Congress works to repeal SGR as 24 percent Medicare rate cut looms

AAFP submits comments, recommendations on bipartisan, bicameral proposal

posted 11.21.13

Congress might be closer than ever to repealing the sustainable growth rate, or SGR, the flawed payment methodology for Medicare physician services. For more than 10 years, AAFP, TAFP, and physician organizations across the board have called for the repeal of the SGR, and while the formula has had few if any defenders in Congress, a long-term solution has been too expensive to succeed. Instead, Congress has passed a series of last-minute, short-term patches, keeping physician fees flat for more than a decade.

The Senate Finance and House Ways and Means committees are considering a bipartisan, bicameral proposal that would repeal the SGR and implement several measures to transform Medicare payment from a fee-for-service system to a value-based system. AAFP has given the committees its qualified support for the proposal, and has submitted a list of recommendations.

The proposal would freeze physician payment levels through 2023, but it creates a set of performance-based incentives for practice and quality improvements. It also includes bonus payments for physicians participating in alternate payment models, like patient-centered medical homes, and it provides money to help small practices in rural areas participate in alternative payment models.

In the recommendations and comments AAFP sent lawmakers on Nov. 12, the Academy described the difficulty a payment freeze would pose to many physician practices. “Even after repeal, however, updates of zero percent through 2023 will pose significant challenges to family physician practices—especially small and solo practices, which are often in rural and critical-access areas. Although many family physician practices are now recognized as a patient-centered medical home (PCMH), and others are moving aggressively to transform into the medical-home model, many will not be able to move away from the fee-for-service model in the near term, for financial or other reasons beyond their control. For those practices in particular, zero percent updates over 10 years will lead to undue financial strain in the face of rising operating costs, and could severely threaten access for millions of Medicare beneficiaries to primary care.”

AAFP summarized its other recommendations in a Nov. 12, 2013 press statement:

• Decrease the regulatory and administrative burden placed on physicians and physician practices to ensure that a majority of a physician’s time is spent on patient care.
• Increase the level of financial assistance for individual physicians and small practices to ensure that these critical providers of care are able to prosper in new delivery systems.
• Identify appropriate exemptions for those physicians and physician practices that would allow young physicians entering practice to establish financial security prior to facing the regulatory requirements of the proposal.
• Create payment policies that appropriately value primary care services.
• Extend current payment incentives that promote access to primary care physicians for Medicare and Medicaid beneficiaries.
• Improve the methodology for determining the value of physician work in a manner that places less emphasis on time and greater emphasis on the services provided.

“The specter of 10 years without even a cost adjustment for inflation is a frightening prospect for physicians facing constant changes in their practice environments,” said TAFP CEO Tom Banning. “But continuing to confront the annual threat of double-digit rate cuts if the SGR stays in place is no better.”

Because Congress writes budget deals in 10 year increments, the inclusion of a 10 year period of zero percent updates is a budgetary device designed to keep the cost of the proposal within an agreed window. Including fee increases would push the cost beyond what lawmakers can accept. “The 10 year freeze is not a lockout,” Banning says. “Nothing prevents Congress from increasing rates if patients begin to experience problems with access to care in the future.”

According to Politico, staffers on Capitol Hill are so confident this proposal can succeed there is no discussion about a fallback plan for a short-term SGR patch this time around. The Congressional Budget Office predicts repealing the SGR will cost $139 billion over the next 10 years, and no one is talking about what possible pay-fors to cover that cost might include. With only a couple of weeks left before the December congressional holiday break, lawmakers haven’t got much time to hammer out the details and pass the legislation. If they don’t, physicians face a 24.4 percent cut in Medicare fees scheduled to take effect Jan. 1, 2014.

Here’s a rundown of what the proposal would do:

• Repeal the Medicare sustainable growth rate, or SGR.
• Establish a period of stability in Medicare physician payments, while providing pathways for physicians to receive higher payments for practice and quality improvements.
• Provide $50 million to assist small physician practices with transformation activities.
• Shift emphasis away from fee-for-service payments towards new payment models that support advanced delivery models demonstrating higher quality care.
• Recognize and financially award alternative payment models, or APMs, like the patient-centered medical home.
• Consolidate existing quality improvement programs into a single Value-Based Performance Payment.
• Create and finance care coordination codes in the Medicare physician fee schedule.
• Create a process and benchmarks to evaluate misvalued codes in the Medicare physician fee schedule and redistribute those savings to undervalued services.
• Freeze the conversion factor at 2013 rates for 10 years (2014-2023) at 0 percent update annually – physicians in APMs may earn 5 percent increases annually, while other physicians may earn additional payments based on the quality and efficiency of care provided.
• Create financing mechanisms to accelerate adoption of advanced APMs by physicians and physician groups.
• Create appropriate use criteria for high-cost/high-utilization services.
• Increase transparency and availability of Medicare data for both physicians and patients.