Leavitt on the SGR -- A Simple Solution for a Complex Problem

I'll admit it, I'm embarrassed. It's been over a month since my last post, which, although for perfectly legitimate reasons, is still unacceptable. Since it's Sunday night and I'm not at work and have no inspiration, I've turned to Leavitt's blog for a topic.

Leavitt's last post, dated Dec. 3 (he is a much better blogger than I), discusses the SGR, or sustainable growth rate, update. This rate determines how much physicians are paid for specific procedures. Because of the way that it's formulated, SGR updates actually would have been negative updates in the costs of procedures over the last couple of years. Obviously, giving physicians less and less money for the same procedure has not gone over too well for an industry with a very well-organized lobby. So physicians have successfully lobbied over the last couple of years to overturn the negative update and get a small increase. Which in turn, increases the negative rate increase for the next year.

It's a pretty sick cycle, and this year physicians are stuck lobbying against a 10% cut to their payments. That's huge. According to Leavitt,

This is a lousy system and it hasn’t reduced Medicare costs. The total expenditures just keep going up. Why? When rates per procedure don’t go up, doctors have simply done more procedures.

I think this is slightly simplistic reasoning for why the rates have increased. Nevertheless, Leavitt makes an interesting suggestion for fixing this obviously screwed up system:

Long term, the solution to this problem is to change the way we pay doctors. At least some portion of their payment should be based on how successful they are in keeping people healthy, rather that just the volume of procedures they perform [pay for performance].... [W]e cannot make progress unless doctors adopt a system of electronic medical records. Such a system depends on being able to gather quality data electronically.

What struck me as most interesting was his shift from a pay-for-performance system to EHRs. I am a full supporter of the EHR, but I'm not really sure how its adoption will lead to us correct the $200 billion deficit Leavitt earlier in the post says that we have from not reducing reimbursements to physicians. His prescription:

It is the position of the Administration that any new bill overriding the SGR law should require physicians to implement health information technology that meets department standards for interoperability in order to be eligible for higher payments from Medicare.

The connection between EHRs and pay-for-performance systems is a little tenuous. It's one thing for HHS to tell doctors to stop charging the government for their screw ups -- it's a complete other to mandate that doctors adopt costly technology or they won't get a raise. It would be completely awful to implement such a mandate without some financial assistance, especially for Medicare beneficiaries in rural areas where it's already difficult to find doctors who accept Medicare.

I guess I was expecting Leavitt to argue for a more, um, comprehensive reform. EHRs are great, and if you need to tie them to the SGR in order to ensure that they are implemented, go for it. But don't act like the fix to the growing problem of physicians payments can be encapsulated in better technology.