Weathering the ‘Perfect Storm?’

The era of the Affordable Care Act is upon us, and short of an unlikely repeal following midterm elections, this will remain the law of the land. As surgical residents, most of us have neither the time nor mental stamina to become significantly entrenched in politics. As a result, many of us know less about the impact that the Affordable Care Act will have on our future livelihood than many of the Senators did when they passed the bill on December 24, 2009. While most of the public focus has been on the individual mandate, pre-existing conditions, and insurance exchanges, further hidden from the public eye are the methods by which our fundamental model for health care reimbursement will change.

Much of the mystery was dispelled for me this May, when I heard a lecture entitled "The Perfect Storm: The Affordable Care Act and the Repeal of the SGR" by Dr. Jeffrey Rich. Dr. Rich’s presentation was the 2014 Norman E. Shumway, MD, Visiting Professorship Lecture at Stanford (Calif.) University, a webcast of which is available at http://ctsurgery.stanford.edu/media/.

Dr. Rich has a unique perspective on the issue of health care reimbursement, as he has served both as president of STS from 2012-2013 and director of the Center for Medicare Management, part of the Centers for Medicare & Medicaid Services, in 2008, in the political tumult leading up to the passage of the Affordable Care Act. On top of this, he has remained a practicing cardiothoracic surgeon in the Sentara Health System and sits as director-at-large for the Virginia Cardiac Surgery Quality Initiative. It is impossible to overstate the impact that he and his staff have had on the future of health care reimbursement. His recent lecture highlighted the ideological change in payment models that the Affordable Care Act embodies, along with the carrots and the sticks that the government will be wielding over the next 5 years to change physician and hospital behavior. This, along with the untenable continuation of the Sustainable Growth Rate (SGR) with all of its problems, portends huge swings both positive and negative for the reimbursement of all doctors, and cardiothoracic surgeons in particular. Early adopters may find themselves with a much-needed windfall, while those who do not anticipate the changes may find themselves in dire financial straits.

First, let us examine where we stand. The United States spends 17.6% of its gross domestic product (GDP) on health care. The nearest rival sits at 12%. State and federal government together spent $1.5 trillion on health care in 2013. Add private insurance into the mix and the figure is $2.8 trillion. Our life expectancy has not followed the money, and the rate of increase in health care spending is far outstripping inflation and the growth in our GDP. Our spending has increased exponentially since the passage of the Social Security Amendments of 1965 and shows no sign of slowing down. These statistics are well publicized, and should no longer be a surprise to anyone.

Keeping in mind that hindsight is 20/20, it seems obvious how we got here. The private health insurance industry took off during WWII, when competitive wage controls were put in place to keep skilled laborers in jobs supporting the war effort. To compete for laborers, private sector employers began offering health insurance policies. Shortly thereafter, public pressure to provide a health care safety net culminated in the creation of Medicare and Medicaid in 1965, and our complex public/private health insurance environment was born. For the first decade or so, physician reimbursement was based on "reasonable charge," meaning that doctors sent a bill to Medicare and, if it was considered reasonable, the doctor was paid. This fee-for-service model can be seen as a blank check of sorts, in that it contained few stipulations to withhold repayment for redundant or unnecessary tests and procedures. Expenses associated with complications also were reimbursable. The incentive to "do more" was set. It is worth noting that the Social Security Amendments of 1965 are federal law, and the law stipulates that reimbursement is tied to the amount of work that a physician performs, which also forbids associating reimbursement with the quality of work that the physician produces. It takes an act of Congress to change such law.

The Affordable Care Act is that act. Dr. Rich’s work at CMS paved the way for the inclusion of "Title III: Improving the quality and efficiency of health care," which allows Medicare and Medicaid reimbursements to be altered based on efficiency and outcomes, moving away (although not disintegrating) the fee-for-service model. It incentivizes the development of Accountable Care Organizations and Clinically Integrated Networks to encourage cross-specialty collaboration within the fee-for-service model and lays the groundwork for physician and hospital reimbursement to be based on high-quality, efficient, and appropriate care.

This is the most comprehensive change to the status quo, but it is by no means the first. By 1975, the federal government could see that open fee-for-service was leading to skyrocketing health care costs. It began experimenting with ways to curb physician charges. It pegged reimbursements to the Medicare Economic Index (still used to update hospital reimbursements by 3.2%-3.6% per year) and then tried basing reimbursement on relative value units. Costs continued to rise. Thirty years after the 1965 law, as health care spending continued to spiral out of control, the Sustainable Growth Rate was applied to physician repayment as an attempt to reel it in. The basic premise was that increased costs from increased patient and procedure volume would be curbed by decreasing the reimbursement per procedure.

