Health Policy

A Solution to the SGR: Value-Based Medicare Payments

You have probably heard of the SGR, or Sustainable Growth Rate. It is a formula that was put in place in 1997 as part of the Balanced Budget Act that links physician payments to the gross domestic product (GDP) in order to control Medicare spending on physician services. The SGR ensures that the growth of Medicare spending on physician services does not exceed the growth of the GDP. However, the formula does not take into account recessions that cause a decrease in the GDP rather than growth, new technology that is more expensive, an increase in the number of patients enrolled in Medicare, or changes in Medicare coverage. Since 2006, the SGR has been “fixed” nine times to avoid physician payment cuts. If the SGR expires, physicians will face a 23.7% cut in Medicare payments. However, a solution may be in sight with House bill 4015 and Senate bill 2000, which aim to repeal the SGR.

If passed, the bills will not change SGR payments until 2018, when they will implement an incentive payment program based on value and quality instead of services provided. The new payment plan will be called the Merit-Based Incentive Payment System (MIPS). From the date the bills take effect, until 2018, when incentive-based payments begin, physicians will receive an annual update of 0.5%. The shift from a fee-for-service to a value-based payment program has many doctors worried. Here is a closer look at the proposed changes.

Every year, CMS will publish a list of quality measures to be used in the forthcoming MIPS performance period. The MIPS will assess the performance of eligible professionals in four categories: quality, resource use, electronic health records (EHRs) meaningful use, and clinical practice improvement activities.

  • Quality measures will be published annually. In addition to measures used in the existing quality performance programs, the Center for Medicare Services (CMS) will solicit and fund professional organizations to develop additional measures.
  • Resource use will be assessed by CMS. CMS will engage physicians and the public to identify resources needed for specific care episodes. Additionally, CMS will take into account the specific role of the treating physician and the type of treatment; for example, primary care versus specialist care, and chronic conditions versus acute episodes. This step addresses concerns that Medicare payment rules, specifically the SGR, failed to link Medicare payments to the cost of providing services. CMS will also try to improve risk adjustment methodologies to ensure that professionals are not penalized for serving sicker or more costly patients.
  • Meaningful use of electronic health records will allow professionals to report quality measures through certified EHR systems to CMS.
  • Clinical practice improvement activities will be implemented. Professionals will be measured on their effort to engage in clinical practice improvement activities. Physicians will be expected to improve their practices. The menu of recognized activities will be established in collaboration with doctors. The activities will be broad and applicable to all specialties and attainable for small practices and professionals in rural and underserved areas.

Physicians' Medicare MIPS payments will be dependent upon the doctor's performance score. The performance threshold will be the mean of the composite performance scores for all MIPS-eligible professionals during a period prior to the performance period. Physicians with scores that fall above the mean threshold will receive positive payment adjustments and physicians with scores that fall below the mean will receive negative payment adjustments.

  • Negative adjustments will be capped at 4% in 2018, 5% in 2019, 7% in 2020, and 9% in 2021. Eligible professionals whose composite performance score falls between 0% and 25% of the threshold will receive the maximum possible negative payment adjustment for the year. Professionals with composite performance scores closer to the threshold will receive proportionally smaller negative payment adjustments. These negative payment adjustments for eligible professionals whose composite performance scores fall below the threshold will fund positive payment adjustments to professionals with composite performance scores above the threshold.
  • Zero adjustments – Eligible professionals whose composite performance score is at the threshold will not receive a MIPS payment adjustment.
  • Positive adjustments will be made for professionals whose composite performance scores are above the mean. These physicians will receive proportionally larger incentive payments up to a maximum of three times the annual cap for negative payment adjustments.
  • Additional incentive payments will be available for physicians with exceptional performance. Incentive payments will be capped at $500 million per year for each of 2018-2023. Additional incentive payments will be allocated according to a linear distribution, with better performers receiving larger incentive payments.

The new payment plan will also be focusing on evidence-based care, starting with imaging. On November 15, 2015, CMS will specify one or more appropriate use criteria (AUCs) for advanced diagnostic imaging. Then on January 1, 2017, payments for advanced diagnostic imaging will only be made for claims that show the physicians order adheres to the applicable AUC(s). The requirement to comply with AUC(s) does not apply to imaging services ordered for a patient with an emergency medical condition as defined under EMTALA.

Even if the legislature fails to pass H.R. 4015 and S. 2000, it is likely that some form of these bills will be passed to repeal the SGR. H.R. 4015 and S. 2000 ask for physician and medical society input to provide quality measures and appropriate use criteria. It is important that emergency physicians claim their seat at the Medicare payment table, or another specialty will dictate how emergency physicians are reimbursed.

Update: On March 26, 2014, Congress rejected the above bipartisan SGR repeal in favor for another 12-month SRG fix. This will be the 17th “fix” of the SGR. The new bill, the SGR fix, was discussed in the House on March 27, and the vote was delayed due to lack of a quorum. At the time of publication, it is unclear what will happen on April 1 when the current SGR fix expires. ACEP, the AMA, and many other physician organizations have sent a letter to Congress and the House of Representatives declaring their strong opposition to another SGR fix and their disappointment with the rejection of the above described SGR repeal.