March 23, 2015

Once more, the law preventing the Sustainable Growth Rate (SGR) formula from wreaking havoc on Medicare payments to physicians is about to expire. Payments are scheduled to decrease by 21.2 percent on April 1.

On Thursday, March 26, the House of Representatives voted overwhelmingly 392-37 in favor of the bipartisan Medicare Access and CHIP Reauthorization Act (H.R. 2), which had already received an enthusiastic response from physician organizations, as well as strong support from President Obama.  On Friday, disappointingly, the Senate recessed without taking action on the bill.  The pressure is on for the Senate to bring the legislation to a vote soon after it reconvenes on April 13, and many observers expect passage.  We at ABC encourage all our readers to contact their Senators during this recess and urge them to support the legislation so that the SGR goes to its grave at long last.

In the short term, CMS may delay processing claims for a few weeks in order to keep the April 1st cut from being implemented.

Under H.R. 2, payments for physician services would be updated according to the following schedule:

Thus, for each of the years 2015-2019, there would be a 0.5 percent payment increase and no new changes to the current payment system.  Thereafter payments would be adjusted based on performance or on participation in “alternative payment models.”

Merit-Based Incentive Payment System (MIPS)

Beginning in 2019, providers including physician anesthesiologists and nurse anesthetists would be able to receive additional payment adjustments through the MIPS, which would consolidate the Physician Quality Reporting System (PQRS), the Value-Based Payment Modifier (VBM) and the meaningful electronic health record (EHR) use in a cohesive program that seeks to avoid redundancies.  The penalties for failure to report PQRS quality measures and for failure to meet meaningful use requirements would sunset at the end of 2018.  Those programs would be replaced by the MIPS, which would assess the performance of eligible professionals (EPs) in four categories: quality; resource use; EHR meaningful use; and clinical practice improvement activities.  The first three categories would pick up where the PQRS, VBM and EHR incentive programs leave off.  The new category, “clinical practice improvement activities, would “give credit to professionals working to improve their practices” through a “menu of recognized activities [that] would be established in collaboration with professionals.” (Summary of the SGR Repeal and Medicare Provider Payment Modernization Act, on which H.R. 2 is closely based, prepared by the House Committees on Energy and Commerce and Ways and Means.)

The list of quality measures used in the MIPS would initially include the existing PQRS measures as well as the measures adopted by Qualified Clinical Data Registries (QCDRs) such as the Anesthesia Quality Institute’s National Anesthesia Clinical Outcomes Registry (AQI-NACOR).  These measures would remain in the MIPS program unless they are removed or revised under the rulemaking process.  New measures would be added annually and must, “to the extent practicable...address all five of the following quality domains: clinical care, safety, care coordination, patient and caregiver experience, and population health and prevention.”

A composite score for each EP would be based on performance in each of the four categories.  EPs would only be assessed on the categories, activities and measures that apply to their individual practices.  The composite score for each EP would be compared to a performance threshold consisting of the mean or median composite performance score for all EPs during a prior period to be established.  EPs in the lowest quartile would receive the maximum negative adjustment, which would be capped at four percent in 2019, five percent in 2020, seven percent in 2021, and nine percent in 2022.  EPs whose composite performance score is at the threshold would not receive any MIPS payment adjustment and those who score above the threshold would earn proportionally larger incentive payments up to a maximum of three times the annual cap for negative payment adjustments.

Alternative Payment Models (APMs)

The Medicare Access and CHIP Reauthorization Act also creates a two-tier payment system that provides incentives for doctors to shift more of their practice into value-based payment models, including accountable care organizations, bundled-payment arrangements and medical homes.  In order to qualify for higher payments, a doctor would need to have at least 25 percent of Medicare revenue tied to such payment models by 2019. That threshold rises to 75 percent in 2023, although physicians could opt to tally all revenue sources, not just Medicare, to meet that threshold.

Physicians who qualify for the alternative-payment system would receive bonuses of five percent annually bonuses from 2020 to 2024.  Thereafter their payments would increase by 0.75 percent per year, in contrast to the regular 0.25-percent rate of growth for physicians in the traditional payment system.

Other Provisions

The 263-page bill contains numerous other provisions, starting with those that would preserve and extend the Children’s Health Insurance Program (CHIP), which covers more than eight million children and pregnant women in families that earn income above Medicaid eligibility levels.  Two other sections of interest to our readers are those that would:

• Reverse CMS’ 2014 decision to eliminate the global surgical package that bundles payment for all related services performed within 10 or 90 days of the procedure.  Certain pain medicine procedures would benefit from this reversal.
• Delay implementation of the “two-midnight” rule that requires a patient stay of two consecutive midnights in order for a hospital to qualify for inpatient payment rates, through September 30, 2015.

Prospects for H.R. 2

As noted above, the legislation is now headed to the Senate.  Although the cost of repealing the SGR amounts to $141 billion over 10 years, according to the nonpartisan Congressional Budget Office (CBO), it is not the price tag that might prevent the bill from becoming law.  The CBO also estimated that enacting H.R. 2 would cost $900 million less over the next decade than continuing the annual practice of freezing payment rates for physician services, making repeal a relatively attractive option. 

There is a nearly unanimous sense that the time has come to redress the enduring inequity of the SGR formula, which has resulted in Medicare physician payment rates being 17 percent below 2001 levels, adjusted for increases in practice costs, according to CMS itself.  Some Senators have threatened to vote against legislation that provides for fewer than four years of funding for CHIP, two more years than in H.R. 2, but most observers are optimistic—as are we.  Again, to help bring about the right outcome, we urge readers to call their Senators’ offices this week and ask them to repeal the SGR immediately upon their return from the recess.

With best wishes,

Tony Mira
President and CEO