The sustainable growth model essentially placed a spending target that would grow in step with GDP using the total expenditures beginning in 1996 as a benchmark. If, during a given year, spending outstripped the target, the following year a compensatory decrease in physician reimbursement would be enacted. If spending were less than the target, then physician payments would increase. Expenditures have exceeded the target every year since 2002, and each year our spending gets further and further from the benchmark, compounding the penalty. If the SGR penalties were allowed, it is estimated that physician repayment would drop by 25%-35% in the next few years. Each time the penalty is about to be applied, a fix is passed by Congress, saving our livelihoods at the last minute. Although we should be thankful not to take a 35% pay cut, the SGR and its fixes increased physician repayment by a mere 5.1% between 1992 and 2012. For comparison, Social Security benefits, adjusted annually to compensate increasing cost of living, have risen 52.9% in the same period. Meanwhile, as I mentioned earlier, hospital reimbursement continues to be tied to the Medicare Economic Index, which yields a fairly predictable payment increase of 3.2%-3.6% each year. The Affordable Care Act operates as a law separate from the SGR law, though the two are closely intertwined.

Title III of the Affordable Care Act provides a number of new incentives and penalties that will help make efficiency and quality goals that affect profit at least as much as procedural volume. It will impact hospitals and physicians in a number of new and potentially positive ways. Most immediately concerning to hospitals and medical groups are the incentives for quality. With value-based purchasing, Medicare will withhold 2% of diagnosis-related group (DRG) reimbursements to hospitals at the beginning of a year, giving them the chance to earn it back at the end of the year if they meet quality and efficiency performance goals. The top performers will receive a bonus from the funds collected from those who do not meet goals, making this a budget-neutral operation. Cardiothoracic surgeons will feel this scrutiny early, as the first five DRGs subject to the law are acute myocardial infarction, heart failure, pneumonia, surgeries, and health care–associated infections. As time passes, more diagnoses will be added.

Payments will be based on bundled care, meaning that a hospital will be paid one sum to cover the peri-admission period, starting from 3 days prior to 30 days after admission. Complications, readmissions, and repeat tests will not generate additional funds for the hospital. You can expect that daily chest x-rays and multiple echocardiograms will generate a lot of e-mails to attending physicians. Other preventable hospital-acquired conditions, such as catheter-associated urinary tract infections and pressure ulcers, if present in rates beyond the norm for the country, could cut reimbursements an additional 1%. Patient satisfaction scores will influence hospital reimbursement. Readmission rates beyond the specified cutoff for each admission will result in a 3% hospital pay cut, again, starting with the same set of diagnoses. When meaningful use of electronic health records incentives are factored in, hospitals are looking at a 7% swing on reimbursements for the DRGs listed above by 2017. Hospitals typically operate on a profit margin around 3.5%.

On the individual physician level, there are a number of changes. Already in place was a bonus for participating in physician quality reporting systems (PQRS), such as the STS database. By 2016 the bonus for participating will become a 2% pay cut for not participating. Thankfully, our specialty has been forward thinking in this regard, and the majority of cardiothoracic practices already participate in the STS database. Similar to value-based purchasing, the physician value modifier will apply a 2% bonus or penalty to reimbursements, based on a broad spectrum of quality measures, including patient safety, population and community health, total cost per patient by condition, and patient experience. Again, this will be budget neutral. When all of the items are tallied, the lowest-performing providers could see a 6% decrease in their personal reimbursement.

The SGR has not been fixed with the Affordable Care Act. Dr. Rich, in his role as STS president, provided testimony to Congress leading up to the most recent attempt to reform the law. Part of the main thrust of his testimony was that each specialty needs to set its own outcomes standards through database-driven research. Incentives for improved outcomes need to be in place for all members of the heart team, not just the physicians. All three of the proposed bills that followed his testimony included such incentives, but they also included even more dismal updates to physician payments than we have seen in the past 20 years. For better or for worse, none of the bills passed, and we can look forward to more anxiety as we await the next SGR patch. Whatever durable solution passes will likely focus on these new models of payment but without a significant boost in hospital income.

