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House Committee Unveils Framework to Replace the SGR

Last week, the talk of the town (amongst healthcare stakeholders) was about the House Energy and Commerce Committee’s draft legislative proposal for repealing Medicare’s sustainable growth rate (SGR) formula. While this skeleton discussion draft bill is very preliminary, it provides a legislative outline for replacing the current Medicare payment system with an “improved fee for service system in which providers – working with the Secretary of Health and Human Services – develop quality measures that will lead to better care in a more efficient manner.” According to the committee, the new system will be implemented in three phases as follows:

  • Phase 1: Repeal the SGR and replace it with a period of stable payments, during which time the quality infrastructure ramps up. Quality measures will be based on core competencies for each peer cohort (e.g., neurosurgeons) and will be developed by medical specialty societies and others.
  • Phase 2: The new Competency Update Incentive Program is implemented. Under this system, physicians would be paid a “base” rate per service, which would be some percentage of the full fee-schedule rate. To earn the full fee-schedule rate, physicians must successfully meet the peer cohort quality program requirements. Physicians can opt out of this enhanced fee-for-service program, and instead participate in alternative payment models, such as accountable care organizations (ACOs).
  • Phase 3: At some point in the future, physician payments may also be based in part on compliance with efficiency measures.

Many questions remain. For example, while the legislation calls for the Secretary of Health and Human Services to align this program with the existing Physician Quality Reporting System (PQRS), Electronic Health Record (EHR) and Value Based Payment Modifier (VBPM) programs, it is not clear whether existing PQRS, EHR and VBPM program penalties will remain in force on top of this new SGR quality payment withhold (we certainly hope not). The committee has scheduled a hearing on the draft legislation for June 5 at 10AM EST (watch it live here). In April, the AANS and CNS joined with the Alliance of Specialty Medicine in submitting on the original framework.

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