Published 3/1/2013
Catherine Boudreaux

Is a Permanent Fix Close?

Movement to replace SGR gaining momentum

For more than a decade, physicians have been subject to annual threats of reductions in reimbursement—each larger than the previous year’s. The Sustainable Growth Rate (SGR), which debuted in 1997 as a Medicare cost containment strategy, has called for cuts in Medicare payments to physicians every year since 2002. Congress has repeatedly intervened to postpone the cuts, but each time it does so, the cost of “fixing” the formula increases.

A recently released report from the Congressional Budget Office (CBO), however, is giving new energy to efforts to repeal the SGR formula and replace it with a more realistic measure. The CBO’s latest budget outlook estimates that freezing the formula for 10 years would cost $138.3 billion—significantly less than both the $316 billion price tag projected just a year ago, and the $243.7 billion estimate from November 2012.

According to the CBO, the decrease is “primarily because of lower spending for physicians’ services in recent years.” Because the formula ties future payment updates to the difference between spending in previous years and estimated spending established by law, the lower spending now would result in payment increases in 2015.

The American Association of Orthopaedic Surgeons (AAOS) is working with several stakeholders to develop proposals that aim to ultimately repeal and replace the flawed formula.

Experts agree that any effort to repeal the SGR must occur quickly before the CBO reassesses its scoring methods. Glenn Hackbarth, who chairs the Medicare Payment Advisory Commission, has urged lawmakers to move quickly, because “the sale may not last forever. If experience is any guide, projections of this sort vary over time.”

Lawmakers seem to be listening. House Energy and Commerce Committee Chairman Rep. Fred Upton (R-Mich.) recently announced his intentions for the House to pass a permanent fix to the SGR before the August recess, and two proposals have been introduced for this very purpose.

Reintroduced legislation
In early February, Reps. Allyson Schwartz (D-Pa.), Joe Heck (R-Nev.), and seven other cosponsors reintroduced the Medicare Physician Payment Innovation Act (HR 574), bipartisan legislation that was initially introduced in 2012.

The legislation would keep payment rates at their current level until Jan. 1, 2015 and repeal the SGR. In its place, a stable payment schedule would be established so physicians can anticipate changes to Medicare reimbursement. The bill gives differential payments to primary care providers and providers who administer “preventive services.” The bill would also provide incentives for physicians to use bundled payment models such as an episode of care payment. Such models should take into account the severity and complexity of patient diagnoses. The bill also asks the Government Accountability Office to perform an analysis of alternative payment and delivery models.

Draft proposal
The House Ways and Means and the Energy and Commerce Committees jointly introduced a draft proposal to repeal and replace the SGR in three phases. According to the proposal, any repeal must satisfy the following criteria:

  • not increase the deficit
  • involve the physician community and other stakeholders
  • foster clinically meaningful care for patients
  • encourage achievable improvements in quality, efficiency, and patient outcomes based on physician-endorsed measures
  • be applicable to all specialties, practice arrangements, and geographic locations
  • encourage quality and efficiency over volume
  • motivate all stakeholders to adopt reforms

The first phase would be a period of “predictable, statutorily defined payment rates” enabling physicians to transition to and play a prominent role in payment reform.

The second phase would reform the current payment system and provide positive payment updates based on a physician’s performance on meaningful, physician-endorsed measures of care quality and participation in clinical improvement activities. Specialty societies would be involved in developing the quality measures. Physicians will be provided with timely access to data so they can adjust their practices accordingly. An appeals process will be established to ensure accuracy, and rankings will be risk-adjusted among physician specialties.

The last phase would afford physicians the opportunity to earn additional payments based on the efficiency of care. Plans to develop complementary reforms would also be considered.

Neither legislative proposal identifies how the projected cost of a full SGR repeal would be paid for. AAOS remains committed to working with Congressional representatives to identify appropriate sources that will not increase the burden on physicians nor decrease access to patient care.

Catherine Boudreaux is the manager, government relations, in the AAOS office of government relations. She can be reached at boudreaux@aaos.org