Currently, the alternative payment model (APM) pilot programs are still being developed. CMS has a $10 billion budget to fund the pilot programs, and consulting groups that advised the agency chose cardiothoracic surgery as a top priority for APM development. Current discussions indicate that participants in APMs could get a 5% bonus and would not be subject to the physician value modifier.

So how does this apply to us residents? Despite our ground-level perspective, we must recognize that we are straddling two drastically different eras in the practice of medicine. It will be the duty of all of us, not just our attendings, to reduce our costs and provide better patient care. This may mean using our stethoscope more effectively or making those extra phone calls to avoid unnecessary or repeated tests. We need to rebel against the ideology of physician shift work by owning our patients, but still work effectively in that system. When it comes time to seek our first jobs, we should focus not just on the department that we will work on, but its context within the local hospital system. The most vibrant department within an unresponsive hospital system will drown in the future penalties, and likewise for an unenthusiastic department within a forward-thinking system. In short, we need to start training ourselves to be keener, sharper, and more agile physicians, and to position ourselves within like-minded environments. Perhaps more important than any of these, we need to reclaim the right to shape our own profession. In recent history there has not been a better opportunity for cardiothoracic surgeons as a group to assert themselves as adept physicians and leaders. Whether we become head of CMS, participate in STS fly-ins to Capitol Hill, write our congressman about the issues we face, or engage our hospitals to anticipate the coming changes, it is up to us to ensure that we have a future.

Dr. Zeigler is one of the outgoing resident medical editors for Thoracic Surgery News.

The era of the Affordable Care Act is upon us, and short of an unlikely repeal following midterm elections, this will remain the law of the land. As surgical residents, most of us have neither the time nor mental stamina to become significantly entrenched in politics. As a result, many of us know less about the impact that the Affordable Care Act will have on our future livelihood than many of the Senators did when they passed the bill on December 24, 2009. While most of the public focus has been on the individual mandate, pre-existing conditions, and insurance exchanges, further hidden from the public eye are the methods by which our fundamental model for health care reimbursement will change.

Much of the mystery was dispelled for me this May, when I heard a lecture entitled "The Perfect Storm: The Affordable Care Act and the Repeal of the SGR" by Dr. Jeffrey Rich. Dr. Rich’s presentation was the 2014 Norman E. Shumway, MD, Visiting Professorship Lecture at Stanford (Calif.) University, a webcast of which is available at http://ctsurgery.stanford.edu/media/.

Dr. Rich has a unique perspective on the issue of health care reimbursement, as he has served both as president of STS from 2012-2013 and director of the Center for Medicare Management, part of the Centers for Medicare & Medicaid Services, in 2008, in the political tumult leading up to the passage of the Affordable Care Act. On top of this, he has remained a practicing cardiothoracic surgeon in the Sentara Health System and sits as director-at-large for the Virginia Cardiac Surgery Quality Initiative. It is impossible to overstate the impact that he and his staff have had on the future of health care reimbursement. His recent lecture highlighted the ideological change in payment models that the Affordable Care Act embodies, along with the carrots and the sticks that the government will be wielding over the next 5 years to change physician and hospital behavior. This, along with the untenable continuation of the Sustainable Growth Rate (SGR) with all of its problems, portends huge swings both positive and negative for the reimbursement of all doctors, and cardiothoracic surgeons in particular. Early adopters may find themselves with a much-needed windfall, while those who do not anticipate the changes may find themselves in dire financial straits.

First, let us examine where we stand. The United States spends 17.6% of its gross domestic product (GDP) on health care. The nearest rival sits at 12%. State and federal government together spent $1.5 trillion on health care in 2013. Add private insurance into the mix and the figure is $2.8 trillion. Our life expectancy has not followed the money, and the rate of increase in health care spending is far outstripping inflation and the growth in our GDP. Our spending has increased exponentially since the passage of the Social Security Amendments of 1965 and shows no sign of slowing down. These statistics are well publicized, and should no longer be a surprise to anyone.

