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Draft Framework for Repealing the SGR: The Cure May be Worse than the Disease

On Halloween, the Senate Finance and House Ways and Means Committees released a bipartisan, bicameral draft proposal to repeal and replace Medicare’s sustainable growth rate (SGR) formula. 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. Although this framework attempts to solve the SGR problem, it still far from the Superman approach we need. Key provisions in the draft include:

  • Repeal the SGR formula;
  • Freeze annual fee schedule payment updates for 10 years, with positive updates beginning in 2024;
  • Avoid payment differentials between primary care physicians and specialists;
  • Combine Medicare’s current incentive and penalty programs, including the Physician Quality Reporting System (PQRS), Electronic Health Record (EHR), and Value-Based Payment Modifier (VBPM) programs and penalties, to create a single budget-neutral program for evaluating physician performance;
  • Establish a new “value-based performance (VBP) payment program,” which would adjust payments beginning in 2017;
  • Allow physicians to participate in alternative payment models, such as accountable care organizations, rather than the VBP payment program;
  • Require an assessment of medical services, including the global surgical package, to “ensure accurate valuation of services” under the physician fee schedule; misvalued codes would be adjusted to achieve roughly $3 billion in total fee schedule savings;
  • Instruct the Secretary of the Department of Health and Human Services (HHS) to require physicians to submit data on resource use or face a one-year, 10 percent payment reduction;
  • Utilize appropriate use criteria for certain imaging services—prior authorization requirements would be imposed on physicians ordering too many tests and
  • Direct the Department of Health and Human Services to publish utilization and payment data for physicians on the Physician Compare website.

At this point, the AANS and CNS have significant concerns about this proposal, as outlined in our comments to the committees. Although the bipartisan plan repeals the SGR, it also creates a budget neutral system that pits doctors against each other, creating winners and losers. At the end of the day, everyone agrees that the SGR needs to go, but we must be careful what we ask for because if the cure is as bad or worse than the disease, we haven’t solved the problem.

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