Published 1/1/2014
Thomas C. Barber, MD; Elizabeth Fassbender; Catherine Boudreaux, MPP

SGR Repeal and Replacement Moves Forward

Efforts to repeal and replace the sustainable growth rate (SGR) formula are moving closer to being realized. On Dec. 12, 2013, the Senate Finance and the House Ways and Means committees passed bipartisan bills to permanently repeal the SGR—the first step in replacing the outdated formula.

The measure passed by the Ways and Means committee will now need to be combined with one approved earlier by the House Energy and Commerce Committee before legislation goes to the full House and Senate for consideration. Separately, a 3-month SGR patch was also included in the bipartisan budget bill passed last month, which ensures doctors are not subject to cuts while Congress irons out the final details of the SGR’s replacement formula.

“A permanent fix of the SGR formula is essential in addressing uncertainty posed by temporary patches and in improving care delivery for Medicare patients,” stated Joshua J. Jacobs, MD, president of the American Association of Orthopaedic Surgeons (AAOS). “Although the AAOS remains concerned about some recommended changes in the legislation, we appreciate the committees’ recent revisions and look forward to their enacting legislation that will reward quality practitioners and ensure the highest quality of care for Medicare patients.”

Current Medicare physician payment rates, based on the SGR formula, have not kept pace with increases in medical practice costs and are subject to annual cuts. Since 2003, Congress has enacted short-term patches to avoid these cuts. However, a permanent solution is necessary to eliminate the recurring uncertainty for doctors and hospitals that treat Medicare patients.

AAOS efforts
As Congress has worked on a permanent fix, the AAOS has taken a number of steps to ensure that the concerns of orthopaedic surgeons are addressed. Throughout the legislative process, AAOS members, leadership, and staff have been meeting with legislators and their staff in Washington, D.C. These meetings have included sessions with Senate Finance committee staff; Congressional leadership staff; Rep. Kevin Brady (R-Texas), who chairs the House Ways and Means Subcommittee on Health; and House Republican Whip Kevin McCarthy (R-Calif.).

Efforts also included a fly-in for AAOS leadership and other volunteers to meet with key members of Congress on the House Energy and Commerce and Ways and Means committees and the Senate Finance committee. In addition, the AAOS submitted comments on draft legislation to Congressional committees at every opportunity. Because at least seven drafts were presented—including one draft from Senate Finance, four drafts from House Energy and Commerce, and three drafts from House Ways and Means—this helped reinforce the AAOS message and rationales for change.

The AAOS also answered written questions from committee staff and participated in stakeholder meetings with Congressional leadership and initiated a grassroots effort urging members of Congress to sign onto a letter calling for a permanent repeal of the SGR.

Finally, the AAOS worked with various coalitions and specialty societies and used sign-on letters to increase support for its concerns.

Getting results
In response to the efforts by the AAOS and other medical groups, the following provisions are included in the “Medicare Patient Access and Quality Improvement Act of 2013” passed by the House Ways and Means and the Senate Finance committees.

Reducing reporting burdens on physicians: The legislation consolidates the Physician Quality Reporting System (PQRS), the Value-Based Modifier, and the Meaningful Use of Electronic Health Records (EHR), which will remove many of the reporting burdens faced by physicians.

Recognizing improvement: In response to AAOS concerns, physicians will now also be assessed on individual efforts to engage in clinical practice improvement activities, essentially allowing physicians to receive credit for individual self-improvement.

Increasing flexibility: This legislation also provides greater flexibility for physicians to meet the highest standards possible while reducing administrative burdens. For example, physician options to qualify for quality measures and clinical practice improvements include EHRs, clinical quality data registries, and the option to be assessed as a group or an individual. The measure also provides for technical assistance and gives priority to practices with low value-based modifier scores and those in rural and underserved areas, and includes $25 million in annual funding from 2014 to 2018 to support these efforts. It also requests that professionals receive timely feedback.

The new legislation also completely removes the previous language to review expenditures within the global surgical package.

This legislation also allows professionals who opt out of Medicare to privately contract with beneficiaries to automatically renew at the end of each 2-year cycle and creates a demonstration project related to billing by nonparticipating physicians.

Stabilizing payments: The Ways and Means proposal provides a 0.5 percent payment update through 2017 and maintains stable payments through 2023. It also requires additional research and recommendations on how to improve risk-adjustment methodology to ensure that professionals are not penalized for serving sick or more costly patients.

In addition, after many physician groups, including the AAOS, expressed concern that 2017 was too soon to transition into a new payment model, the new legislation decreased the payment amount at risk. Instead of putting 8 percent at risk starting in 2017, the legislation reduces it to 4 percent in 2017, 6 percent in 2018, and 10 percent in 2020.

Clarifying “standard of care”: The Ways and Means proposal clarifies that the development of any quality or clinical guideline in Medicare or through other laws cannot be construed to establish a standard of care or duty of care. The AAOS fought hard for this and it is a welcome provision.

Adjusting valuation review: The new framework makes two positive changes from the old framework regarding the valuation review process. First, the framework completely removes the 10 percent penalty for physicians who are selected but choose not to participate in the process. Second, the framework lowers the percentage of misvalued services that must be found from 1 percent of the total amount of the fee schedule expenditures to 0.5 percent.

Other provisions
In addition to SGR repeal, the bill would, if enacted, allow physicians to continue to be paid on a fee-for-service basis, provide incentives for physicians who participate in alternative payment programs and patient-centered medical homes, consolidate all existing federal quality reporting programs into a single program, and establish bonuses and penalties for meeting certain quality benchmarks. Several amendments were also added to the Senate version, including one to extend the Medicare Dependent Hospital and Low-Volume Hospital programs and another to provide technical assistance to small rural providers in the value-based purchasing program.

The next step will be for legislators to decide how to pay for the measure before it can move forward, which could prove to be a major stumbling point. One idea is to include a final version of the SGR measure in a debt ceiling agreement in early February. Further, the House GOP Doctors Caucus has stated they want any SGR bill taken up on the House floor to meet a series of requirements or risk losing their support. Nonetheless, there remains significant momentum to reach an agreement that could be enacted early this year.

Although the AAOS remains concerned about some provisions of this legislation, the committees have listened to many AAOS requests and made significant improvements from their original framework in the current legislation. Additionally, the AAOS has worked closely with the relevant committees and will continue to express orthopaedic concerns to ensure that the voices of orthopaedists are heard throughout this process. Physicians should have adequate support to provide coordinated care that will improve health, prevent costly complications, and enable physician participation in new payment and delivery models.

Thomas C. Barber, MD, chairs the AAOS Council on Advocacy; Elizabeth Fassbender is the communications specialist in the AAOS office of government relations; Catherine Boudreaux, MPP, is the manager of government relations in the AAOS office of government relations. Questions on this article can be addressed to dc@aaos.org

For links to the proposed legislation, AAOS comment letters, and other advocacy resources relating to the repeal of the SGR formula, see below.