a paucity of data, she said, in part because of the diversity and nature of the diseases it treats. “But we as a specialty need to have quality and outcomes data. The new paradigm of health care reimbursement will tie reimbursement to documented quality measures and to outcomes, and the Academy is responding.”

The move to quantify could have a huge upside for dermatology, according to Dr. Coldiron.

“The scrutiny of health care pricing in the outpatient setting will be wonderful for us,” he said. “Dermatologists are incredibly efficient and cost-effective and we’ve never been recognized for it. Once that’s recognized you’ll discover that we do things so much less expensively than other specialties that we’ll be winners. That’s not something we should be afraid of at all,” he added. “The cost of Mohs surgery in a dermatology practice is a fraction of removing a cancer in a hospital, a fraction of what radiation costs.” The consideration of data that demonstrate this will only benefit dermatologists, he said.

But regardless of where the data come from or what they show, Dr. Price, an orthopedic surgeon, urged caution. “The government’s definition of value will be based on cost, not on the quality of the services provided to an individual patient,” he said. Still, he said, physicians should be involved in quality improvement efforts; indeed, he argued, they are the only ones who can really understand the kind of quality care that can and should be provided to patients. [pagebreak]

Time to be involved

What should dermatologists do now? “This is not a time for dermatologists to be ostriches,” Dr. Schwarzenberger said. “We can’t put our heads in the sand and hope that business will be the same 10 years from now as it is now. It’s a very important time for all of our colleagues to be active in their local health care environment, whether that’s an academic medical center, a small community, or a big city — they should be really in tune with their local environment, and get involved in things like their county and state medical societies.” No two dermatologists’ experiences will be quite the same, she said; “It may be that under the accountable care model, your experience is entirely different if you’re the only dermatologist in a small community than it will be if you’re one of 100 dermatologists in a big city.”

And the accountable care model, while it has attracted much attention, may not be the one that endures, or the prevailing model in every community, Dr. Resneck added. “Many new payment models are being piloted, and it’s entirely too soon to say which will take root and which will fail,” he said. But, he added, “it’s becoming clear that incentivizing projects to reduce spending and moving control of spending prioritization to local delivery organizations is part of our future. In any of these models, it will be critical for dermatology to be visible at the local and regional level, to participate in care integration, and to demonstrate its value.”

Despite the challenges ahead, Dr. Schwarzenberger remains optimistic about the future. “The way our practices look 10 years from now may not be the same, but we will still be very lucky to be dermatologists.” [pagebreak]

What does the future look like?

No one can predict with certainty what payment models will emerge as the most successful as implementation of the Affordable Care Act continues. But two members of Congress who vigorously opposed the ACA’s passage see other elements of the near future of health care that are currently cloudy becoming clearer if the ACA remains law, including insurance coverage issues and the use of the electronic records.

Regarding insurance coverage, Rep. Larry Bucshon, MD (R-Ind.), a member of the House Committee on Education and the Workforce’s Subcommittee on Health, Employment, Labor, and Pensions, said, “Ultimately you’ll have an expansion of the Medicaid program even in states that haven’t yet agreed to it and I think you will see, more than is predicted, people going into the state or federal exchanges. Employer-provided insurance will devolve as part of the way we pay for health care.” This will accrue significant costs to the federal government, he said, and result in physicians seeing many more patients with insurance plans that pay at the Medicare rate or lower, as he expects plans sold on the exchanges will.

Meanwhile, according to Rep. Tom Price, MD (R-Ga.), vice chair of the House Budget Committee, a change is needed in the way the government addresses electronic health records, but EHR “has a huge role in saving costs in the health care system.” He suggested that rather than judging the meaningful use of systems by physicians, the government should set standards regarding the computer languages the systems should use so they can interoperate successfully. “People are becoming more receptive to the government dictating the language as they hear horror stories of people spending $50,000 on a system that doesn’t talk to the hospital down the street,” he said. Dr. Bucshon questioned whether EHR use would ultimately save the government money, but agreed that “the train has left the station. It’s a better way to record-keep and something that’s necessary.”

Dermatology’s approach in a new system

Robert A. Swerlick, MD, Alicia Leizman Stonecipher Chair of Dermatology at the Emory University School of Medicine and a member of the AADA’s Workgroup on Innovative Payment and Delivery, offers a series of seven assumptions about the changing health care system that he believes require dermatologists to think carefully about their role in it.

  1. Our present spending trajectory in health care is unsustainable.
  2. Based upon assumption #1, different payment models are desirable to avoid national bankruptcy based upon uncontrolled health care spending.
  3. Care of patients with skin disease is an essential element of health care.
  4. The ability to deliver health care, including dermatologic care, at higher quality and lower cost to more people is desirable, and these goals should be championed by leadership in dermatology.
  5. The continued existence of dermatology as a discrete specialty will depend upon the ability of dermatologists (individually and as members of groups) to demonstrate that we bring value to those who pay for our services, which will include patients and third-party payers. Central to demonstrating value are the abilities described in assumption #4.
  6. The question is not if we will need to change but how we will change.
  7. There will be winners and losers and perhaps the most important goal should be that patients are winners. Dermatologists can position themselves to be winners if we champion approaches that bring value to patients and put ourselves in a position to demonstrate this in a measurable way.



What does the future look like?
Dermatology’s approach in a new system