Keeping in mind that hindsight is 20/20, it seems obvious how we got here. The private health insurance industry took off during WWII, when competitive wage controls were put in place to keep skilled laborers in jobs supporting the war effort. To compete for laborers, private sector employers began offering health insurance policies. Shortly thereafter, public pressure to provide a health care safety net culminated in the creation of Medicare and Medicaid in 1965, and our complex public/private health insurance environment was born. For the first decade or so, physician reimbursement was based on "reasonable charge," meaning that doctors sent a bill to Medicare and, if it was considered reasonable, the doctor was paid. This fee-for-service model can be seen as a blank check of sorts, in that it contained few stipulations to withhold repayment for redundant or unnecessary tests and procedures. Expenses associated with complications also were reimbursable. The incentive to "do more" was set. It is worth noting that the Social Security Amendments of 1965 are federal law, and the law stipulates that reimbursement is tied to the amount of work that a physician performs, which also forbids associating reimbursement with the quality of work that the physician produces. It takes an act of Congress to change such law.

The Affordable Care Act is that act. Dr. Rich’s work at CMS paved the way for the inclusion of "Title III: Improving the quality and efficiency of health care," which allows Medicare and Medicaid reimbursements to be altered based on efficiency and outcomes, moving away (although not disintegrating) the fee-for-service model. It incentivizes the development of Accountable Care Organizations and Clinically Integrated Networks to encourage cross-specialty collaboration within the fee-for-service model and lays the groundwork for physician and hospital reimbursement to be based on high-quality, efficient, and appropriate care.

This is the most comprehensive change to the status quo, but it is by no means the first. By 1975, the federal government could see that open fee-for-service was leading to skyrocketing health care costs. It began experimenting with ways to curb physician charges. It pegged reimbursements to the Medicare Economic Index (still used to update hospital reimbursements by 3.2%-3.6% per year) and then tried basing reimbursement on relative value units. Costs continued to rise. Thirty years after the 1965 law, as health care spending continued to spiral out of control, the Sustainable Growth Rate was applied to physician repayment as an attempt to reel it in. The basic premise was that increased costs from increased patient and procedure volume would be curbed by decreasing the reimbursement per procedure.

The sustainable growth model essentially placed a spending target that would grow in step with GDP using the total expenditures beginning in 1996 as a benchmark. If, during a given year, spending outstripped the target, the following year a compensatory decrease in physician reimbursement would be enacted. If spending were less than the target, then physician payments would increase. Expenditures have exceeded the target every year since 2002, and each year our spending gets further and further from the benchmark, compounding the penalty. If the SGR penalties were allowed, it is estimated that physician repayment would drop by 25%-35% in the next few years. Each time the penalty is about to be applied, a fix is passed by Congress, saving our livelihoods at the last minute. Although we should be thankful not to take a 35% pay cut, the SGR and its fixes increased physician repayment by a mere 5.1% between 1992 and 2012. For comparison, Social Security benefits, adjusted annually to compensate increasing cost of living, have risen 52.9% in the same period. Meanwhile, as I mentioned earlier, hospital reimbursement continues to be tied to the Medicare Economic Index, which yields a fairly predictable payment increase of 3.2%-3.6% each year. The Affordable Care Act operates as a law separate from the SGR law, though the two are closely intertwined.

Title III of the Affordable Care Act provides a number of new incentives and penalties that will help make efficiency and quality goals that affect profit at least as much as procedural volume. It will impact hospitals and physicians in a number of new and potentially positive ways. Most immediately concerning to hospitals and medical groups are the incentives for quality. With value-based purchasing, Medicare will withhold 2% of diagnosis-related group (DRG) reimbursements to hospitals at the beginning of a year, giving them the chance to earn it back at the end of the year if they meet quality and efficiency performance goals. The top performers will receive a bonus from the funds collected from those who do not meet goals, making this a budget-neutral operation. Cardiothoracic surgeons will feel this scrutiny early, as the first five DRGs subject to the law are acute myocardial infarction, heart failure, pneumonia, surgeries, and health care–associated infections. As time passes, more diagnoses will be added.

Payments will be based on bundled care, meaning that a hospital will be paid one sum to cover the peri-admission period, starting from 3 days prior to 30 days after admission. Complications, readmissions, and repeat tests will not generate additional funds for the hospital. You can expect that daily chest x-rays and multiple echocardiograms will generate a lot of e-mails to attending physicians. Other preventable hospital-acquired conditions, such as catheter-associated urinary tract infections and pressure ulcers, if present in rates beyond the norm for the country, could cut reimbursements an additional 1%. Patient satisfaction scores will influence hospital reimbursement. Readmission rates beyond the specified cutoff for each admission will result in a 3% hospital pay cut, again, starting with the same set of diagnoses. When meaningful use of electronic health records incentives are factored in, hospitals are looking at a 7% swing on reimbursements for the DRGs listed above by 2017. Hospitals typically operate on a profit margin around 3.5%.

