Repeal of the SGR Bill

What does the repeal of the SGR bill mean?

There was so much energy spent on the repeal of the Medicare Sustainable Growth Rate formula.What does it mean for the average physician? How are we to interpret the results?

The Medicare Sustainable Growth (SGR) formula was enacted by Congress as part of the Balanced Budget Act of 1997 (BBA). The formula limits growth in spending for physicians’ services by linking updates to target rates of spending growth. A critical factor in the determination of the target rate is projected growth in the real gross domestic product (GDP) per capita.

1. We know it is complicated and can lead to cuts in the reimbursements for physicians.

The repeal includes replacing the SGR with an increase of 0.5% in Medicare physician reimbursement starting in July 2015 through December 2015, and then annual 0.5% increases lasting through 2019. There isn’t a potential 20+% cut facing physicians at the end of the year.

The short-term impact is basically that you get rid of the SGR and end the threat of the cuts, and that’s critical to create stability for physician practices.

2. What does it mean for future payment models for physicians?

The intermediate and longer-term impact is that over the next 3 years, we’re going to be transitioning to a system in this bill that would move physicians into alternative payment models [APMs], as well as consolidate three existing quality-improvement plan programs that already exist in Medicare.

The new bill consolidates the Meaningful Use program for electronic health records and several quality reporting programs, into a new, merit-based incentive payment system and would incentivize physicians to participate in alternative payment models such as accountable care organizations (ACOs).

Overall Assessment

In my opinion we should be glad to see the complicated SGR formula put to rest and the threat of 20%+ cuts in reimbursement disappear.
On the other side transitioning from fee-for-service to being paid for value or taking on risk requires tremendous change management including clinical, operation, financial and culture.

Physicians and medical groups are going to be taking on more risk in a complicated system that has yet to be worked out. The timelines in the legislation are ambitious and physicians will need tools from CMS that allow them the opportunity to be successful in risk-based payment arrangements.

We may be jumping from the frying pan into the fire.

Jonathan Friedman, MBA, CPC