Congress Does it Again


Instead of finding real solutions, the House and Senate once again offer a temporary fix.

By Jerome Connolly, PT, CAE
June 6, 2014

While it is old news now, congressional action March 31 was greeted with a sigh of relief as another 24 percent cut to Medicare payment rates was averted, again temporarily. Legislation passed only hours before a self-imposed congressional deadline maintains the current Medicare reimbursement rate through March 31, 2015. The legislation also included an extension of the Medicare therapy cap exceptions process, which means that our patients—the ones who need our services the most—are not saddled with the arbitrary annual per beneficiary Medicare cap. The approximate $20 billion cost of this temporary fix was paid for through a combination of gimmicks, including adding another year (2025) to the sequester provisions used to reach a budget agreement in December of last year.

In a 64-35 vote, the Senate cleared the House-passed 12-month “doc fix.” The previous week, the House used a voice vote to pass the same legislation, so a voting record in that chamber is not available.

On the other side of the capitol, Republican senators, Senators Kelly Ayotte (NH), Susan Collins (ME), Orrin Hatch (UT), Mark Kirk (IL), Lisa Murkowski (AK), Roy Blunt (MO), Richard Burr (NC), Saxby Chambliss (GA), John Cornyn (TX), Thad Cochran (MS), Dean Heller (NV), Johnny Isakson (GA), Mitch McConnell (KY), David Vitter (LA), John Hoeven (ND), and Roger Wicker (MS) voted for the bill.

Democratic Senators Tammy Baldwin (WI), Tom Carper (DE), Mark Warner (VA), Amy Klobuchar (MN), Al Franken (MN), and Ron Wyden (OR) voted against the patch.

Wyden, who assumed the chair of the Senate Finance Committee in February when Senator Max Baucus (D-MT) was confirmed as ambassador to China, preferred a full repeal and permanent solution to the SGR and the therapy caps, which were included in legislation (S. 2110) he had introduced. He attempted to get consent to hold an up-or-down vote on his plan, but Senator Jeff Sessions (R-AL) objected. Ostensibly, the resistance in the Senate, as well as in the House, was based on the mechanism Wyden used to pay for the measure, namely leftover funds from the drawdown of the wars in Iraq and Afghanistan known as the Overseas Contingency Operations (OCO) funds.


Senator Tom Coburn (R-OK), a physician, said it was “cowardly” to pass a patch instead of a long-term solution.

“The bill we have on the floor is one of the reasons I’m leaving Congress at the end of the year,” Coburn said ahead of the vote. “We’re going to put off until tomorrow what we should be doing today. This bill is a cowardly response to the real problem we have.”

In the end, the “cowardly” path was chosen and the bill was on its way to the White House for President Obama’s signature.

Congress has voted 17 times in the past 11 years to approve the so-called “doc fix,” a stop-gap measure that delays cuts in Medicare reimbursements to physicians and therapists and serves as an interim solution to the years-long struggle to re-jigger the formula used to determine Medicare funding levels.

This was not supposed to be the case in 2014, as committees with jurisdiction over Medicare matters started work early in the year on sweeping legislation that would repeal and replace both the sustainable growth rate (SGR) formula and the therapy caps.

But the parties could not settle the issue of how to pay for the permanent fix. The House passed a version using funds from delaying the Obamacare individual mandate, a non-starter for Democrats and surely for the White House—and the Senate Democrats—or at least the Finance Chair—wanted to use unspent defense money, which Republicans opposed.

The bipartisan repeal and replace legislation had been hammered out on both sides of the capitol and had been passed by three committees. In place of the dysfunctional SGR formula, Medicare payments would be based on quality. The mantra being used in Washington is shifting Medicare reimbursement away from volume and toward value.

“This is really the first time there has been any real progress in terms of getting things done,” said one Democratic aide, of this year’s efforts to pass a permanent fix to the SGR funding method. “This is the furthest that they’ve ever come to actually getting rid of the formula.”

The proposed policy was amenable to lawmakers on both sides of the aisle. The way to pay for the policy was not.

Democrats have repeatedly floated the idea of using OCO funds to offset the cost of ditching the system, but that option has been panned by Republicans. Some on the right have proposed cuts to other parts of the health care budget to offset the cost of repealing the SGR, but that is a risky proposition in an election year.

Nevertheless, some on Capitol Hill are hoping that this year’s efforts lay groundwork and will remain relevant, no matter which party controls the House and/or Senate next year.

The agreed-upon policy, the SGR Repeal and Medicare Beneficiary Access Act of 2013, would have removed sustainable growth rate methodology from the determination of annual conversion factors in the formula for payment for therapists’ and physicians’ services. It also would have frozen the increase to the single conversion factor at 0.5 percent per year for 2014 through 2018 and at a flat 0.00 percent for 2019 through 2023. Then, it would have established an update of 1 percent for health professionals participating in alternative payment models (APMs) and an update of 0.5 percent for all other health professionals after 2023.

