Bipartisan Proposal From House, Senate Would Repeal SGR

AAFP Seeking Member Input on Medicare Payment Proposal

November 06, 2013 11:38 am Nancy Kuehl
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The House Ways and Means and Senate Finance committees have released a bipartisan, bicameral proposal that would repeal the broken sustainable growth rate (SGR) formula and replace it with alternative payment models more aligned with quality of care, including the patient-centered medical home (PCMH) model and accountable care organizations.

The proposal's emphasis on reforming the fee-for-service payment system in favor of a more quality-oriented approach supports a health care system built on a foundation of primary care, according to a media statement from the AAFP. The proposal "encourages the health care system to focus on the quality of care, not the quantity of procedures or tests performed. Moreover, it encourages comprehensive care management services that are increasingly needed as our population ages and develops multiple chronic conditions," said AAFP President Reid Blackwelder, M.D., of Kingsport, Tenn., in the release.

Story highlights
  • The House Ways and Means and Senate Finance committees have fielded a proposal that would repeal the current Medicare payment formula.
  • The committees propose to phase out fee-for-service payments in favor of payment models that would focus on quality of care.
  • The AAFP Board of Directors is asking members for their feedback before the Board decides how to respond to the proposal.

The SGR formula has created yearly problems for family physicians. For the past 12 years, the flawed formula called for payment decreases for physicians who provide care for Medicare patients, necessitating congressional action to supply last-minute payment patches. Those short-term fixes, often at the last minute, have created chaos for physicians and patients, and, since 2003, Congress has spent nearly $150 billion on these patches.

According to a press release issued by the House Ways and Means Committee(, "The bipartisan, bicameral framework … corrects a decade-long problem that has created uncertainty for millions of Medicare providers and beneficiaries."

"A decade of short-term 'patches' has frustrated providers, threatened access for beneficiaries and created a budgetary dilemma from which Congress has struggled to emerge," says a discussion paper on the proposal( from the Ways and Means Committee.

What It Means for Family Physicians

On first read, the SGR repeal proposal includes both good and not-so-good news for family physicians who see Medicare patients. The most important news is that the proposal replaces the flawed SGR formula, which means the AAFP and its members will not have to spend significant amounts of time each year trying to ensure that the system does not cut physician payments.

Having Your Say: AAFP Board Seeks Feedback

The AAFP is asking members to comment on the contents of a proposal from the House Ways and Means and Senate Finance committees( that would repeal the sustainable growth rate formula that is used to set physician payments for providing health care to Medicare patients.

Comments are due by Nov. 9 at noon CST and can be emailed directly to the AAFP Board of Directors at The Board will carefully consider all comments before formulating an official response to the SGR repeal proposal.

In addition, the proposal

  • provides pathways for physicians to receive higher payments for practice and quality improvements;
  • provides $50 million to assist small physician practices with transformation activities;
  • shifts the emphasis away from fee-for-service payments toward payment models that support higher-quality care;
  • financially rewards alternative payment models, such as the PCMH;
  • creates a process and benchmarks to evaluate misvalued codes in the Medicare physician fee schedule and redistribute those savings to undervalued services;
  • creates appropriate-use criteria for high-cost/high-use services; and
  • increases transparency and availability of Medicare data for both physicians and patients.

The proposal also would consolidate existing quality improvement programs -- meaningful use, the Physician Quality Reporting System and the value-based modifier -- into a single, Value-based Performance (VBP) Payment Program. Current incentive and penalty programs would be phased out in 2016, and physician payments would be adjusted based on their performance in the VBP program. The four assessment categories in the VBP program are quality measures, resource use, clinical practice improvement activities and meaningful use of electronic health records.

Another part of the proposal would create and finance care-coordination codes in the Medicare physician fee schedule. Starting in 2015, the proposal would create a Medicare payment within the fee-for-service system for complex chronic care services. The care-coordination payment would compensate eligible physicians for services generally provided outside of the traditional face-to-face patient encounter. Eligible physicians would include those participating in a PCMH or a comparable payment model certified by an organization recognized by HHS.

The not-so-good news in the proposal is that it would freeze fee-for-service payment rates for Medicare for 10 years (2014-2023). However, physicians participating in alternative payment models, including the PCMH, could receive bonuses of as much as 5 percent each year from 2016-2021, and they would be exempt from the reporting and performance thresholds established by the VBP program.

"The proposal seems to be an attempt to move away from the current fee-for-service system," Blackwelder told AAFP News Now, noting that the Academy supports a combined payment structure that includes some fee-for-service along with quality payments. "It's important that we think beyond fee-for-service payments only and consider how payments for quality care need to be structured so we eventually can move away from fee-for-service as a sole payment model," he added.

The AAFP's Stance

Although the payment freeze is disappointing, said Blackwelder, if the proposal is passed, physicians will no longer have to face the yearly cuts called for by the SGR. The cost to patch the SGR increases each year, and Congress has to struggle to find the money. "In the current legislative climate, there may come a time when Congress will no longer have the will or be able to find the money for a payment fix," Blackwelder noted.

"Congress has not been able to look at better payments for primary care physicians because of the chokehold the SGR has had on its attention," said Blackwelder. With the SGR repealed, the AAFP can focus its advocacy efforts on securing better primary care payments, which would cost considerably less than payment patches to the SGR.

However, Blackwelder added, there still is much to consider about this proposal. Comments are due back to the House and Senate by Nov. 12, and the AAFP Board of Directors is carefully examining the proposal before it articulates the Academy's stance. "Staff members are working with legislative aides to get questions about the proposal answered," said Blackwelder.

In addition, the AAFP is seeking feedback from its constituent chapters and all members on the proposal. Comments can be emailed to the AAFP at, and staff will ensure that Board members see all comments before they formulate a response to the proposal. Comments are due by Nov. 9 at noon CST.