RE: Medicare Physician Fee Cuts:

beyondtheSGR.ThisisbecausetheSGRandtheconversionfactor,though significant,arenottheonlyfactorsindeterminingreimbursementforaparticular service.Everyfiveyears,theRelativeValueUpdateCommittee(RUC),whichis convenedbytheAmericanMedicalAssociationandcomprisedofphysicians fromacrossthespectrumofphysicianspecialties,meetstomake recommendationsregardingthevalueoftheworkincludedinphysicianservices providedunderMedicare.TheRUCassignsavaluefortheworkineachservice relativetothevalueoftheworkinotherphysicianservices.Thevaluesassigned totheworkineachservicearemeasuredinrelativevalueunits(RVUs).After thecompletionofthefive-yearreviewprocess,theRUC 9srecommendationsare submittedtotheCentersforMedicareandMedicaidServices(CMS),who -8- reviewstheRUC 9sworkandimplementsthefinalrecommendations,sometimes withmodification,intheMedicarephysicianfeeschedule.Themostrecentfive- yearreviewwascompletedin2006andimplementedonJanuary1,2007. UndertheRUC 9smostrecentfive-yearreview,whichCMSapproved, morethan$4billioninthefeeschedulewasshiftedtoE/Mcodesfromcodesfor otherservices,includingsurgicalcare.Forinstance,theworkvaluesassociated withanintermediateofficevisit,themostfrequentlybilledphysicianservicein Medicare,increased37percent.Becauseallchangestothefeeschedulemust bebudget-neutral,theseincreaseswereoffsetbya10.1percentacross-the- boardreductioninworkvaluesforallphysicianservices,knownasthe"work adjuster."Asaresult,in2007,mostsurgicalcodeswerecutbetween3and7 percent,dependingonhowmanyE/Mvisitswerefactoredintotheservice.In 2008,evenwitha0.5percentincreaseintheconversionfactor,thecalculationof newworkvaluesforotherservices,inparticularanesthesiaservices,alongwith thephase-inofotherchangesrelativetopracticeexpenses,meantthatMedicare paymentsformanysurgicalserviceswerecutagain.Asaresult,theminimal growthinoverallMedicarephysicianpaymentshasmeantsignificantcutsfor surgicalreimbursement. Solutions:PreservingAccessTodayandTomorrow WhiletherearemanyfacetstothebrokenMedicarepaymentsystem,itis criticalthatCongressacttoprotectpatientaccesstosurgicalcareandall physicianservicesbeforeJuly1.Itishardtoprojectwhatwillhappenifthe10.6 -9- percentcutdoesgointoeffect,butitisscenariothatnoneofusshouldwantto explore.Therefore,themostimportantthingthisCongresscandointheshort- termispasslegislationtostopthescheduled10.6percentcutonJuly1,2008, andtoreplaceascheduled5.4percentcutin2009withareasonableincreasein Medicarephysicianpayments.Bystoppingscheduledcutsthrough2009,small businesssurgicalpracticeswillbebetterabletobudgetandplanforthenext18 months,andpolicymakerswillbeabletoconsiderlong-termreformsthatwill preservepatients 9accesstohigh-qualitysurgicalcare.<br><br> Whentheconversionfactorwasfirstcutin2002,thephysiciancommunity calledonCongresstoreplacetheSGRwithpaymentupdatesbasedona measureofpracticecostinflationsuchastheMedicareEconomicIndex(MEI). Fromearlyon,budgetpolicycomplicatedtheprospectsforthisproposal,andthe costofthisproposalhascontinuedtoescalate.Accordingtothelatestestimate fromtheCongressionalBudgetOffice,thisproposalwouldnowcostasmuchas $364.1billionoverthenexttenyears.Asaresult,theAmericanCollegeof Surgeonshasdevelopedanalternativeforlong-termreform. TheServiceCategoryGrowthRate(SCGR) Asanalternative,positivesolution,theCollegehasproposedareformof theMedicarephysicianpaymentsystemthatrecognizesthedifferencesamong thevarioustypesofservicesphysiciansprovidetotheirpatients.TheCollege 9s reformproposalwouldestablishasystemof sixseparatephysicianservice categories touseincalculatingMedicarepaymentupdates.Theservice -10- categorieswouldinclude:1)primaryandpreventivecare;2)otherevaluationand managementservices;3)majorprocedures;4)anesthesiaservices;5)imaging anddiagnosticservices;and6)minorproceduresandallotherphysician services.