To change the Medicare outpatient system from volume to value, the bill would have revised and consolidated components of the three specified existing performance incentive programs (including the Physician Quality Reporting System or PQRS) into a merit-based incentive payment (MIP) system under which MIP-eligible professionals (excluding most APM participants) would receive annual payment increases or decreases based on their performance.

The legislation also would have repealed the therapy cap, and the $3,700 threshold for manual medical review would have been extended through the end of 2014, after which it would be repealed. In its place, beginning January 1, 2015, a new medical review program for outpatient therapy services was to be established for therapy providers. The Secretary of Health and Human Services (HHS) would identify the services for medical review, using appropriate factors.

Under this new policy, the secretary would use prior authorization medical review for the identified outpatient therapy services furnished to a beneficiary above certain established thresholds such as a dollar threshold or by type of outpatient therapy service or setting. Prior authorization medical review would not apply to providers who have a low denial rate under prior authorization.

The secretary could also use pre-payment review or post-payment review for services that are not subject to prior authorization medical review, including those services falling below the established thresholds. The prior authorization medical review of outpatient therapy services would be accomplished by Medicare administrative contractors or other review contractors.

The bill also explicitly mentioned that therapy providers could submit the information necessary for medical review by fax, mail, or electronic means, and if a determination was not received within ten business days, the services were deemed to be covered.

In a related provision, the bill would have established the collection of standardized data elements for outpatient therapy services such as (1) demographic information, (2) diagnosis, (3) severity, (4) affected body structures and functions, (5) limitations with activities of daily living and participation, (6) functional status, and (7) other domains determined to be appropriate by the secretary.

The draft of the proposal standardized data elements would be subject to public comment, and final adoption would be accomplished through rulemaking. The secretary would then develop and implement a system for therapy providers to report the standardized data elements for individuals receiving outpatient therapy services. Once this system was operational, no Medicare payment would be made for outpatient therapy services furnished to a beneficiary unless a therapy provider reported the standardized data elements for the beneficiary.

A year and a half after launching the data reporting system, the secretary would be required to submit a report to Congress on the design of a new payment system for outpatient therapy services. The report would include an analysis of the standardized data elements collected and other appropriate data and information. It would consider (1) appropriate adjustments to payment (such as case mix and outliers), (2) payments on an episode of care basis, and (3) reduced payment for multiple episodes. Stakeholders’ input on the design of such a new payment system would be mandated.

Functional limitation reporting, the current claims-based data collection strategy designed to assist in reforming the Medicare payment system for outpatient therapy services, would sunset when the new data collection program is implemented.

The annual per beneficiary therapy caps established by the Balanced Budget Act of 1997 were intended to be temporary until an alternative payment method could be devised. For a while this year, it appeared that “temporary” period of 17 or 18 years would finally be coming to a close, and that the alternative payment method would be under development. However, since the repeal and replacement legislation did not make it through both chambers, it remains to be seen if the policy proposal will be revived in the next Congress and serve as the springboard to the adoption of permanent replacements for the SGR and therapy caps or find a spot on the political shelf.

Either way, we and our Medicare patients have another year’s reprieve from gargantuan payment cuts and full implementation of the arbitrary therapy caps. We also have more time to work on important PPS priorities that were not included in this year’s Medicare bill; namely locum tenens, opt-out, and closing the physician self-referral loophole that fosters overutilization of therapy.

Adding physical therapists (PTs) to the locum tenens statute under Medicare is still very much alive, and we will continue to press Congress to make this change. The notion of adding PTs to the opt-out provision is dead for this year, as the most Congress was able to agree on was a change that would allow continuing renewals of any two-year period for which a physician or practitioner opts out of the Medicare claims process under a private contract with a beneficiary. There was no sentiment for adding practitioners to this Medicare provision.

On the issue of physician self-referral, PPS strongly argued that curbing this overutilization would capture savings, thus closing the loophole, by removing PT from the in-office ancillary exception. This change would not only be good policy, but also cost-effective for the Medicare program. Consequently, we argued this action should be considered as an offset to help pay for the full repeal legislation. This proposal was not acceptable to the 17 physician congressmen who are part of the House Republican caucus. Moreover, since Congress never got to the point of looking seriously for offsets, the point became moot.

An official study of physician self-referral in physical therapy is currently being conducted by the Government Accountability Office (GAO), which should release its report by midyear. The GAO findings, along with other developments, such as the outcome of the November elections, will guide the Section’s future strategies on the issue.


Jerome Connolly, PT, CAE, is a registered federal lobbyist whose firm Connolly Strategies & Initiatives has been retained by PPS. A physical therapist by training, he is a former private practitioner who throughout his career has served in leadership roles of PPS and APTA. Connolly also served as APTA’s Senior Vice President for Health Policy from 1995 – 2001.

Follow your lobbyist and legislative activities on Twitter: @TherapyPolicy.

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