Public Policy

Reduced Estimate to Fix SGR Formula Brings Hope for Change


The tiresome cycle of the sustainable growth rate (SGR) continues and, as a result, providers are facing a pay cut of approximately 25% at the end of 2013. With virtually universal agreement that something must be done to permanently repeal the SGR, the insurmountable barrier to a solution has been the cost, which is estimated at $245 billion.

However, a bright spot has emerged.

Several months ago, the Congressional Budget Office produced an anomalous, revised SGR repeal estimate of $138 billion. At nearly half the cost of previous estimates, this is a much less daunting budgetary hole to fill. Needless to say, this revised estimate has breathed new life into the potential to permanently fix the SGR this year. The only catch is that this low estimate is unlikely to persist, so a flurry of activity is expected to last throughout the summer months before the window of opportunity closes.

One of the earliest proposals to move away from fee-for-service to a payment system rooted in quality and value came from the reintroduction of legislation by U.S. Reps. Allyson Schwartz (D-Pa.) and Joe Heck (R-Nev.). SHM is actively supporting this legislation and will continue to do so, but it will give the same attention to other reasonable plans designed to move away from the SGR by incorporating the concepts of quality and value as laid out by Schwartz and Heck.

Along these lines, a joint effort by House Energy and Commerce Committee chairman

Fred Upton (R-Mich.) and House Ways and Means Committee chairman Dave Camp (R-Mich.) would repeal the SGR and replace it with a more sustainable payment system. The plan is being developed iteratively, with opportunities for specialty societies, such as SHM, to provide input along the way. Clear details have yet to emerge because the plan is still in its early stages, but broadly, it will repeal the SGR, replacing it with quality and resource use metrics coupled with value-based payment, and somehow incorporate alternative payment models, such as accountable-care organizations (ACOs). This may sound familiar

because much of it is.

The Centers for Medicare & Medicaid Services (CMS) is developing programs, guided by the Affordable Care Act (ACA), to meet many of these systemic needs in the absence of a repeal of the SGR. The Physician Quality Reporting System (PQRS) is transitioning into a mandatory program, and it’s coupling with Quality and Resource Use Reports (QRURs) brings value into the equation. Both of these programs are a part of the ACA-mandated Physician Value-Based Payment Modifier (VBPM), which implements a level of value-based payment to all physicians by 2017. Additionally, the Center for Medicare & Medicaid Innovation, along with Medicare itself, is developing and testing many alternative models, such as ACOs, bundled payments, and patient-centered medical homes, to name a few.

Upton and Camp have expressed that their goal is to not only repeal the SGR, but also to establish a system that pays for value and is less piecemeal and confusing than what is currently being implemented. For example, they are looking at ways to potentially unify the often disparate yet overlapping reporting requirements placed on physicians through such programs as PQRS, Meaningful Use, and VBPM. This is a great opportunity to take the knowledge and experience hospitalists have with these current CMS programs and advocate for aligning programs, ensuring the usefulness of quality measurement, and reducing administrative barriers and burdens.

Ultimately, the repeal of the SGR will take much thought and legislative will to accomplish. With a broad framework in place, the process has at least begun. It remains to be seen whether Congress will act now on the SGR “sale” and help the health-care system transition into something more sustainable and stable.

Josh Boswell is SHM’s senior manager of government relations

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