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SGR Repeal Momentum Increases, Path Forward Remains Unclear

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As 2013 comes to a close, Congress and physicians continue to discuss the impeding payment cliff physicians will face Jan. 1, 2014, due to the Sustainable Growth Rate (SGR) formula.

If Congress fails to intervene, physicians and other eligible Medicare providers (e.g., physician assistants, nurse practitioners) will face a 24.4 percent reduction in payments. While Congress has intervened annually since 2002 to prevent the SGR driven payment reduction, legislators and stakeholders are tired of the Band-Aid approach and are seriously considering SGR repeal options.

The recent House Ways & Means and Senate Finance committee bipartisan discussion draft is the latest approach to dealing with the flawed SGR formula. The draft provides a high-level overview of key provisions but does not provide granular detail on certain provisions. The bipartisan approach builds off previous efforts and focuses on the same key areas as past approaches: period of payment stability, push for participation in alternative payment models (APMs) and value-based performance (VBP) payment metrics. The bipartisan proposal would freeze current payment levels for the next 10 years for all providers, foster participation through additional bonus payments for physicians participating in two-sided risk APMs with a quality measurement component, such as accountable care organizations (ACOs), and adjust payments based on a VBP score which consolidates current PQRS, EHR meaningful use and value-based payment modifier performance metrics.

Stakeholders await additional details around the proposal to better understand the intent and nuances of provisions and impact it may have physicians. The current bonus payment for participating in qualifying two-sided risk models in lieu of being subject to the VBP adjustment may limit opportunity for physicians who are not able to participate in such models due to local practice dynamics and geographic differences. The draft does encourage the Secretary to test APMs relevant to specialists, but opportunities for many specialists to participate in APMs remain unclear and may hinder opportunities to reach bonus levels. The clinical practice improvement metrics, part of the new VBP program, are geared toward primary care activities and may be more difficult for specialists to achieve relevant scoring in this area. Additionally, while the VBP program is budget-neutral, where penalties pay for rewards, the proposal does not provide insight into the level of penalties or rewards that may be adjudicated. The proposal indicates that in 2017 the performance pool will be roughly 8 percent overall Medicare expenditures, but does not specify the opportunity or risk for physicians (e.g., 5% increase for high scoring practices, -5% for low scoring practices). The American Medical Association (AMA) and others have provided feedback on the initial draft and wait greater clarity in future iterations.

While the discussion draft is a positive step toward SGR reform, it remains unclear whether the passage of a meaningful bill will occur before 2014, particularly in light of larger budgetary issues. CBO estimates an SGR repeal and 10-year payment freeze to cost approximately $140 billion. A permanent fix to the SGR also could surface as part of a bigger budgetary deal. Finding pay-fors will likely be the biggest area of contention, as recent history proves that anything is on the table. Senate Finance confirms that they will begin markup on Dec. 12, to allow enough time before winter recess begins Dec. 17.

A complete copy of the discussion draft can be found here.

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