Congress Repeals SGR Bill. What Now?

In April 14, 2015, the U.S. Senate passed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) by an overwhelming bipartisan majority – putting an end to the controversial Sustainable Growth Rate (SGR) formula that had threatened to cut physician payments for years. Two weeks earlier, it passed the House by a similar overwhelming majority.

For more than 10 years, the SGR had mandated large cuts which needed to be averted by temporary Congressional action. Eliminating the SGR formula has been a major focus of ASH and other organizations’ advocacy efforts.

The legislation spans more than 200 pages and covers many issues beyond the repeal of the SGR. ASH Clinical News spoke with Samuel M. Silver, MD, PhD, chair of ASH’s Subcommittee on Reimbursement, about the implications of the SGR’s much-awaited repeal on clinical practice.

Annual Payment Updates

Most importantly, MACRA repeals the SGR, which was used to calculate Medicare payment rates to physicians. The SGR was put in place to control costs so that the yearly increase in the expense per Medicare beneficiary does not exceed the growth in gross domestic product. Because SGR was tied to the national economy with what most agreed to be a flawed formula, in years of economic growth the payment rate to physicians increased; when our national economy worsened, though, payments were cut by more than 20 percent.

“For years, Congress did nothing. Only physicians were being punished about how the national economy performed; the drug and equipment manufacturers did not have any such targets,” Dr. Silver, who is professor of internal medicine at the University of Michigan Medical School, explained. “Each year, at the last minute, Congress would pull a rabbit out of a hat, put a patch on the problem, and the target would change from –21 percent (in which, theoretically, physicians owed the government money) to an increase of 0.5 percent.”

For practicing physicians, these last-minute fixes meant there was no reliability in income; private practice physicians, for instance, were not able to plan for the costs of hiring new staff and other business expenses.

Now, the SGR formula is being replaced by a statutory payment update that is not set by a formula. The annual payment updates will be enacted over the next few years:

On July 1, 2015, Medicare payments for physicians will go up by 0.5 percent from the current rates.

Each year on January 1, from 2016 to 2019, payments will increase by an additional 0.5 percent. As is true today, payments for individual services may increase or decrease, but the average service will have payments increased by 0.5 percent.

Starting in 2020, payments will be flat for an additional five years with no increases.

Beyond 2020, payment rates will have very modest increases. While the rates are not as high as in previous years of healthy economic growth, Dr. Silver noted, “The bottom line is that the annual payment update provides a baseline of stability.”

The SGR formula was actually supported by physicians when it passed. The statutory formula was a gamble, though, and physicians lost. With this new mechanism in place, there is no situation that would lead to increases in physician payment of 5 percent or more, which is what some thought the SGR could have done.

Consolidation of Quality Reporting Programs

Under the current law, physician payments in Medicare are subject to a series of adjustments based on three separate programs: the Electronic Health Record (EHR) Meaningful Use Program, the Physician Quality Reporting System (PQRS), and the Value-Based Modifier pay-for-performance program. MACRA will convert all three of these adjustments into a single assessment program referred to as the Merit-Based Incentive Payment System (MIPS), which will be implemented in 2018.

In 2015, physicians could have as much as 6 percent of their Medicare payment at risk from the existing PQRS, meaningful use, and value-based modifier programs. The legislation just passed by Congress actually decreases the amount at risk in the first year, reducing it to 4 percent, but gradually increasing the risk to 9 percent in 2021.

While this consolidation may appear to be a big change, the programs already had significant linkages that may make the practical effect of this change rather modest. “The MIPS is basically a consolidation of what we already have, but that does not mean we completely understand these quality reporting systems,” Dr. Silver noted. “We need to ensure that these systems are relevant to and work well for hematology. We treat many low-volume diseases, so developing overlying quality metrics is difficult. That is a priority for the ASH Quality Committee.”

The MIPS program will, however, require practices to participate in clinical practice improvement activities. These activities are defined with very broad examples, so they could take many different forms.

One major difference in the measurement of quality is that quality benchmarks will be established a year in advance, and physicians or practices will receive credit for either achievement or improvement. This measurement methodology, which is already used in the hospital, value-based purchasing system, allows strong incentives for both high and low performers.

Incentives to Move to New Payment Models

The establishment of very modest payment increases followed by flat payments is intended to provide an additional incentive to physician groups to move into “riskier” payment models. MACRA essentially establishes two paths for physicians: one for those accepting newer models and one for those sticking with traditional models. Those who embrace alternative payment models (to the extent that 25% of their Medicare revenue comes from these models by 2019) will receive an additional 5 percent bonus payment for all services. In 2021 and 2022, the threshold for receiving this bonus increases to 50 percent.

There are both upsides and downsides to these alternative payment models, Dr. Silver said, and exactly how these models will impact hematologists is unknown. There will be a significant amount of regulation to define how a physician or practice would demonstrate what percentage of their payments come from these models, particularly in cases in which a physician is considering work with private payers.

What Will This Mean for Hematologists?

For the most part, the everyday practice and its involvement with Medicare will look very much like it does today with the passage of this law – just without the looming payment cuts associated with the SGR formula. The quality reporting and other mechanisms are again similar to today’s programs, just repackaged in a relatively modest fashion. The incentives to move to alternative payment models should be carefully evaluated to ensure that groups are comfortable taking on risk, even with the bonus increases associated with early adoption.

“We are certainly very grateful that SGR is now repealed,” Dr. Silver said, “but that doesn’t mean that there aren’t many more issues to work on.” And the passage of this legislation is not an end of the advocacy work related to physician payment. MACRA will require a great deal of regulatory interpretation by CMS – particularly in the realm of defining the performance improvement activities and ensuring their relevance to hematology.