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Summer 2015

The SGR “Fix” in the Context of Anesthesia Practice

Serene K. Zeni, Esq.
Clark Hill, PLC, Birmingham, MI

Greg Moore, Esq.
Clark Hill, PLC, Birmingham, MI

Alexandra A. Hall, Esq.
Clark Hill, PLC, Birmingham, MI

It is not by chance that the discussions leading to the SGR “fix,” the Medicare Access and CHIP Reauthorization Act of 2015 (H.R.2), signed into law on April 16, 2015, began with an anesthesiologist, Republican Congressman Andy Harris, MD. The manner in which the Sustainable Growth Rate (SGR) would be fixed was particularly relevant to anesthesiologists who get roughly 31 percent of commercial payment when they bill Medicare, according to Jane Fitch, MD, chair of anesthesiology at the University of Oklahoma Health Sciences Center in Oklahoma City, in an interview with Anesthesiology News. Understanding H.R.2, therefore, is necessary to understand how anesthesia practices will be reimbursed in the future.

To understand the rationale underlying H.R.2, it is necessary to start with the basic assumption that providers need to shift away from the fee-for-service model and that there is not already a focus on quality by the practitioner without forcing the issue through reimbursement. It will then appear that H.R.2 guides the payment system in the right direction. While the underlying concepts of quality seem simple to integrate into reimbursement, H.R.2 ignores the cost and complexity involved in instituting its measures on a provider level. Even after a provider invests in the cost of compliance, H.R.2 is broad enough that a provider can miss the mark on what it takes to qualify for an incentive or higher reimbursement.

I. The Immediate Fix

Before Senate approval of H.R.2 on April 14, 2015, Medicare payments for physician services were annually adjusted upward or downward by a conversion factor determined by the SGR. The SGR intended to ensure the expense per Medicare beneficiary did not surpass the gross domestic product (GDP). However, due to the slow growth of the economy, SGR would have cut reimbursement for physician services by 21.2 percent by April 1, 2015.

H.R.2 avoids this massive decline by freezing the current conversion factor to zero percent through June 2015, which means physicians will maintain their current compensation for services provided. The conversion factor will increase to .5 percent as of July 1, 2015, and continue at .5 percent every year through 2019, which will gradually increase physician reimbursement every year rates are recalculated. From 2020 to 2025, the conversion rate will return to zero percent, leveling reimbursement during that period.

II . Not Catchy Enough For The Headlines

Where providers may get lost is in the actual details of reimbursement after the SGR fix is implemented. The complex reimbursement model achieved by H.R.2 did not make the headlines when the public was pressuring the Senate to sign the bill into law.

As of 2026, H.R.2 incentivizes providers towards “quality” as opposed to volume consistent with the overall trend in health care. For this purpose, H.R.2 requires use of two conversion factors, which will apply to practitioners (including physicians, physician assistants, nurse practitioners and clinical nurse specialists and certain other qualifying professionals) depending on whether they are reimbursed under a “qualifying” alternative payment model (APM). A provider qualifies by furnishing a particular threshold (depending on the year, starting in 2019) of his or her services under an APM or an entity participating in an APM that falls under one of these payment systems as defined under the Social Security Act: (1) innovative payment models; (2) the shared savings program; (3) a demonstration; or (4) any demonstration project required by federal law.

The reward for “qualifying” is reimbursement with a year upward conversion factor of .75 percent. The caveat is that he or she must also use certified electronic health record (EHR) technology and specific quality measures and either bear financial risk for participation or be a patient-centered medical home. A conversion factor of .25 percent will apply to professionals participating in non-qualifying APMs, leaving the fee-for-service model available, but, theoretically, less attractive.

H.R.2 sunsets payment incentives under the physician quality reporting, value-based payment modifier, and meaningful use programs by 2018. H.R.2 establishes in its place the Merit-based Incentive Payment System (MIPS) in 2019, merging all three programs into one. MIPS is structured to evaluate overall provider performance by scoring performance in various categories and giving each category a proportion: “quality” (30 percent), “resource use” (30 percent), “clinical practice improvement activities” (15 percent), and “meaningful use of electronic health records” (25 percent). Each measure is largely dependent on provider reporting and studies with an additional incentive for “exceptional performance.” The provider’s MIPS score will factor into her reimbursement rate.

III . Just When You Thought You Understood “Meaningful Use”

H.R.2 reestablishes the current standards for data sharing. H.R.2 mandates and permits data sharing (even selling) in multiple contexts. Of course, H.R.2 continues to promote data privacy and security while expanding access to unidentifiable patient information.

The extent of data sharing encouraged by H.R.2 increases the data security risks already prevalent in the healthcare industry. For example, H.R.2 sets a goal of achieving interoperability of EHR systems by December 31, 2018, and prohibits deliberate blocking of information sharing between EHRs from different vendors by redefining meaningful use. This requirement may pose a challenge to providers given the Secretary’s power to adjust meaningful use penalties and decertify EHRs if not achieved.

The data sharing provisions of H.R.2 will generate further complications for professionals already struggling to comply with HIPAA and HITECH.

IV . The Provider Fix

Regardless of one’s perspective on H.R.2, the practitioner must nonetheless prepare for its impact. Even if a provider chooses not to participate in Medicare, third-party payers are more than likely to follow suit and the precedent established by H.R.2 will be inescapable.

The unpredictability of the value add or decline of H.R.2 is creeping into different contexts of provider arrangements. For example, recently drafted employment contracts accommodate the contingency of a decline in reimbursement by shifting the burden of such decline from the employer to the employee.

Anesthesiologists will need to reevaluate their current efforts to comply with quality measurements, data protection and value performance. They will need to look at current and potential relationships with other providers and ensure such relationships account for the potential decline in reimbursement in the long term. H.R.2 did not simply solve the SGR problem. Rather, it created numerous long-term challenges that providers will need to truly understand to protect their bottom line and determine their professional success. It also perpetuated the many challenges already experienced by anesthesiologists in other payment reform contexts, such as failing to answer how quality is measured in the context of anesthesia practices. Despite the law starting with a conversation in the presence of anesthesiologists, the law only temporarily favors anesthesiologists and only creates more ambiguity in the long term. 

Serene K. Zeni, Esq. is of counsel to Clark Hill, PLC, representing health professionals and organizations to establish and maintain quality, risk management, and compliance programs in a variety of settings. Her services range from simple contract review and negotiation to supporting the launch of a new organization in the healthcare field. She can be reached at

Greg Moore, Esq. chairs Clark Hill’s Health Care and Behavioral Health Care Practice Groups. Mr. Moore is a frequent speaker and author of numerous health law articles who has focused his career on representing and counseling providers of all types and sizes including: behavioral healthcare companies, facilities and networks, behavioral healthcare information networks, medical groups, federally-qualified health centers, trade associations, nonprofit and for profit hospitals, international and domestic medical tourism companies. He can be reached at

Alexandra A. Hall, Esq. is an associate in Clark Hill’s Health Care Practice group. Ms. Hall practices in all areas of healthcare law and represents a variety of health professionals and organizations. Ms. Hall has also supported healthcare providers in the Recovery Audit Contract and Medicare appeals process, conducted primary research regarding Medicare compliance and reimbursement issues, and assisted clients on regulatory and licensure matters. She can be reached at