On the individual physician level, there are a number of changes. Already in place was a bonus for participating in physician quality reporting systems (PQRS), such as the STS database. By 2016 the bonus for participating will become a 2% pay cut for not participating. Thankfully, our specialty has been forward thinking in this regard, and the majority of cardiothoracic practices already participate in the STS database. Similar to value-based purchasing, the physician value modifier will apply a 2% bonus or penalty to reimbursements, based on a broad spectrum of quality measures, including patient safety, population and community health, total cost per patient by condition, and patient experience. Again, this will be budget neutral. When all of the items are tallied, the lowest-performing providers could see a 6% decrease in their personal reimbursement.

The SGR has not been fixed with the Affordable Care Act. Dr. Rich, in his role as STS president, provided testimony to Congress leading up to the most recent attempt to reform the law. Part of the main thrust of his testimony was that each specialty needs to set its own outcomes standards through database-driven research. Incentives for improved outcomes need to be in place for all members of the heart team, not just the physicians. All three of the proposed bills that followed his testimony included such incentives, but they also included even more dismal updates to physician payments than we have seen in the past 20 years. For better or for worse, none of the bills passed, and we can look forward to more anxiety as we await the next SGR patch. Whatever durable solution passes will likely focus on these new models of payment but without a significant boost in hospital income.

Currently, the alternative payment model (APM) pilot programs are still being developed. CMS has a $10 billion budget to fund the pilot programs, and consulting groups that advised the agency chose cardiothoracic surgery as a top priority for APM development. Current discussions indicate that participants in APMs could get a 5% bonus and would not be subject to the physician value modifier.

So how does this apply to us residents? Despite our ground-level perspective, we must recognize that we are straddling two drastically different eras in the practice of medicine. It will be the duty of all of us, not just our attendings, to reduce our costs and provide better patient care. This may mean using our stethoscope more effectively or making those extra phone calls to avoid unnecessary or repeated tests. We need to rebel against the ideology of physician shift work by owning our patients, but still work effectively in that system. When it comes time to seek our first jobs, we should focus not just on the department that we will work on, but its context within the local hospital system. The most vibrant department within an unresponsive hospital system will drown in the future penalties, and likewise for an unenthusiastic department within a forward-thinking system. In short, we need to start training ourselves to be keener, sharper, and more agile physicians, and to position ourselves within like-minded environments. Perhaps more important than any of these, we need to reclaim the right to shape our own profession. In recent history there has not been a better opportunity for cardiothoracic surgeons as a group to assert themselves as adept physicians and leaders. Whether we become head of CMS, participate in STS fly-ins to Capitol Hill, write our congressman about the issues we face, or engage our hospitals to anticipate the coming changes, it is up to us to ensure that we have a future.

Dr. Zeigler is one of the outgoing resident medical editors for Thoracic Surgery News.

The era of the Affordable Care Act is upon us, and short of an unlikely repeal following midterm elections, this will remain the law of the land. As surgical residents, most of us have neither the time nor mental stamina to become significantly entrenched in politics. As a result, many of us know less about the impact that the Affordable Care Act will have on our future livelihood than many of the Senators did when they passed the bill on December 24, 2009. While most of the public focus has been on the individual mandate, pre-existing conditions, and insurance exchanges, further hidden from the public eye are the methods by which our fundamental model for health care reimbursement will change.

Much of the mystery was dispelled for me this May, when I heard a lecture entitled "The Perfect Storm: The Affordable Care Act and the Repeal of the SGR" by Dr. Jeffrey Rich. Dr. Rich’s presentation was the 2014 Norman E. Shumway, MD, Visiting Professorship Lecture at Stanford (Calif.) University, a webcast of which is available at http://ctsurgery.stanford.edu/media/.

Dr. Rich has a unique perspective on the issue of health care reimbursement, as he has served both as president of STS from 2012-2013 and director of the Center for Medicare Management, part of the Centers for Medicare & Medicaid Services, in 2008, in the political tumult leading up to the passage of the Affordable Care Act. On top of this, he has remained a practicing cardiothoracic surgeon in the Sentara Health System and sits as director-at-large for the Virginia Cardiac Surgery Quality Initiative. It is impossible to overstate the impact that he and his staff have had on the future of health care reimbursement. His recent lecture highlighted the ideological change in payment models that the Affordable Care Act embodies, along with the carrots and the sticks that the government will be wielding over the next 5 years to change physician and hospital behavior. This, along with the untenable continuation of the Sustainable Growth Rate (SGR) with all of its problems, portends huge swings both positive and negative for the reimbursement of all doctors, and cardiothoracic surgeons in particular. Early adopters may find themselves with a much-needed windfall, while those who do not anticipate the changes may find themselves in dire financial straits.

