Since 2003, Congress has passed 17 patches to the SGR and has spent approximately $150 billion to avoid cuts in physician payments.
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Published 5/1/2014
Thomas C. Barber, MD; Elizabeth Fassbender

Divided Congress Fails to Repeal SGR

Physicians get yet another SGR patch

Earlier this year, Congress came closer than it ever had before to permanently repealing and replacing the flawed sustainable growth rate (SGR) form­ula. Bipartisan legislation had been proposed with substantial support, but differences between Republicans and Democrats on how to pay for the fix resulted in a last-minute maneuver to avoid a 24 percent reduction in physician payment fees under Medicare—through yet another short-term patch.

The measure signed by President Obama on April 1 suspends reimbursement cuts for 12 months and extends other health-related provisions that were set to expire.

Despite producing bipartisan, bicameral policy to permanently repeal and replace the SGR in a patient-centric, fiscally responsible way, Congress failed to act before the March 31 deadline—disappointing the American Association of Orthopaedic Surgeons (AAOS) and many other medical groups.

What happened?
Unprecedented bipartisan and bicameral agreement on permanent SGR legislation together with favorable budget scoring from the Congressional Budget Office (CBO) led many to believe that permanent SGR reform could be achieved. However, progress stalled after legislators were unable to reach an agreement on how to pay for the bill. (See
“SGR Repeal, Replacement Legislation Introduced,” AAOS Now, March 2014.)

As the April 1 deadline neared, House Republicans attempted to use the SGR repeal to undermine the Affordable Care Act (ACA) by delaying penalties for individuals who fail to comply with the individual mandate. However, such a provision would mean the bill was “dead on arrival” in the Democratic-controlled Senate and faced a veto from President Obama. Ultimately, the House passed H.R. 4302, the “Protecting Access to Medicare Act of 2014,” by voice vote on March 27.

Following the House vote, which garnered last-minute opposition and caused confusion on the House floor, Frederick M. Azar, MD, AAOS president, released a statement criticizing the latest development.

“The AAOS is profoundly disappointed by the actions of the House in passing the latest SGR patch,” Dr. Azar stated. “Yesterday’s controversial voice vote not only advanced the 17th straight SGR patch despite bipartisan objection but also ignored the appeals of the medical community and undermined future passage of permanent SGR reform. Continued access to care for patients and a return to certainty for physicians require a permanent solution.”

In the Senate, Ron Wyden (D–Ore.) proposed to pass a permanent fix paid for by reducing unused war funds by $197 billion. “We have a choice. We can either continue on with the status quo in Medicare by enacting a 17th patch—reinforcing a flawed payment formula that jeopardizes seniors’ access to their doctors, pits provider groups against each other, and fails to actually improve the Medicare program. Or, we can end the budget fiction that is the SGR, provide certainty to seniors and their doctors, and get the ball moving on bipartisan Medicare reforms,” Sen. Wyden stated.

Other senators expressed their frustrations as well. Sen. Tom Coburn (R–Okla.) insisted that if legislators couldn’t permanently fix the SGR, they “don’t deserve to be here.” Sen. Ben Cardin (D–Md.) urged Congress to pass a permanent solution, stating, “We have two options: Another temporary fix, continuing uncertainty, continuing this problem down the road, asking those who didn’t cause it to pay for it, even though it’s already been paid for before—or we could really take care of it.”

Still, with just hours before the reimbursement cuts were scheduled to go into effect, the Senate easily passed identical language to H.R. 4302 with a bipartisan vote of 64–35.

What’s included in the patch
H.R. 4302 replaces the 24 percent cut in Medicare reimbursement for physicians with a 0.5 percent update through April 1, 2015. Further, the bill includes funding for various other Medicare provisions that were set to expire and calls for a 1-year delay in implementing the International Classification of Diseases–10th edition (ICD-10).

In addition, H.R. 4302 does the following:

  • extends the 2-midnight rule auditing program for hospitals for 6 months
  • extends the Medicare work Geographic Practice Cost Index (GPCI) floor for 1 year
  • extends the Medicare therapy cap exception process for 1 year
  • establishes computed tomography equipment radiation dose standards for purposes of payment under the Medicare program
  • sets into place appropriate use criteria (AUC) for imaging services ordered by medical providers under the Medicare program
  • uses the $2.3 billion set aside for SGR in the Bipartisan Budget Act of 2013
  • allows the Secretary of Health and Human Services (HHS) to use information received from medical providers and other sources to adjust code pricing to address misvalued codes used under the Medicare Physician Fee Schedule (MPFS)
  • Realigns the Medicare sequester in 2024 without increasing the overall effect of the sequester on Medicare providers

AUC provisions
An attempt to rein in increasing imaging costs is also included in the legislation by requiring the use of AUC. Under H.R. 4302, only physician-developed or endorsed AUC for imaging services can be used and applied to Medicare providers as of January 2017. Ordering professionals must consult with one or more qualified clinical decision-support mechanisms; these mechanisms may include electronic health record (EHR) technology, private sector clinical decision-support mechanisms independent from certified EHR technology, or clinical decision-support mechanisms established by the Secretary of the HHS.

Ordering professionals who are outliers under this rule will need to obtain prior authorization for applicable imaging services beginning Jan. 1, 2020. The determination of an outlier will be based on 2 years of data; data collection will begin Jan. 1, 2017.

AAOS is in the process of developing AUCs and has worked with the relevant congressional committees to ensure that the following criteria are applied to any AUCs:

  • They will be provider-led and endorsed by professional medical societies.
  • Clinical decision-support tools will include web-based portals and mobile applications (such as the AAOS AUC mobile app).
  • Additional methods of consultation will be provided other than submission to a registry.

Misvalued services provision
The legislation also contains a provision, as described above, that sets a 0.5 percent annual savings target from identifying misvalued codes in the MPFS, beginning in 2017 and through 2020. If this savings target is met, those dollars saved would be returned to the MPFS in a budget-neutral manner. If the target is not met, the unmet balance would be removed from the MPFS. Thus, this provision acts as a binding mandate to meet this annual savings target.

The provision also reiterates the authority of the HHS to collect data that can be used to value physician services via surveys and other data collection methods.

What’s next?
Members of Congress and physician groups alike still hope for a permanent SGR fix within the next year. Negotiations could resume after midterm elections when legislators may be more willing to use unpopular financial offsets to pay for the bill, and Sen. Wyden has already predicted full repeal during this Congress.

“I believe that we are going to get permanent repeal and replace before the end of this Congress,” he said. “I’m telling you—it’s going to happen this Congress.”

“We may have kicked the can down the road for another year, but we will continue to work to fix this flawed system for doctors and patients alike,” stated Sen. Michael Bennet (D-Colo.). “Colorado’s seniors and Medicare providers deserve the certainty that would come with a permanent solution.”

Physician groups, including the AAOS, will continue to work with Congress to resolve outstanding issues and enact the bipartisan policy already developed. The AAOS, however, is hopeful that this momentum will continue and a permanent solution can be reached this year.

More information on the SGR is available on the AAOS website at

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

Additional Information