<br><br> InadditiontothereplacingthecurrentSGRwithseparateservice categories,theCollege 9sproposalwoulddothefollowing: SCGRtargetswouldbebasedonthecurrentSGRfactors(trends inphysicianspending,beneficiaryenrollment,lawandregulations), exceptthatGDPwouldbeeliminatedfromtheformulaandbe replacedwithastatutorilysetpercentagepointgrowthallowance foreachservicecategory . Toaccommodatealreadyanticipatedgrowthinchronicand preventiveservices,weestimatethatprimaryandpreventivecare serviceswouldrequireagrowthallowanceabouttwiceaslargeas theotherservicecategories(between4and5percentasopposed tosomewherebetween2and3percentforotherservices). LiketheSGR,spendingcalculationsundertheSCGRsystem wouldbecumulative.However,theSecretarywouldbeallowedto makeadjustmentstoanyofthetargetsasneededtoreflectthe impactofmajortechnologicalchanges.<br><br> AsundertheSGR,theannualupdateforaservicecategorywould betheMedicareEconomicIndex(MEI)plustheadjustmentfactor. But,innocasecouldthefinalupdatevaryfromtheMEIbymoreor -11- lessthan3percentagepoints;norcouldtheupdateinanyyearbe lessthanzero. Thebenefitofseparatephysicianservicecategoriesisthat reimbursementforparticularserviceswouldbebasedonthegrowthratesof similarservices,allowingbetteranalysisandunderstandingofthefactorsdriving therisingcostsofmedicalcareandparticularphysicianservices.Thisstandsin contrasttothecurrentsystemofcombiningtheutilizationofdissimilarservicesto determinereimbursementrates.Inaddition: Low-volumegrowthservices,suchasmajorsurgicalcare, wouldnolongerbesubjecttothebluntpaymentcutsproduced bytheSGR.<br><br> Differentutilizationtrendswouldbeeasiertoidentify,providing theopportunitytostudythosedifferencessofuturepayment policiescanbedevelopedtoeitherallowhighergrowthratesor constrainspending,asappropriate,tomeetbeneficiaryneeds. Currentandfutureeffortstoidentifyandpromotetheuseof specificserviceswouldbesimplified. TheSCGRwouldprovideaframeworkforthedevelopmentof qualityimprovementinitiativesandvalue-basedpurchasing systemsthataretailoredtodifferencesinthewayvarious physicianservicesareprovided.<br><br> -12- IampleasedtosaythattheCollege 9sproposalhasalreadygarnered significantbipartisaninterestonCapitolHill.TheoriginalversionoftheCollege 9s proposalwasintroducedasthe cMedicarePhysicianPaymentReformActof 2007, dH.R.3038,byRep.PeteSessionsinJuly2007.Amodifiedversionofthe College 9sproposalwasincludedinthe cChildren 9sHealthandMedicare ProtectionActof2007, dH.R.3162,whichwasintroducedbyRep.JohnDingell andpassedbytheHouseonAugust1,2007.Inaddition,inaletterdated December8,2007,abipartisancoalitionof140membersoftheHouseof Representatives(90Democratsand50Republicans),ledbyRep.LincolnDavis andRep.PeteSessions,sentalettertoSpeakeroftheHouseNancyPelosiand RepublicanLeaderJohnBoehnerexpressingsupportformeasuresincludedin theHouse-passedCHAMPActthatwouldreplaceMedicarepaymentcutsin 2008and2009withpaymentincreasesandwouldreplacetheMedicarepayment systemwithasystemthatestablishessixseparateservicecategorytargets startingin2010.ByeithervotingfortheCHAMPActorsigningtheDavis- Sessionsletter,279MembersoftheHousehaveexpressedsupportforseparate servicecategorytargets. MadamChairwoman,thankyouandyourcolleaguesforprovidingthis opportunitytosharewithyouthechallengesfacingsurgeonsundertheMedicare programtoday,andtoprovidepositiverecommendationstohelpthesmall businessmedicalpracticesurvive.TheCollegelooksforwardtocontinuingto workwithyoutoreformtheMedicarephysicianpaymentsystemtoensurethat Medicarepatientswillhaveaccesstothehigh-qualitysurgicalcaretheyneed. -13- IappreciatethisopportunitytotestifybeforethecommitteeandIwouldbe happytotakeanyquestions.<br><br> TheAmericanCollegeofSurgeonsisavoluntary,educationalandscientificorganizationof74,000Fellows devotedtotheethicalandcompetentpracticeofsurgeryandtoenhancingthequalityofcareprovidedtosurgical patients.Foundedin1913,theCollegewasestablishedtoimprovethecareofsurgicalpatientsandthesafetyofthe operatingroomenvironment.Forover90years,theCollegehasprovidededucationalprogramsforitsFellowsandfor othersurgeonsinthiscountryandthroughouttheworld.Inaddition,theCollegeestablishesstandardsforthepracticeof surgical,trauma,andcancercare,aswellasguidelinesforoffice-basedsurgeryfacilities.Italsoprovidesinformationon surgicalissuestothegeneralpublic. AmericanCollegeofSurgeons DivisionofAdvocacyandHealthPolicy 1640WisconsinAvenue,NW Washington,DC20007 (202)337-2701

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