Public Policy

What the SGR Repeal Means for Hospitalists


 

The long awaited permanent repeal of the poorly designed Sustainable Growth Rate (SGR) came just in time to avert the 21.2% Medicare physician payment cut that would have taken effect on April 1st, 2015. The SGR formula was first enacted in the Balanced Budget Act of 1997 with the intent to control Medicare spending on physician services. The federal budget sequester in the Budget Control Act of 2011 led to heightened speculation of doom and gloom about the U.S. debt and, ultimately, the necessity of a massive reduction in Medicare payments. Over the past decade, lawmakers have managed to pass 17 various delays and adjustments to keep spending in line with the target SGR. In its place, Congress finally passed H.R. 2, the Medicare Access and CHIP Reauthorization Act (MACRA), which was signed into law by President Obama on April 16, 2015.

What physicians should expect:

(1) The bill includes a 0.5% physician pay increase per year for the next five years beginning July 1, 2015.

(2) It incentivizes physicians to use alternate payment models that focus on care coordination and preventive care.

(3) It consolidates the three existing Medicare quality reporting programs known as the Physician Quality Reporting System (PQRS), Meaningful Use of Electronic Health Records, and the Physician Value-Based Payment Modifier, as well as their associated penalties into a single value-based performance program called the Merit-based Incentive Payment System (MIPS) which starts in 2019.

Is this good for hospitalists? While hospitalists are now protected from the 21% pay cut, we are still faced with increasing burden of legislative mandates on quality metrics. This has created unique challenges for acute inpatient care. The current individual incentive programs will remain in effect until MIPS in 2019, mandating the reporting of PQRS and VBPMs in order to avoid penalties. As such, we will need to continue to focus our efforts on meeting these challenges by aligning our performance measures with that of our institutions. This includes helping to develop alternative payment mechanisms (APMs), such as accountable care organizations (ACOs), patient-centered medical homes, bundled-payment arrangements, and other models. Of note, physicians involved in APMs will not be subject to MIPS assessment and will receive an annual 5% increase from 2019-2024.

The legislation creates other concerns such as the planned enforcement of Medicare's “2-midnight” rule, the requirement of EHR to be interoperable by the end of 2018, and the uncertainty of fairness of CMS in assessing quality and incentive payments. And the question remains, will Congress shift its attention to lowering payments for hospitals and non-physician providers to offset the once expected Medicare cuts? Hospitalists are distinctively qualified to potentially make headway given our already very active involvement in hospital process improvements. It will be in our best interest to stay vocal at the hospital, local, and national level.

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