House GOP floats new details of SGR reform plan

Republicans say they want to repeal the Medicare doctor payment formula and phase in a new system that rewards higher-quality care.

By — Posted April 15, 2013

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Signaling that they've heard the concerns of organized medicine, House Republican leaders provided more details to the physician community on how they plan to repeal Medicare's sustainable growth rate formula and transition to a system that would guarantee payment stability while rewarding care quality and efficiency.

The reforms are a top priority, wrote Republican leaders of the House Energy and Commerce and Ways and Means Committees in an April 3 letter to health care professionals, which included the latest draft of a blueprint to reform the way Medicare physicians are paid. Taking into account the input from physicians and others on an earlier draft of the plan, the letter assured doctors that the GOP's approach would give medicine adequate enough time to prepare for a new payment system that used evidence-based quality measures.

The SGR formula has been threatening payment cuts to physicians for the past decade. Moves to repeal it have run into cost barriers, but recent declines in spending on physician services have lowered the estimates on the price tag for repeal. In February, the Congressional Budget Office cut earlier projections in half when it said that it would cost $138 billion over 10 years to freeze physician pay rates. With the cost going down so dramatically, there's a concerted effort on both sides of the political aisle to get this problem fixed, said Dan Mendelson, CEO and founder of Washington consultant Avalere Health LLC.

The House Republicans' approach would involve repealing the SGR, phasing in a system that would reward doctors in fee-for-service Medicare for providing more efficient, higher-quality care, and then making further upgrades to the payment system. “Quality measures are to be risk-adjusted as to the severity of illness so that providers are not penalized for treating sicker or more complicated patients,” the revised proposal stated.

Physicians who rate highly on risk-adjusted quality measures eventually would have more opportunities to earn incentive payments for using health care resources more efficiently. The new draft also promised that physicians would receive timely feedback on their performances so they can identify areas where they could improve.

The newest proposal clarified that physicians would experience a period of stable payment updates after the SGR's repeal. This also would allow enough time for the medical community to help craft the quality and efficiency measures that would define the next phases of the Medicare payment system, the plan stated.

The lawmakers tried to reassure physicians that they would attempt to minimize reporting burdens and encourage flexibility in the quality measures that would help determine future pay rates. Each physician practice could select a payment and delivery model that best fits its situation, the blueprint stated.

Optimism about GOP's approach

Physician organizations largely reacted favorably to the House GOP's latest pay reform draft. Steven J. Stack, MD, chair of the American Medical Association Board of Trustees, said the committees' blueprint and the request for additional feedback was “generally consistent with the overall approach to Medicare physician payment reform supported by the AMA and other physician groups. We are pleased that the committees are continuing to focus on this critical issue and that they are seeking input from physicians.”

The framework is an important step toward repealing the SGR “and moving toward building a new system that will better serve the needs of patients and physicians by supporting high-quality, high-value health care,” Dr. Stack said.

Cynthia R. Moran, assistant executive director for government relations and health policy with the American College of Radiology, said she was encouraged by the proposal's emphasis on using specialty-specific registries to determine quality improvement. “The use of registries is growing, and it's important as far as the ability to accrue data and give feedback,” Moran said. Registries have become a popular option for doctors participating in federal pay-for-reporting initiatives.

A period of stable payments would be “a terrific change of pace,” Moran said. “Radiology more than any other specialty has been singled out for the last several years for very specific reductions, both from [the Centers for Medicare & Medicaid Services] and on the legislative side, so anything that would give us a reprieve and ability to catch our breath” would be welcome, she said. Allowing physician organizations enough time to work with their own members to put some of the long-term improvements in place is a laudable goal, she said.

Draft still silent on some elements

Physician incentives for better care coordination certainly would make the Medicare program more efficient, because beneficiaries often have multiple physicians who don't talk to one another, said Robert Wanerman, a partner in the health care and life sciences practice of Epstein Becker Green PC in Washington.

What the House GOP proposal has yet to flesh out is how one would chart those individual quality measurements, Wanerman said. It's already known that a gap exists between what physicians do and what they actually document. This has been a contentious issue with physicians, “because there are a number of cases where insufficient documentation has been considered fraudulent,” he said.

The question becomes how this would play into the quality metrics that would be developed. “If you're just reviewing what a physician documents, does that capture everything they did, some of what they did? That's a potential Achilles heel in attempting to provide incentives for quality of care,” he said.

Wanerman also said there were no specifics on how primary care physicians might be treated differently from specialists under the new incentives-based system. “I didn't see any sort of carve-out or any kind of protection for primary care, because, presumably, primary care would help to drive either lower costs or smaller increases in the rate of utilization.”

