Legislative Replacement for SGR is on the Horizon for Anesthesiologists and other Physicians

Legislation to repeal the Sustainable Growth Rate (SGR) formula is emerging in the House of Representatives. On July 31st, the Energy and Commerce Committee voted unanimously to pass H.R. 2810, the Medicare Patient Access and Quality Improvement Act of 2013.   This is the culmination of more than two years of work involving members of both the Energy and Commerce Committee and the House Ways and Means Committee, with feedback from healthcare providers.  The bill now advances to the full Ways and Means Committee;  the Senate Finance Committee is expected to produce its version in the fall.

Summary of H.R. 2810

In Phase I, “Stabilizing Fee Updates,” the bill would permanently repeal the SGR formula at the end of 2013 and replace it with fixed 0.5 percent updates to the Medicare Fee Schedule for each of the years 2014-2018.  The positive and negative adjustments or incentives available through the PQRS and EHR programs would continue through 2018.  During this five-year transition period CMS would develop and test quality measures and clinical practice improvement activities in preparation for Phase II.

Starting in 2019, the 0.5 percent update would continue, and Phase II, the “Quality Update Incentive Program (QUIP),”would begin, replacing the current Medicare system with a fee-for-service model that includes performance incentives.  Physicians would receive additional updates based on meeting quality measures and participating in clinical practice improvement activities.  “These measures and activities may be those currently in use or new measures.  Providers and other stakeholders shall be included in the development and selection of measures used in the QUIP,” according to a Committee staff memorandum.

Providers would be assessed by ranking them within “peer cohorts,” as defined by the American Board of Medical Specialties (ABMS) or equivalent certification boards.  Anesthesiology would be one such peer cohort; nurse anesthesia would presumably be another.  Physicians would self-select a cohort applicable to their specialty and types of services provided and would be assessed based on how well they performed on clinical performance measures.  Emphasis would be on measures that improve clinical care, care coordination, patient safety, prevention, and patient experience with the care provided.  The QUIP would align measures with other quality reporting programs including the PQRS.

Physicians would be scored on a scale of 1-100, and for each performance period, i.e., calendar year starting with 2019, those scoring in the top third (67-100 points) would get an annual quality adjustment of 1.0 percent.  Those scoring in the next third (34-66 points) would receive a 0.5 percent quality adjustment, and those in the lowest third (below 34 points) would be penalized one percent.  These adjustments would be on top of the 0.5 percent across-the-board update.  Those who decline to participate in either the QUIP or an alternative payment model will receive a 5.0 percent payment reduction per year starting in 2019.

The legislation provides for “Alternative Payment Models” (APMs) that would allow eligible professionals at any time to opt out of the FFS program and participate in alternative models including:  Patient-Centered Medical Homes, Patient Centered Medical Neighborhoods (for specialists), Accountable Care Organizations, Shared Savings programs, case management fee chronic disease programs or other models that combine fee-for-service payment with shared savings.  The Medicare Payment Advisory Commission (MedPAC) must report on payment system alternatives no later than June 15, 2016.  Providers would submit proposals on an ongoing basis for innovative payment APMs through a newly developed, streamlined process that encourages high quality, high value healthcare.

The bill describes numerous mechanisms for the Secretary of Health and Human Services to solicit information from and to provide feedback to providers, as well as mandates for the U.S. Government Accountability Office (GAO) and MedPAC reports and miscellaneous provisions such as a bar to the use of the future QUIP quality standards for establishing the standard of care in professional liability litigation.  The ASA is concerned about a particular provision that would remove savings from the current pool of physician payment resources through the identification of misvalued services.

Next Steps

When Congress returns, the House Ways and Means Committee is expected to release its own Medicare SGR bill, in September.  Then the two Committees, Energy and Commerce and Ways and Means, will reconcile their different Medicare SGR bills into one package that moves to the House floor.  The Senate Finance Committee is also expected to move forward with their Medicare SGR legislation at that time.

What is glaring in its absence is provision for funding.  The Congressional Budget Office estimated earlier this year that SGR repeal would cost about $139 billion over 10 years—a much lower cost than in previous years due to the decline in Medicare cost growth, which CMS expects will continue, but nevertheless “real money” even in Washington.  All the Committees are waiting until there is agreement on the policy before assigning funding sources to pay for the SGR repeal.  Some of the identified funding sources include hospital outpatient services that are reimbursed at higher rates than when provided in a physician’s office, higher cost-sharing by Medicare beneficiaries, benefit changes, pharmaceutical rebates and controversial sources from the Affordable Care Act.

The current legislation represents the most promising effort to date to eliminate the SGR from the Medicare update formula.  Readers hardly need to be reminded that without Congressional action, they will be facing a Medicare cut of approximately 24.2 percent next year—on top of the two percent sequestration reduction, if the larger budget issues are not resolved.  To help make sure that H.R. 2810 continues moving forward, readers are encouraged to seek support from their Congressmen while they are in their home districts.