Orthopaedic input was key in helping to develop the SGR Repeal and Medicare Provider Payment Modernization Act, resulting in several features important to the specialty.
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Published 3/1/2014
Thomas C. Barber, MD; Elizabeth Fassbender

SGR Repeal, Replacement Legislation Introduced

On Feb. 6, 2014, key committees in the U.S. House of Representatives and U.S. Senate reached an agreement on legislation to permanently repeal and replace the flawed sustainable growth rate (SGR) formula that governs physician payments under Medicare.

Since 2003, the SGR formula has generated increasingly larger proposed cuts to physician payments, and Congress has responded by enacting legislative “patches” to prevent them while simultaneously promising a permanent solution. Months of intense negotiations finally led to the introduction of H.R. 4015/S. 2000, The SGR Repeal and Medicare Provider Payment Modernization Act of 2014.

H.R. 4015/S. 2000 represents the most significant step yet toward replacing Medicare’s current payment formula. The bill is based on bipartisan legislation unanimously approved by three separate legislative committees—the House Committees on Energy & Commerce and Ways & Means and the Senate Finance Committee. Medical associations, including the American Association of Orthopaedic Surgeons (AAOS), provided significant input that helped shape the legislation.

“I am delighted to report that Congress has listened carefully to our input as reflected by the positive inclusion of many of our suggestions,” said AAOS President Joshua J. Jacobs, MD. “Based on our current understanding of the bill, AAOS congratulates Congress for this legislation and looks forward to working closely with the relevant committees.”

As previously reported in AAOS Now (January 2014), the AAOS took a number of steps to make sure that the legislation addressed the concerns of orthopaedic surgeons. AAOS members were in Washington, D.C., on the day the bill was introduced to discuss the in-office ancillary services issue as it relates to SGR. The AAOS also submitted a letter to Congress expressing appreciation for the work involved in developing the legislation and highlighting several important provisions that were incorporated into the bills to reform the way Medicare providers are reimbursed. These include consolidating three separate merit-based programs into a single program, rewarding use of alternative payment models, and encouraging adherence to appropriate use criteria.

What’s included?
H.R. 4015/S. 2000 guarantees doctors a 0.5 percent per year positive update for each of the next 5 years. This provision was originally part of the Ways and Means proposal and more than the update included in the Senate version. It is also significantly better for physicians than the proposed 10-year payment freeze that was part of an earlier draft, which AAOS and other physician groups opposed. The updates are meant to help physicians transition to a new payment system in a timely manner.

Additionally, after many physician groups, including the AAOS, expressed concern that 2017 was too soon for physicians to transition into a new payment model, H.R. 4015/S. 2000 delays implementation of new payment models until 2018 and further eases the transition by decreasing the payment amount at risk under the new Merit-Based Incentive Payment System (MIPS).

MIPS is the result of consolidating three existing incentive, or merit-based, programs—the Physician Quality Reporting System (PQRS), the Value-Based Modifier (VBM), and Meaningful Use of Electronic Health Records (EHR MU). The consolidated program will remove many of the reporting burdens physicians face and will be based on performance measures selected by each physician from a menu of performance measures created by specialty-specific associations.

The MIPS program will assess providers on quality, resource use, meaningful use, and clinical practice improvements. Under previous draft legislation, penalties for providers who did not meet the criteria would have equaled 8 percent of total Medicare payments, beginning in 2018. Under the revised H.R. 4015/S. 2000, however, the penalty gradually increases from 4 percent in 2018, to 5 percent in 2019, 7 percent in 2020, and 9 percent in 2021.

The legislation also requires more research and recommendations on how to improve risk-adjustment methodology to ensure that professionals are not penalized for serving sick or more costly patients.

Finally, the legislation provides greater flexibility for physicians to meet the highest standards possible and to reduce administrative burdens. Options for meeting these standards include the use of EHRs and participation in qualified clinical quality data registries. The legislation also provides for $40 million annually from 2014 to 2018 for technical assistance for practices with 15 or fewer professionals and gives priority to practices in rural and underserved areas.

Reactions from legislators continue to be positive and hopeful that the legislation will be approved. “There is no more destructive or pernicious federal policy for the delivery of health care to America’s seniors than the SGR formula,” said Rep. Michael C. Burgess, MD (R-Texas), vice chair of the House Health and Oversight and Investigations Subcommittees. “For the first time, Congress has come together in a bipartisan fashion to show the seriousness of removing the SGR.

“This bill puts medicine back in charge and allows providers to work collaboratively with the Centers for Medicare & Medicaid Services to determine the appropriate methodology to accurately measure quality,” continued Rep. Burgess. “In addition, by maintaining a fee-for-service option, more providers are likely to remain in the system. The progress we have made this year toward repealing and replacing the SGR is unparalleled, but it is not the end of our efforts. We will continue to fight for a stable update beyond the first 5 years.”

What is next?
Because current pay-as-you-go rules require that Congress ensure most new spending is offset by spending cuts, the next hurdle for H.R. 4015/S. 2000 will be to find a way to pay for the legislation, which is currently calculated to cost $126 billion. As this article went to print, no pay-fors had been identified, though several deficit-reduction options are being discussed that would offset the price of repealing and replacing the SGR. AAOS will continue to work with Congress as the offsets are determined and speak out against any effort to remove in-office ancillary services from physician offices.

“As Congress enters into final negotiations to discuss offsets, we want to encourage legislators to refrain from using any provisions that could harm the physician–patient relationship and impede a patient’s ability to receive timely and appropriate care,” said Dr. Jacobs.

Once the pay-fors are decided, Congress will not have much time to act. The current SGR patch expires on March 31, 2014, at which point the SGR formula calls for a 24 percent across-the-board cut to physician payments.

For the latest SGR news, visit the AAOS office of government relations web page, www.aaos.org/dc

Thomas C. Barber, MD, chairs the AAOS Council on Advocacy; Elizabeth Fassbender is the communications specialist in the AAOS office of government relations.

Key Points of H.R. 4015/S. 2000

  • Increases physician payments under the current fee-for-service program 0.5 percent each year for the next 5 years, while transitioning to a value-based payment formula
  • Consolidates current Medicare quality programs (PQRS, VBM, and EHR MU) into a single program (MIPS)
  • Implements a process to improve payment accuracy for individual provider services
  • Provides incentives for care coordination efforts for patients with chronic care needs
  • Introduces physician-developed clinical care guidelines to reduce inappropriate care that can harm patients and result in wasteful spending
  • Requires development of quality measures and ensures close collaboration with physicians and other stakeholders regarding the measures used in the performance program
  • Provides a 5 percent bonus to providers who receive a significant portion of their revenue (minimum of 25 percent of Medicare revenue) from a patient-centered medical home or an alternative payment model (APM), such as a bundled payment or risk-sharing arrangement
  • Establishes a Technical Advisory Committee to review and recommend physician-developed APMs based on criteria developed through an open comment process
  • Makes public quality and utilization data through the Physician Compare website
  • Allows qualified entities to provide analysis and underlying data to providers for purposes of quality improvement, subject to relevant privacy and security laws
  • Allows qualified clinical data registries to purchase claims data for purposes of quality improvement and patient safety

(Source: House Committees on Energy & Commerce and Ways & Means and the Senate Committee on Finance Staff)