First, let us examine where we stand. The United States spends 17.6% of its gross domestic product (GDP) on health care. The nearest rival sits at 12%. State and federal government together spent $1.5 trillion on health care in 2013. Add private insurance into the mix and the figure is $2.8 trillion. Our life expectancy has not followed the money, and the rate of increase in health care spending is far outstripping inflation and the growth in our GDP. Our spending has increased exponentially since the passage of the Social Security Amendments of 1965 and shows no sign of slowing down. These statistics are well publicized, and should no longer be a surprise to anyone.

Keeping in mind that hindsight is 20/20, it seems obvious how we got here. The private health insurance industry took off during WWII, when competitive wage controls were put in place to keep skilled laborers in jobs supporting the war effort. To compete for laborers, private sector employers began offering health insurance policies. Shortly thereafter, public pressure to provide a health care safety net culminated in the creation of Medicare and Medicaid in 1965, and our complex public/private health insurance environment was born. For the first decade or so, physician reimbursement was based on "reasonable charge," meaning that doctors sent a bill to Medicare and, if it was considered reasonable, the doctor was paid. This fee-for-service model can be seen as a blank check of sorts, in that it contained few stipulations to withhold repayment for redundant or unnecessary tests and procedures. Expenses associated with complications also were reimbursable. The incentive to "do more" was set. It is worth noting that the Social Security Amendments of 1965 are federal law, and the law stipulates that reimbursement is tied to the amount of work that a physician performs, which also forbids associating reimbursement with the quality of work that the physician produces. It takes an act of Congress to change such law.

The Affordable Care Act is that act. Dr. Rich’s work at CMS paved the way for the inclusion of "Title III: Improving the quality and efficiency of health care," which allows Medicare and Medicaid reimbursements to be altered based on efficiency and outcomes, moving away (although not disintegrating) the fee-for-service model. It incentivizes the development of Accountable Care Organizations and Clinically Integrated Networks to encourage cross-specialty collaboration within the fee-for-service model and lays the groundwork for physician and hospital reimbursement to be based on high-quality, efficient, and appropriate care.

This is the most comprehensive change to the status quo, but it is by no means the first. By 1975, the federal government could see that open fee-for-service was leading to skyrocketing health care costs. It began experimenting with ways to curb physician charges. It pegged reimbursements to the Medicare Economic Index (still used to update hospital reimbursements by 3.2%-3.6% per year) and then tried basing reimbursement on relative value units. Costs continued to rise. Thirty years after the 1965 law, as health care spending continued to spiral out of control, the Sustainable Growth Rate was applied to physician repayment as an attempt to reel it in. The basic premise was that increased costs from increased patient and procedure volume would be curbed by decreasing the reimbursement per procedure.

The sustainable growth model essentially placed a spending target that would grow in step with GDP using the total expenditures beginning in 1996 as a benchmark. If, during a given year, spending outstripped the target, the following year a compensatory decrease in physician reimbursement would be enacted. If spending were less than the target, then physician payments would increase. Expenditures have exceeded the target every year since 2002, and each year our spending gets further and further from the benchmark, compounding the penalty. If the SGR penalties were allowed, it is estimated that physician repayment would drop by 25%-35% in the next few years. Each time the penalty is about to be applied, a fix is passed by Congress, saving our livelihoods at the last minute. Although we should be thankful not to take a 35% pay cut, the SGR and its fixes increased physician repayment by a mere 5.1% between 1992 and 2012. For comparison, Social Security benefits, adjusted annually to compensate increasing cost of living, have risen 52.9% in the same period. Meanwhile, as I mentioned earlier, hospital reimbursement continues to be tied to the Medicare Economic Index, which yields a fairly predictable payment increase of 3.2%-3.6% each year. The Affordable Care Act operates as a law separate from the SGR law, though the two are closely intertwined.

