Evidence-Based Oncology

Oncology Groups Active in Effort to Repeal SGR

Published Online: December 13, 2013
Mary K. Caffrey
Talk about a “fiscal cliff.”

The eyes of America’s doctors will be fixed this month on the nation’s capital, as Congress appears poised to repeal the Medicare Sustainable Growth Rate, or SGR. Should lawmakers fail to undo the much-maligned formula, physicians would face Medicare cuts of at least 24% on January 1, 2014.1

While this seems unlikely, doctors—and oncologists in particular—are learning the cure is hardly without side effects. A bipartisan proposal unveiled October 30, 2013, would replace SGR with a reimbursement scheme that moves doctors away from fee-for-service and closer to compensation based on quality of care, as envisioned under the Affordable Care Act (ACA). But, to keep a lid on spending, Congress included some pills that doctors may find hard to swallow: a 10-year payment freeze, and, for oncologists, a system of winners and losers; some fear this will discourage sharing best practices and penalize some physicians who are generally doing a good job.2

The fact that the American Medical Association’s (AMA’s)3 House of Delegates supports the proposal and the American Society of Clinical Oncology (ASCO) is “encouraged”4 by its broad outlines speaks to the need to get rid of SGR, which has consistently failed to keep up with Medicare Part B expenditures. Doctors want an end to the annual uncertainty of waiting for the Congressional “patch” to cover the mounting SGR shortfall.5 Still, both AMA and ASCO, as well as the Community Oncology Alliance (COA),5 have expressed reservations with elements of proposal.

The oncology groups cite details of the plan they say will undermine its goal of moving from fee-for-service to payment for quality, as well as aspects they say will hasten the march of cancer treatment into expensive hospital settings.1,2 The AMA joins the oncologists in asking whether the 10-year payment freeze, coming on top of Medicare cuts physicians have already endured, will allow practices to invest in technology and other changes needed to move toward new payment models.

After years of waiting for an SGR remedy, however, oncology groups appear willing to work with the current proposal. At the meeting Value-Based Oncology Management in Chicago, Illinois, Ted Okon, executive director of COA, spoke a day before Congress’ proposal was announced. Okon outlined the “destructive” effects that current Medicare reimbursement policies have had on community clinics.

Since 2005, after Congress altered Medicare cancer drug reimbursement formulas—pegging to average sales price instead of average wholesale price—Okon said 288 clinics have closed, and 469 have been acquired or have a physicians’ services agreement with a hospital. “The community share of oncology patients is declining,” Okon said. “More and more I hear physicians say, ‘I give up.’ These are well-run practices.”

Years of uncertainty over Medicare reimbursement have left practices unwilling or unable to make long-term investments, he said. “They say, ‘We strategic plan day-by-day.’ ”

The Arc of the SGR Shortfall

The problem with SGR dates to 1997, when Congress created the formula in an effort to control spending. The formula was supposed to set realistic yearly and cumulative spending targets; if the cost of care exceeded the target in any given year, rates would be cut the following year to make up the difference.

However, inaccurate forecasts meant actual Medicare Part B spending has exceeded the target for more than a decade. Each year, the “sword of Damocles,” as UCAMA president Ardis Hoven, MD, called it,5 would hang over physicians’ heads as they waited for Congress to pass legislation to thwart the automatic triggers that would absorb the accumulating shortfall. Yet the longer Congress failed to fix SGR, the worse the problem grew.  In May 2012, in an interview with Evidence-Based Oncology, ASCO chief executive officer Allen S. Lichter, MD, called the situation “the classic kick-the-candown-the-road.”6

How big is the problem? Estimates for getting rid of SGR include $377 billion for 2012 and $139 billion for 2013,8 and there are no good answers on how to address it. When asked how the repeal would be funded, AMA’s Hoven said, “I don’t think we really know.”5

Problems with Medicare’s dysfunctional reimbursement model have hit oncology especially hard, and the effects of the federal sequester have only made things worse, Okon explained in Chicago. Oncology’s buy-and-bill system of administering increasingly expensive medications, the diversity of disease states, and the fact that so many cancer patients are older and reliant on Medicare mean an outdated reimbursement model is acutely felt in oncology. According to the American Cancer Society’s 2013 report, 77% of all new cancers are diagnosed in persons 55 years or older.7

In his 2012 interview with EBO, ASCO’s Lichter outlined just how an unreformed fee-for-service payment model fails the oncologist, since the total amount of Medicare funding is capped. “Over time, the number of things physicians can do, and the number of patients and the number of medical conditions that we can now affect, has just grown and grown and grown. If the amount of funding to pay the fees is finite, and to some extent the number of things we can do keeps growing and growing, then the fee for each unit of service needs to be cut. That’s essentially, in very broad brush strokes, how the SGR dug the hole that we’re in,” he said.6

Meanwhile, the scientific side of cancer treatment—including new therapies and the impact of genetics on treatment—has been transformed. With that transformation has come the call for oncology to move with the rest of medicine toward a payment model that rewards quality. But while multiple pay-for-quality demonstration programs exist in cancer care, as long as Medicare stuck with SGR, change would be difficult.

The lack of resolution has not been good for doctors or patients, Okon told the Chicago gathering. More and more patients have been pushed into hospitals for chemotherapy, where costs are higher. Shortages of key chemotherapy drugs, especially generics, have emerged, along with parts of the country where care is limited.

“If you look at a state like Wyoming, you see we’ve created treatment cracks in rural areas,” Okon said. “Drug shortages have cost lives in this country.”

Oncologists’ Concerns With Proposal

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