SGR Repealed, But the Work Is Just Beginning

Gail Thompson

May 2015, Vol 5, No 4 - Payment Reform


The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was signed into law on April 16, making history not just by repealing the sustainable growth rate (SGR) formula for Medicare physician payment, but for the resounding bipartisan support of the legislation after decades of partisan posturing in the US House of Representatives and Senate. The House of Representatives approved the bill by a 392–37 vote, and the Senate followed a few weeks later with an approval vote of 92–8. These landslide votes were achieved by actual compromise on both the Democratic and Republican sides, which by itself is noteworthy.

“After more than a decade of uneven progress, it’s almost overwhelming to think that more than 90 percent of Congress finally voted to repeal the SGR,” said Rep Michael C. Burgess, MD (R, Texas), who sponsored the legislation. “With bipartisan strength, we passed the most meaningful entitlement reform in years with a product that’s a huge victory for seniors, providers, taxpayers, and the integrity of the entire Medicare system.”

Many details of the signed bill are yet to be defined, however, and will have a lasting and profound impact on healthcare delivery for decades. The SGR formula calculation that was to have managed costs of medical care has been replaced by a modest 0.5% annual payment update for the next 5 years for all physicians, as well as a merit-based incentive payment system (MIPS) for all physician payments beginning January 1, 2019.

MIPS payments will be based upon measures and criteria that are yet to be defined. The secretary of the Department of Health &Human Services is tasked under the law to “assess appropriate adjustments to quality measures, resource use measures, and other measures used under the MIPS; and…assess and implement appropriate adjustments to payment adjustments, composite performance scores, scores for performance categories, or scores for measures or activities under the MIPS.”

The legislation calls for performance assessments in 4 key areas: quality of care, resource use, clinical practice improvement (including expanded practice access, population management, care coordination, beneficiary engagement, and patient safety and practice assessment improvement activities), and the meaningful use of certified electronic health record (EHR) technology. It also extends the Children’s Health Insurance Program and the Maternal, Infant, and Early Childhood Home Visiting program, and continues certain assistance programs for qualifying Medicare and Medicaid beneficiaries.

Next Steps

Medicare has to adjust the payment rates in its systems to reflect the final law; however, Medicare assures practices that it will continue to process claims on a timely basis and that any claims that may have been processed with the SGR-driven 21% reduction in physician payments will be reprocessed. New and final 2015 rates will be applied and payments adjusted without further action needed by the physician practices.

Congress and the Centers for Medicare & Medicaid Services (CMS) have not yet begun to elaborate on how the new value-based payment models will transition, or how the new alternative payment mechanisms will work. Bundled payment initiatives already are being explored, but with mixed results. Some CMS alternative model pilots have seen mixed success, with both reported savings as well as a number of participants dropping out, citing concerns for their continued financial viability based upon the costs of participating in comparison to the financial return.

Pundits are expressing concern about the final direction of the MACRA legislation, warning that it will force doctors into hospital-run accountable care organizations with rules decreed by the federal government. Other concerns center on the lack of credible quality measurements for physicians.

Going forward, as CMS moves to new definitions of value in healthcare, it is clear from ongoing reform initiatives that there will be both winners and losers. Discussions to define the intent and execution of the MACRA legislation will continue, and providers should remain vigilant to monitor developments regarding this legislation as well as key details that are not yet finalized.