SGR Repeal Changes the Nature of Care and Compensation

U.S. CapitolThe challenge of running a successful healthcare organization, whether it’s a private practice or a thousand-bed hospital, is made even more difficult when the facility’s revenues are in constant danger of being cut. Such has been the case with Medicare payments for more than a decade under the Sustainable Growth Rate (SGR).

Since 2003, Congress has spent approximately $170 billion in temporary “doc fixes,” in order to avoid Medicare payment cuts under the SGR formula. In recent weeks, however, a lull befell the bickering voices on Capitol Hill as lawmakers united in developing a more permanent solution.

On March 26, 2015, an often-divided House of Representatives overwhelmingly passed H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015, by a landslide vote of 392-37. The system had been slated to cut physicians’ Medicare payments by 21.2 percent on April 1. Following the House decision, however, the Centers for Medicare and Medicaid Services delayed the cuts until April 15, allowing the Senate two days to consider the legislation once it reconvened. During that time the upper chamber debated six proposed amendments, which ultimately failed, before finally passing H.R. 2 in its original form by a vote of 92-8. The legislation will replace the SGR and is designed to prevent the future need for short-term solutions to reimbursement, thus changing the way physicians receive Medicare payments.

H.R. 2 then headed to the White House, where President Obama signed it into law on April 16. The question physicians must now ask—what does the law specifically change?

Compensation for Value-based Care
Under the new law, Medicare payment is no longer a numbers game with fee-for-service rules. The new provisions shift the payment focus towards the quality of care rather than the quantity. Simply put, physicians will receive greater incentives for providing patients with top-quality, value-based care.

Medical costsBeginning July 1, 2015 and continuing through 2019, Medicare physician payments will increase annually by 0.5 percent regardless of performance. These reimbursement increases will halt from 2020 to 2025; however, during that time, physicians can receive additional compensation through the Merit-based Incentive Payment System (MIPS). By 2026, the bill will base physician pay raises on factors such as Meaningful Use and alternative payment models (APM). Those who meet the APM requirements will earn an increase of 0.75 percent. Those who don’t will receive only a 0.25 percent increase.

The SGR repeal will likely create challenges for some facilities as they race to comply with the new measures. However, providers should find that the new initiative will streamline quality reporting by combining three incentive programs, the EHR incentive program, value-based payment modifier and the Physician Quality Reporting System, into MIPS.

The Impact on Healthcare Facilities
The SGR replacement ends the annual threat of large payment cuts and puts the ball in the court of care providers. Facilities that rely heavily on Medicare will have their revenues tied directly to performance measures and healthcare outcomes.

Conspicuously absent from the new law is any further delay in the ICD-10 transition scheduled to take place on October 1st of this year. After delaying the switch to the expanded diagnostic code set for two years, Congress showed no inclination to further delay what many consider to be an important coding upgrade for the healthcare system.

Organizations that have already fast-tracked measures like Meaningful Use will have an easier time achieving payment bonuses. Those that have fallen behind will have a short time to catch up in order to avoid penalties. Achieving the highest level of incentive reimbursement can seem daunting. Yet, despite the challenges, the new measures offer much needed reform for Medicare’s payment model and improves accountability for physician performance.