iProtean—Proposal Surfaces In Congress to Repeal the SGR

We don’t often report on early proposals from federal lawmakers, but this one captured our attention. It seems the Senate Finance Committee and the House Ways and Means Committee have a bipartisan draft proposal to repeal the Medicare Sustainable Growth Rate (SGR) formula and freeze current payment levels for 10 years. (“Key Committees Release Bipartisan Proposal to Scrap SGR and Freeze Payment Rates,” Health Lawyers Weekly, November 1, 2013)


The SGR formula, enacted by Congress as part of the Balanced Budget Act of 1997, is a mechanism that ties physician payment updates to the relationship between overall fee schedule spending and growth in gross domestic product (GDP). Its purpose is to control spending by Medicare on physician services. The implementation of the physician fee schedule update to meet the target SGR can be suspended or adjusted by Congress, as has been done regularly in the past (the “doc fix”). For example, over the last 10 years, Congress has spent nearly $150 billion on short-term SGR overrides to prevent pending cuts.


The proposal would permanently repeal the SGR update mechanism, reform the fee-for-service payment system through greater focus on value over volume, and encourage participation in alternative payment models. The revised fee-for-service system would freeze current payment levels through the 10-year budget window, while allowing individual physicians and other healthcare professionals to earn performance-based incentive payments through a compulsory budget-neutral program. “By combining the current quality incentive programs into one comprehensive program, this proposal would further value-based purchasing within the overall Medicare program while maintaining and improving the efficiency of the underlying structure with which professionals are already familiar,” (Discussion Draft, SGR Repeal and Medicare Physician Payment Reform,” Report: House Ways and Means Committee, October 30, 2013)


The proposal would combine three current payment incentive programs into one program—the Value-Based Performance (VBP) Payment Program—and would begin adjusting physician payments in 2017. In that year, the funding available for VBP incentive payments would be equal to 8% of the total estimated spending for VBP eligible professionals, according to the proposal. (“Key Committees Release Bipartisan Proposal to Scrap SGR and Freeze Payment Rates,” Health Lawyers Weekly, November 1, 2013)


The three current payment incentive programs are:

  • Physician Quality Reporting System (PQRS)—failure to successfully report on quality measures results in a 2 percent penalty;
  • Value-Based Modifier— budget-neutral payment adjustment based on quality and resource use; and
  • EHR MU—Failure to demonstrate meaningful use (MU) of certified electronic health record (HER) technology results in a 3 percent penalty


Under the VBP program, these payment penalties would sunset at the end of 2016.



Update from HHS on Hospitals and the Exchanges

Hospitals can cover the insurance premiums of their disadvantaged patients and not violate the federal anti-kickback statute prohibiting assistance to patients covered by federal health programs, according to a recent letter from the Secretary of Health and Human Services to a lawmaker.


Some hospitals and health systems offer financial assistance to vulnerable or disadvantaged patients by paying their health insurance premiums. The opinion from the Secretary makes it clear that this practice can continue when those patients get their coverage through health exchanges/marketplaces.


However, there may be additional issues; for example, it isn’t clear whether some states’ anti-kickback statutes still would prohibit hospitals from providing insurance assistance. (“HHS: Hospitals Not Prohibited from Paying Insurance Costs,” HFMA Weekly News, October 31, 2013)



iProtean subscribers, we hope you have viewed the new advanced Finance course Making Difficult Decisions About Services and Programs: A Portfolio Approach, Part One. Experts Marian Jennings, Lisa Goldstein and Nate Kaufman continue their in-depth view of this difficult topic in Part Two—to be released at the end of this month



For a complete list of iProtean courses, click here.

For more information about iProtean, click here.