Jeffrey Cain, MD, president of the American Academy of Family Physicians, said the AAFP was awaiting more details on the proposal, which isn't the only reform plan at play in the House. A bipartisan bill introduced by Reps. Allyson Schwartz (D, Pa.) and Joe Heck, DO (R, Nev.) in February includes similar ideas for stabilizing pay while encouraging doctors to provide higher-quality care, Dr. Cain said.

Finding a way to pay for such a broad proposal remains the main challenge in the debate, Mendelson said. Reducing Medicare pay for other parts of the health system, such as hospitals and nursing homes, are a likely move to help cover the price tag. These entities “know that they are paying for it anyway, and this year it's on sale. And they'll want to structure it in such a way that whatever payment reduction is in the context of other things they want and need,” he said.

The most practical way to enact an SGR repeal would be to fold it into a much larger bill in which there is money on the table that's coming from other sources, such as a major tax and spending measure, Mendelson said. In the context of a trillion dollar fiscal measure, $138 billion wouldn't appear to be a significant amount of money, he said.

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SGR factors into Medicare Advantage pay boost

Federal regulators are banking on Congress again intervening on scheduled Medicare physician pay cuts so the program can raise pay rates for Medicare private plans in 2014 instead of cutting them.

In early April, the Centers for Medicare & Medicaid Services said it would increase Medicare Advantage rates by 3.3% next year, a significant reversal from an earlier projection that it would lower the plans' growth factor by 2.2%.

“The policies announced today further the agency's goal of improving payment accuracy in all our programs, while at the same time ensuring program stability and preserving beneficiary choice,” Jonathan Blum, CMS acting principal deputy administrator, said in a statement.

The original plan to reduce Medicare Advantage payments assumed that a more than 24% reduction to physician pay under Medicare's sustainable growth rate formula would occur in 2014. Fee-for-service spending growth is a key determinant in how private plans are paid, so assuming lower spending due to doctor pay cuts would reduce pay to insurers as well. The CMS reversal takes into account “the likely congressional override of the scheduled physician payment reduction,” CMS stated, a move that lawmakers have made each year for the past decade.

The decision to boost private plan rates came after insurers and lawmakers raised concerns about the impact of cuts on seniors who choose private plan coverage. House and Senate Republicans hailed the CMS policy change as protecting continued high-quality care for these beneficiaries. “While this action alone isn't a silver bullet to guarantee the sustainability of the Medicare Advantage program, it does reflect the strong bipartisan support for preventing such devastating cuts from occurring,” said Sen. Orrin Hatch (R, Utah), the top Republican on the Senate Finance Committee.

About 27% of Medicare beneficiaries are enrolled in Medicare Advantage. The program has expanded significantly in the past decade, from 5.3 million beneficiaries in 2004 to 13.1 million in 2012, according to the Kaiser Family Foundation. However, private plans also were targeted for payment reductions under the Affordable Care Act to help pay for coverage expansions, possibly decreasing enrollment by several million seniors in the future.

Aetna, whose private plans contract with Medicare, said the CMS rate increase notice was an improvement over the initial cut projection, but that the ACA reductions still would be large. “We are pleased that CMS clearly recognizes the benefits provided by Medicare Advantage. However, the net effect is still a material reduction in 2014 over 2013 levels for Medicare Advantage and Medicare prescription drug plans,” said Aetna spokeswoman Cynthia Michener.

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The Republican approach to a new Medicare pay system

Republican leaders on key House panels unveiled a more detailed version of their proposal to repeal Medicare's sustainable growth rate formula and replace it with a system that encourages physicians to provide higher-quality, more efficient care. In the revised proposal, GOP lawmakers outlined their goals for reform:

  • Repealing the SGR, eliminating the 24.4% across-the-board cut slated for 2014 and any future SGR cuts.
  • Establishing a period of stable payments, enabling providers to prepare for payment changes.
  • Engaging the provider community in efforts to improve, reform and update reimbursement systems.
  • Empowering providers and other relevant stakeholders to determine the measures of quality and efficiency that are meaningful for Medicare beneficiaries.
  • Establishing a more reasonable time frame for developing measures that promote value.
  • Prompting the Centers for Medicare & Medicaid Services to provide timely feedback, enabling providers to make adjustments to improve patient care and optimize their incentive payments.
  • Providing options that enable providers to select the Medicare payment system — whether performance-based fee-for-service or an alternative model — that best fits their practice situation.
  • Aiming to improve the provider practice environment by reducing practice costs and administrative burden — freeing up time to focus on patient care, not administrative paperwork.

Source: Second draft of sustainable growth rate repeal and reform proposal — request for feedback, House Energy and Commerce and Ways and Means Committees, Republican leadership, April 3 (link)

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External links

Second draft of sustainable growth rate repeal and reform proposal — request for feedback, House Energy and Commerce and Ways and Means Committees, Republican leadership, April 3 (link)

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