Lawmakers hashing out yet another temporary patch to prevent big cuts in Medicare's pay for physicians may have a narrow window to scrap the entire controversial formula. Many provider groups are pushing federal legislators to seize the opportunity.

A scenario for jettisoning Medicare's sustainable growth-rate formula emerged amid recently launched talks over House-passed legislation that would delay a scheduled 27.4% cut for two years. Instead of another pay patch, Democrats have urged the use of one-time savings from the end of the Iraq War to cover the cost of replacing the formula.

Some leading provider groups have joined that effort as a way to avoid the cuts to non-physician providers—whose reimbursement was reduced to pay for the patch—and as a fleeting chance to end the yearslong drama of Congress scrambling to avert a cycle of looming cuts.

“We've talked to a number of Republican offices” about the proposal to scrap the SGR, said Anders Gilberg, senior vice president of government affairs for the MGMA. “They're not completely opposed to the idea of it, so that's what we're pursuing.”

Republicans, especially the members of the GOP Doctors Caucus, said they strongly support replacing the SGR but doing so in a fiscally responsible way.

Critics of the claimed savings from war spending, known as Overseas Contingency Operations funding, describe it as an accounting gimmick that exists only on congressional budget documents that automatically project forward all current spending as ongoing. Those projections will disappear when Congress passes a new defense spending bill.

But proponents of using that savings—sufficient to cover the nearly $300 billion 10-year cost of replacing the SGR—view it as appropriate because they say the Medicare physician formula also amounts to an accounting gimmick. That is, Congress created the SGR formula as a way to constrain the growth of the program, but Congress has repeatedly waived it over the last decade and its members widely view implementing such cuts as unrealistic.

The use of the war offsets is apparently gaining ground among congressional Republicans, with several reporting that they support using some version of the funding for a permanent repeal.

“Momentum is building to use the war savings for a permanent fix,” said American Hospital Association Executive Vice President Richard Pollack.

But the limited prospects are evident in the lack of actual legislative language for such a plan. Democratic staffers said there are no imminent plans to offer such language.

“If that's their proposal, then let's see the legislative language and it may be something to consider,” said Rep. Tom Price (R-Ga.), a member the influential Doctors Caucus and a negotiator on the SGR bill.

Serious hurdles to a permanent fix continue to hinder a formal repeal proposal, health policy experts said. Beyond challenges to the gimmickry of the war savings, supporters remain uncertain whether the administration would go along with that approach.

President Barack Obama proposed in his State of the Union speech to use the savings to fund infrastructure projects and to reduce the federal government's debt.

An administration official remained vague when asked if the president would oppose the use of the funds as an offset for an SGR replacement.

“The president intends to keep moving forward with these proposals so we can rebuild an economy where hard work pays off and responsibility is rewarded,” an official said in a written response to Modern Healthcare. “The president remains committed to fixing the SGR and will continue to work with Congress to prevent Medicare physician payment cuts in a fiscally responsible way.”

Even among Republicans who are tempted to use the war savings to fund repeal, some remain worried that it would complicate the budget picture and even undermine funding for aspects of the war on terror beyond Iraq.

Provider advocates are worried, as well, that the size of the SGR repeal and competing budget priorities could produce a compromise in which cuts to non-physician providers are needed in addition to the war savings.

“If that were the case, we would prefer a temporary patch with no provider cuts,” said Shawn Gremminger, assistant vice president for legislative affairs at the National Association of Public Hospitals and Health Systems.

The $44.6 billion in healthcare cuts included in the two-year SGR patch that the House passed have drawn strong concerns from hospital advocates. Those reductions include $8 billion from a prevention fund created by the healthcare reform law and $13.4 billion in that law's health insurance exchange premium subsidies.

Hospitals are most concerned about a $10.6 billion cut from the bad debt payment program; $8.5 billion from reducing payments based on where care is provided; and $4.1 billion from rebasing disproportionate-share hospital payments.

For instance, safety net hospitals, which make up only 2% of hospitals, expect that 15% of the location-based payment reductions will come from them. “Their efforts to expand outpatient care have dramatically expanded access to care in low income urban areas but it has left them vulnerable to this kind of cut,” Gremminger said.

Beyond the major hurdle of funding an overhaul of the SGR, another potential roadblock is uncertainty over what type of system should replace it.

Rep. Allyson Schwartz (D-Pa.) has created a replacement proposal for the SGR if funds are found elsewhere to pay for scrapping the program.

Schwartz, a member of the committee negotiating an SGR solution, hopes the panel will use her proposal to replace the program, said a staffer. However, the proposal's lack of bipartisan support to date does not bode well for it.

If members of Congress cannot agree to some form of replacement for the formula, Republicans and Democrats agree that the challenge will only grow. Specifically, the two-year patch will cost $39 billion while increasing the cost of repeal to $346 billion. And even if it were adopted, physicians would face a 36% cut in Medicare payments in January 2014.