Title III of the Affordable Care Act provides a number of new incentives and penalties that will help make efficiency and quality goals that affect profit at least as much as procedural volume. It will impact hospitals and physicians in a number of new and potentially positive ways. Most immediately concerning to hospitals and medical groups are the incentives for quality. With value-based purchasing, Medicare will withhold 2% of diagnosis-related group (DRG) reimbursements to hospitals at the beginning of a year, giving them the chance to earn it back at the end of the year if they meet quality and efficiency performance goals. The top performers will receive a bonus from the funds collected from those who do not meet goals, making this a budget-neutral operation. Cardiothoracic surgeons will feel this scrutiny early, as the first five DRGs subject to the law are acute myocardial infarction, heart failure, pneumonia, surgeries, and health care–associated infections. As time passes, more diagnoses will be added.

Payments will be based on bundled care, meaning that a hospital will be paid one sum to cover the peri-admission period, starting from 3 days prior to 30 days after admission. Complications, readmissions, and repeat tests will not generate additional funds for the hospital. You can expect that daily chest x-rays and multiple echocardiograms will generate a lot of e-mails to attending physicians. Other preventable hospital-acquired conditions, such as catheter-associated urinary tract infections and pressure ulcers, if present in rates beyond the norm for the country, could cut reimbursements an additional 1%. Patient satisfaction scores will influence hospital reimbursement. Readmission rates beyond the specified cutoff for each admission will result in a 3% hospital pay cut, again, starting with the same set of diagnoses. When meaningful use of electronic health records incentives are factored in, hospitals are looking at a 7% swing on reimbursements for the DRGs listed above by 2017. Hospitals typically operate on a profit margin around 3.5%.

On the individual physician level, there are a number of changes. Already in place was a bonus for participating in physician quality reporting systems (PQRS), such as the STS database. By 2016 the bonus for participating will become a 2% pay cut for not participating. Thankfully, our specialty has been forward thinking in this regard, and the majority of cardiothoracic practices already participate in the STS database. Similar to value-based purchasing, the physician value modifier will apply a 2% bonus or penalty to reimbursements, based on a broad spectrum of quality measures, including patient safety, population and community health, total cost per patient by condition, and patient experience. Again, this will be budget neutral. When all of the items are tallied, the lowest-performing providers could see a 6% decrease in their personal reimbursement.

The SGR has not been fixed with the Affordable Care Act. Dr. Rich, in his role as STS president, provided testimony to Congress leading up to the most recent attempt to reform the law. Part of the main thrust of his testimony was that each specialty needs to set its own outcomes standards through database-driven research. Incentives for improved outcomes need to be in place for all members of the heart team, not just the physicians. All three of the proposed bills that followed his testimony included such incentives, but they also included even more dismal updates to physician payments than we have seen in the past 20 years. For better or for worse, none of the bills passed, and we can look forward to more anxiety as we await the next SGR patch. Whatever durable solution passes will likely focus on these new models of payment but without a significant boost in hospital income.

Currently, the alternative payment model (APM) pilot programs are still being developed. CMS has a $10 billion budget to fund the pilot programs, and consulting groups that advised the agency chose cardiothoracic surgery as a top priority for APM development. Current discussions indicate that participants in APMs could get a 5% bonus and would not be subject to the physician value modifier.

So how does this apply to us residents? Despite our ground-level perspective, we must recognize that we are straddling two drastically different eras in the practice of medicine. It will be the duty of all of us, not just our attendings, to reduce our costs and provide better patient care. This may mean using our stethoscope more effectively or making those extra phone calls to avoid unnecessary or repeated tests. We need to rebel against the ideology of physician shift work by owning our patients, but still work effectively in that system. When it comes time to seek our first jobs, we should focus not just on the department that we will work on, but its context within the local hospital system. The most vibrant department within an unresponsive hospital system will drown in the future penalties, and likewise for an unenthusiastic department within a forward-thinking system. In short, we need to start training ourselves to be keener, sharper, and more agile physicians, and to position ourselves within like-minded environments. Perhaps more important than any of these, we need to reclaim the right to shape our own profession. In recent history there has not been a better opportunity for cardiothoracic surgeons as a group to assert themselves as adept physicians and leaders. Whether we become head of CMS, participate in STS fly-ins to Capitol Hill, write our congressman about the issues we face, or engage our hospitals to anticipate the coming changes, it is up to us to ensure that we have a future.

Dr. Zeigler is one of the outgoing resident medical editors for Thoracic Surgery News.