1. Current Payment Challenges and New Payment Models Cecil B. Wilson, MD Immediate Past President College of American Pathologists May 7, 2012

2. © 2011 American Medical Association. All rights reserved. 2 Overview SGR outlook Payment and delivery reform Collaborative efforts

3. © 2011 American Medical Association. All rights reserved. 3 Growing Gap Between Costs and Payments Practice Cost Inflation (MEI) Payment Updates Can not overstate the SGR’s: Obstruction to positive change Impact on physician attitudes, views, satisfaction Political implications Uniqueness and complexity

4. © 2011 American Medical Association. All rights reserved. 4

5. 5 Collateral Damage Caused by SGR Flat payment rates impede practice investments and innovation Consumes resources, splinters medicine Issue fatigue on all sides –Side-effects on perception of organized medicine’s effectiveness Feeds perception of physicians’ obsession with income (1% problem) –Access threat is real, but obscured

6. © 2011 American Medical Association. All rights reserved. 6 Obstacles to SGR Reform Escalating cost –In 2004, repeal cost was $48.6 billion –In 2011, repeal cost was $289.7 billion Beneficiary premiums an early concern –Seniors value choice of physician, and now support medicine (to a point) Other Medicare providers have been cut –No more low hanging fruit Uncertainty about what comes afterward –There is no one silver bullet

7. © 2011 American Medical Association. All rights reserved. 7 Bipartisan Support for SGR Repeal Simpson-Bowles “Moment of Truth” Senate “Gang of 6” Senator Tom Coburn (R-OK) “Back in Black” Senator Pat Toomey (R-PA) “Restoring Balance” Congressional Super Committee Proposals by Senator Jon Kyl (R-AZ), Rep. Allyson Schwartz (D-PA)

8. © 2011 American Medical Association. All rights reserved. 8 AMA Framework for Reform Developed in consultation with states and specialties last year Three-pronged approach –Repeal the SGR –Provide 5 years of stable, positive updates that keep pace with practice costs –Transition to a broad array of new payment models One-size does not fit all

9. © 2011 American Medical Association. All rights reserved. 9 Outlook and Next Steps on SGR Further develop transition plans Prepare for the next “big deal” –Be ready for lame duck action, just in case Congressional committees are looking ahead this year Continue efforts to learn from, and shape new models Prepare physicians for change

10. © 2011 American Medical Association. All rights reserved. 10 AMA Perspective and Objectives for Payment and Delivery Reform Current system is unsustainable; no one is satisfied –The “default” scenario is not a good one Preserve the patient-physician relationship Reward physicians for all that they do –Break down payment silos Align incentives, streamline administration Provide array of choices for practices –There will always be some fee-for-service component Remove barriers to physician leadership

11. © 2011 American Medical Association. All rights reserved. 11 Obstacles to Adoption of New Models Physicians don’t know where to begin Many do not want to change Regulatory, legal, financial, and other barriers –Antitrust rules –Fraud and abuse statutes –Lack of actionable data on quality and cost –Lack of adequate risk adjustment –Burdensome regulations

12. © 2011 American Medical Association. All rights reserved. 12 Recent Successes ACOs rules provide for physician leadership and more shared savings Advanced Payment ACOs designed for small physician practices CMMI Bundled Payments for Care Initiative offers alternative models Improved antitrust rules Eased regulatory burdens There is still much to learn, and physicians need the tools

13. © 2011 American Medical Association. All rights reserved. 13 AMA Efforts to Prepare Physicians Innovator Committee Payment Pathways white paper, seminars, webinars, other educational programs How to Manuals Working with private payers

14. © 2011 American Medical Association. All rights reserved. 14 Recent AMA/ CAP Collaboration Principles for personalized medicine and laboratory developed tests Joint efforts through the Personalized Medicine Coalition Policy Council PDUFA/ MDUFA proposals Gene patents Z codes

15. © 2011 American Medical Association. All rights reserved. 15 Concluding Thoughts Physicians need to be engaged –Don’t succumb to issue fatigue We need to shape the systems of the future –Physician satisfaction is key to success We need to prepare ourselves and our colleagues for change Let’s continue working together

16. © 2011 American Medical Association. All rights reserved. 16