Healthcare Business News

Bipartisan plan calls for SGR repeal, replaced by payment updates, value-based care

By Jessica Zigmond
Posted: February 6, 2014 - 3:30 pm ET

(Story updated Feb. 6 at 2:30 p.m. Central time.)

Congressional lawmakers on Thursday unveiled a bicameral, bipartisan agreement to repeal Medicare's physician payment formula and replace it with a system that would provide stable payment updates for five years and shift Medicare to a system based on value versus volume of care.

The deal is the product of three congressional committees—Senate Finance, House Ways and Means and House Energy and Commerce—working to eliminate Medicare's sustainable growth-rate formula and offer incentives for Medicare-participating physicians to move to alternative payment models.

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Called the SGR Repeal and Medicare Provider Payment Modernization Act, the legislation would permanently repeal the SGR and provide an annual update of 0.5% from 2014 through 2018. The 2018 payment rates would be maintained through 2023 so physicians have time to receive additional payments through a merit-based incentive payment system.

Still to come are details on how lawmakers would cover the agreement's cost to repeal and replace the SGR, which is about $126 billion over 10 years, according to a GOP aide.

“This proves that the two parties and the two chambers can work together when policy is put before politics,” Rep. Joe Pitts (R-Pa.), chairman of the House Energy and Commerce Health Subcommittee, said in a statement. “We are, however, only half way there. We only have agreement on policy,” he continued. “We still have to figure out how to pay for it, and I am under no illusions about how difficult that may be. We are going to do our best. We've already done more than most people thought was possible."

Starting in 2018, payments in the new system would be adjusted based on performance in the new incentive-pay system, referred to as MIPS, which would consolidate three current incentive programs: the Physician Quality Reporting System (PQRS), which provides incentives for physicians to report on the quality of care measures; the Value-Based Payment Modifier, which adjusts payment based on quality use of resources; and meaningful use of electronic health records.

The new MIPS would apply to doctors of medicine or osteopathy, dental surgery or dental medicine, podiatric medicine, chiropractors, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists. Other professionals who are paid under the physician fee schedule may be included starting in 2020 if viable performance metrics are available then.

Meanwhile, the agreement provides a 5% bonus to providers who receive a significant portion of their revenue from an alternative payment model that includes a quality-measurement component and risk of financial losses or a patient-centered medical home. Participants in the program would have to receive at least 25% of their Medicare revenue through an alternative payment model in 2018-2019, and the threshold would increase over time. The policy also provides incentives for private-payer alternative payment models. And it establishes a technical advisory committee to review and recommend physician-developed alternative payment models based on criteria developed through an open-comment process.

The SGR was established in 1997 to control physician spending, but since 2003, Congress has spent about $150 billion to provide short-term fixes to spare physicians from a huge Medicare payment cut each year they say would compromise how they treat patients and do business. If Congress passes legislation to permanently eliminate the SGR, Medicare-participating physicians would avert the 23.7% payment cut scheduled to kick in April 1.

In a statement, Dr. Ardis Dee Hoven, president of the American Medical Association, congratulated lawmakers for finding common ground on a contentious issue that has bedeviled lawmakers for years.

“This legislation is the product of months of unprecedented bipartisan, bicameral work to reach this landmark agreement to build a stronger Medicare program,” Hoven said in her statement. “Throughout the legislative process, the bill authors have been receptive to AMA's recommendations to improve the policy.”

Members of the committees that drafted the deal praised one another for agreeing on policies that could finally push Medicare's dated physician payment system into the 21st century. The announcement came on the same day the U.S. Senate voted to confirm Senate Finance Committee Chairman Max Baucus (D-Mont.) as ambassador to China. Many have said Baucus wants to fix the SGR before he leaves Congress.

“Congress has spent a decade lurching from one 'doc fix' to the next, creating a new, unnecessary threat to seniors' care each time. Enough is enough,” Baucus said in a statement. “This proposal would bring that cycle to an end and fix the broken system. Our bill makes Medicare's physician payments more modern and efficient, and it will protect seniors' access to their doctors,” he continued. “This bill is the product of years of hard work, and I hope Congress comes together to pass it.”

Follow Jessica Zigmond on Twitter: @MHjzigmond

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