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From Health Law Daily, August 1, 2013

House committee votes to repeal sustainable growth rate

By Sarah E. Baumann, JD

The House Committee on Energy and Commerce voted to unanimously repeal the Sustainable Growth Rate (SGR), which determines the rate at which CMS pays Medicare providers under the Physician Fee Schedule, on July 31, 2013. Instead, the Committee will advance a bill to replace the SGR with a phased-in process ultimately involving quality incentives or alternative payment models. The bill is the culmination of a two-year examination of the SGR.

SGR. The Balanced Budget Act of 1997 (P.L. 105-133) authorized the use of the SGR to determine the rate at which Medicare would pay physicians for their services. Rather than simply adjusting the payment rate based on inflation, the SGR was supposed to balance increases in health care costs with other economic factors; however, health care costs began to increase at higher than expected rates. If implemented annually, the SGR formula would have dramatically decreased Medicare payments to physicians—which may have led physicians to stop accepting Medicare patients. Congress recognized this problem, and annually voted to postpone the SGR increase for more than a decade. Had cuts gone into effect on January 1, 2013, physicians would have seen a drastic 27 percent cut in payments. Instead, Congress extended current physician payment rates through December 31, 2013.

Committee bill. The Medicare Patient Access and Quality Improvement Act of 2013 (H.R. 2810) would repeal the SGR and replace it with a five-year period of stable payments, beginning in 2014 and ending in 2018, with annual adjustments for inflation of 0.5 percent. This time period would allow stakeholders to develop and test quality measures and clinical practice improvement activities. Beginning in 2019, physicians would participate in a Physician Quality Reporting System (PQRS), which would set provider benchmarks for excellence in health care. Providers who meet or exceed benchmarks could receive an additional positive update of 1 percent; underperforming physicians could lose 1 percent. Alternatively, physicians could opt-out of the fee-for-service program and choose to engage in alternative payment models (APMs), which could include patient-centered medical homes, specialty models, and bundles or episodes of care, among other possibilities.

In addition to reforming the physician payment model, the bill would expand the availability of Medicare data, encourage care coordination and medical homes, and address other miscellaneous issues.

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