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Congress Passes SGR Repeal Legislation, Ushers in New Era in MD Value-Based Payment

April 14, 2015
by Mark Hagland
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Passage of the so-called “SGR repeal legislation” will end the never-fully-implemented SGR formula for MD payment, and will introduce a new Merit-based Incentive Payment Program for physicians

On Tuesday evening, April 14, the U.S. Senate passed legislation ending the Sustainable Growth Rate (SGR) formula  whose problematic history has plagued Medicare physician payment issues for over a decade, as it approved the Medicare and CHIP Reauthorization Act (MACRA), which President Barack Obama is expected to sign before midnight eastern time, according to press reports. The House of Representatives had approved the bill by a vote of 392 to 37 on March 26, just before a two-week recess.

Tuesday evening, the Senate voted 92-8 to approve the ending of the SGR formula, less than three hours before federal officials would have had to reduce Medicare physician payments by 21 percent. President Obama released a statement saying he would sign the bill, which also extends the federal Children’s Health Insurance Program (CHIP).

As a report in the Washington Post noted, “Despite the last-minute nature of the vote, it was lauded by [Capitol] Hill leaders as a bipartisan triumph for both removing a yearly headache from the legislative calendar but also by implementing modest reforms to Medicare, including future incentives for doctors to deliver better care as well as premium hikes for the wealthiest Medicare recipients.”

The legislation’s success in the Senate had not been reassured. According to Capitol Hill sources, some question remained during the legislative break as to whether the bill that had passed through the House could pass through the Senate without amendments, which would have pushed the payment issue over the deadline of midnight Wednesday morning.

As it turns out, both Republicans and Democrats in Congress compromised to make the bill’s passage possible. The core concession that Republicans gave was that only about one-third of the $200 billion-dollar-plus legislative package was offset by corresponding spending reductions (with those spending offsets divided about evenly between provider payment cuts and increases in costs for more affluent Medicare recipients). On the Democratic side, Democrats allowed the legislation to ensure the reauthorization of the Children’s Health Insurance Program for only two years rather than the four years that some Democratic senators and representatives had advocated.

Initial reactions among provider associations were very positive. In announcing that its CEO, James L. Madara, M.D., would host a media conference call on Wednesday to discuss the development, the Chicago-based American Medical Associated stated that “The important bipartisan, bicameral legislation that passed tonight will ensure access to care for seniors, military personnel and their families, children and low income adults. The Medicare and CHIP Reauthorization Act (MACRA),” the statement went on to say “once and for all gets rid of the flawed Sustainable Growth Rate (SGR) formula that has plagued the health care system for more than a decade, paving the way for physicians to implement new delivery and payment reforms that will improve quality of care and reduce costs.The AMA has launched ambitious initiatives to improve the health of the nation and passage of this new legislation provides us with a better path forward,” the preliminary statement added.

Meanwhile, the Engelwood, Colo.-based Medical Group Management Association (MGMA) posted a statement attributed to Halee Fischer-Wright, M.D., that association’s president and CEO, which said, "This is a historic day--the dark cloud over physician group practices has been lifted. The Senate vote to permanently repeal the SGR returns stability to physicians and Medicare patients alike. MGMA congratulates Congress on this momentous, bipartisan achievement."  

Healthcare Informatics’ analysis of the “SGR repeal legislation” found that it will repeal Medicare’s Sustainable Growth Rate Formula for physician payment, and instead institute a 0.5-percent payment update for the next five years for physicians, under Medicare, offering as well the prospect of a sweeping change in how physicians will be paid under the Medicare program.

The legislation will replace physicians’ mandatory participation in the Value-Based Payment Program under Medicare (for all physicians participating in Medicare) with a new Merit-based Incentive Payment System, or “MIPS.” Under the new “MIPS,” to be applied to payments beginning Jan. 1, 2019, the Secretary of Health and Human Services would “assess appropriate adjustments to quality measures, resource use measures, and other measures used under the MIPS; and… assess and implement appropriate adjustments to payment adjustments, composite performance scores, scores for performance categories, or scores for measures or activities under the MIPS.”

The legislation targets four key areas: quality, resource use, clinical practice improvement (including care coordination and improvement activities), and the meaningful use of certified EHR (electronic health record) technology.

Healthcare Informatics will continue to update its readers on developments in this area as they occur.