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February 18, 2014



SGR Repeal, Replacement Legislation Introduced

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SGR Repeal, Replacement Legislation Introducedimage

On February 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. The bill, H.R. 4015/S. 2000, SGR Repeal and Medicare Provider Payment Modernization Act of 2014, was formally introduced by Rep. Michael C. Burgess, MD (R-TX) and represents months of intense negotiations.

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, including the House Energy & Commerce Committee, House Ways & Means Committee, and the Senate Finance Committee. Medical associations, including the American Association of Orthopaedic Surgeons (AAOS), provided significant input that helped shape the legislation.

As previously reported in AAOS Now (click here to read the article), the AAOS took a number of steps to ensure that the legislation addressed the concerns of orthopaedic surgeons. Additionally, AAOS members were in Washington, DC 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.

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

  • Physician payments under the current fee-for-service program would increase 0.5 percent each year for the next 5 years, while transitioning to a value-based payment formula. This provision was originally part of the Ways and Means proposal and is 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.

  • Current Medicare quality programs (PQRS, VBM, and EHR MU) will be consolidated into a single program (MIPS).

  • Implements a process to improve payment accuracy for individual provider services.

  • Incentivizes care coordination efforts for patients with chronic care needs.

  • Introduces physician-developed clinical care guidelines to reduce inappropriate care that can harm patients and results 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 an alternative payment model (APM) or patient-centered medical home.

  • 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.
“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. Burgess, vice chair of the House Health and Oversight and Investigations Subcommittees. “For the first time, Congress has come together in a bipartisan fashion and among all committees of jurisdiction 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.”

The next step for the legislation requires that Congress find a way to pay for the bill, which is currently calculated to cost $126 billion. Currently, 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. 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, view the AAOS Office of Government Relations SGR issue page here: