On Thursday, February 6, 2013, three congressional committees—the Senate Finance, House Ways and Means and House Energy and Commerce—introduced collaborative bipartisan legislation to repeal the sustainable growth rate (SGR), Medicare’s controversial physician payment formula, and replace it a system based on value versus volume of care. Although the committees agreed on policy, the lawmakers did not agree on who will pay the cost, which is about $126 billion over 10 years, according to a Congressional Budget Office report. If the legislation passes, Medicare-participating physicians would avert the 23.7% payment cut scheduled to occur on April 1.

If enacted, the SGR Repeal and Medicare Provider Payment Modernization Act will sufficiently change Medicare Part B payments. Below is a summary of some of the significant proposals.

1. Repeal the SGR
   • The legislation would permanently repeal the SGR and provide an annual update of 0.5% from 2014 through 2018. The 2018 payment rates would be maintained through 2023 so physicians have time to receive additional payments through a merit-based incentive payment system.
2. Establish a Merit Based Payment System
   • In 2018, payments will be based upon the new Merit-Based Incentive Payment System (MIPS) which consolidates the Physician Quality Reporting System (PQRS), Value-Based Modifier, and “meaningful use” program for electronic health records (EHRs). The MIPS would apply to doctors of medicine or osteopathy, dental surgery or dental medicine, podiatric medicine, chiropractors, physician assistants, nurse practitioners, clinical nurse specialists and certified registered nurse anesthetists. Other professionals who are paid under the physician fee schedule may be included starting in 2020 if viable performance metrics are available.
   • Under the MIPS, payments are based upon quality, resource use, meaningful use and clinical practice improvements. Under that system, penalties for underperformers are capped at 4% in 2018, 5% in 2019, 7% in 2020 and 9% in 2021. Rewards for exceptional performers are capped at $500 million per year from 2018 through 2023.
3.  Push to Alternative Payment Models
   • Physicians who receive a significant percentage of Medicare revenue from an alternative payment model such as an accountable care organization will receive a 5% bonus starting in 2018. The payment model must involve a certain amount of risk for financial losses and include a quality measurement component. However, patient-centered medical homes are exempt from the financial risk obligation if the model works in the Medicare population. In addition, alternative payment models from private payers and Medicaid will be taken into consideration if no Medicare model exists in a provider’s area. Providers who participate in an alternative payment model will be exempt from the MIPS. CMS would also create a Technical Advisory Committee to study physician-focused alternative payment model proposals.