House, Senate health leaders reach agreement on SGR reform package Last Updated: July 29, 2014
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After months of negotiations, House and Senate committee leaders today unveiled legislation to reform the Medicare physician payment system that resolves policy differences between the three committee’s approaches to calculating future payments. Like its predecessors, the bipartisan, bicameral legislative draft would repeal the Medicare physician sustainable growth rate (SGR) formula and replace it with a period of steady updates while transitioning to a value-based purchasing system that encourages participation in alternative payment models (APMs). The bulk of the committees’ discussion centered on the duration and amount of a guaranteed update. The resulting agreement is for a 0.5 percent update for the first five years of the program, which tracks with the House Ways and Means Committee-approved version and contrasts with the Senate Finance Committee’s bill, which would have frozen payments during that same time period.

Beginning in 2018, the legislation would institute a value-based performance payment program, referred to as the Merit-Based Incentive Payment System (MIPS). While annual updates would be frozen at the 2018 rate at that time, physicians’ payments would be adjusted based on quality performance, resource use, electronic health records (EHR) meaningful use and clinical practice improvement activities. Providers performing above the threshold will receive positive adjustments and those that fall below the threshold will receive negative adjustments. This provision is not budget neutral; therefore all providers have the opportunity to receive a positive update. Under the plan, the three current physician incentive programs – the EHR Incentive Program, the Physician Quality Reporting System and the Value-based Modifier – would be combined into the new program; however, the funds from the penalties that would have been assessed under these programs would remain in the physician payment pool.

The plan also encourages participation among various alternative payment models (APMs) and patient-centered medical homes (PCMHs) by providing a 5 bonus payment each year for physicians who receive a significant amount of their revenue in such models and exempting them from the MIPS from 2018-2023. PCMHs would be exempt from the down-side financial risk requirement. In a departure from earlier versions, the legislation would establish a technical advisory committee to review the new models and provide for a stakeholder comment process.

Today’s announcement, however, by no means translates to a fuller agreement on the overall package. While there have been discussions on the Medicare extenders policies, the Medicare and Medicaid extraneous policies and the offsets, there is no broader agreement on those other parts of the package. Those discussions will take some weeks to resolve, likely consuming most of the current time before the Medicare SGR “patch” expires on March 31.

Additional details of the legislation include:

  • As mentioned above, physicians treating Medicare patients would receive a 0.5 percent update for 2014 through 2018, during the transition to a new system. During this period, CMS would solicit stakeholder input and develop the metrics to be used in the MIPS.
  • Starting in 2018, payments to physicians would be adjusted based on performance in the MIPS, which links physician payments to providers’ scoring on measures as follows:
    • From 2019 through 2023, the annual update for the physician fee schedule would be frozen at the 2018 rate. Physicians who fall below the performance threshold established in the MIPS would receive a negative adjustment capped at -4 percent in 2018, -5 percent in 2019 and -7 percent in 2020.
    • Physicians whose performance scores are above the threshold will receive positive payment adjustments up to a maximum of three times the annual cap for negative payment adjustments. An additional incentive payment will be paid to physicians with exceptional performance.
  • To receive the 5 percent bonus payment, participants in APMs must receive at least 25 percent of their Medicare revenue through an APM in 2018-2019. This threshold is increased over time.
  • Similar to an initiative CMS put forward in its CY 2014 proposed physician fee schedule rule, CMS would be required to create codes for chronic care management services.