Congress Takes Aim at SGR

AAFP Calls Legislation Repealing SGR Major Step to Improving Quality of Care

February 19, 2014 01:50 pm News Staff

The AAFP has announced it is supporting pending legislation in Congress that would repeal the Medicare sustainable growth rate (SGR) payment formula and create a payment system that encourages quality improvements instead of the current emphasis on volume. In a letter sent to House and Senate leaders this week(3 page PDF), AAFP Board Chair Jeff Cain, M.D., of Denver, outlined the Academy's support for the bill.

"Legislators and staff have shown a Herculean effort in crafting this proposal," said Cain in the letter. "They solicited and responded to suggestions brought forth by the physician community and other stakeholders and included many in this final product. The AAFP urges Congress to pass this measure before March 31, when the current extension of the Medicare payment formula that includes the SGR expires."

The SGR Repeal and Medicare Provider Payment Modernization Act(, would provide physicians with a 0.5 percent increase in the Medicare payment rate each year for the next five years. The legislation provides a bridge to allow physicians to make the transition to an alternative payment model (APM) or to participate in a new, at-risk quality payment system.

The legislation seeks to end the cycle of annual, short-term legislative measures that have been repeatedly adopted to prevent steep cuts to Medicare, and it encourages physicians to implement a team-based approach that delivers coordinated care.

Story highlights
  • The AAFP is supporting bicameral, bipartisan legislation that would repeal the Medicare sustainable growth rate payment formula and create new methods of payment.
  • The legislation would end the cycle of annual measures Congress has had to take to prevent payment cuts to physicians.
  • The legislation outlines new payment methods that would allow physicians to earn higher payments if they meet specific quality measurements or participate in alternative payment models.

"Congress is well aware of the troublesome history of this (SGR) payment formula, since Congress has had to override the reductions in the physician payment rate mandated by the current formula," said Cain. "These perennial reductions threatened the stability of the Medicare program and the access of seniors to Medicare benefits. The looming threat of frequent reductions also stifles innovation in care delivery and hinders the transformation of primary care practices."

According to the legislation, annual increases would continue through 2018 for all physicians, and then the rates would be frozen through 2023. The legislation would replace the fee-for-service model with two different payment models that give priority to value and quality of care. The first model is a merit-based incentive system scheduled to be introduced in 2018. It will grade physicians in several categories. Depending on how well a physician measures up to the quality standards, he or she could earn an additional 1 percent increase in the payment rate.

In the second model, physicians who choose to participate in APMs, such as the patient-centered medical home (PCMH), would be exempt from the reporting and performance thresholds established by the merit-based system. If they are part of a PCMH that has been certified as maintaining or improving quality without increasing costs, they are eligible for an annual 5 percent bonus from 2018 to 2023.

Although the legislation represents a significant step toward paying for quality improvements, Congress still needs to identify a means to pay for the bill. Previously, measures taken to compensate for projected SGR cuts called for reductions in payments to other Medicare providers, such as hospitals, nursing homes and home health agencies.

"We applaud legislation that repeals the flawed Medicare sustainable growth rate formula that has jeopardized the health security of elderly and disabled Americans," said AAFP President Reid Blackwelder, M.D., of Kingsport, Tenn., in a prepared statement. "For more than a decade, the SGR has threatened our most vulnerable patients' access to care by requiring drastic cuts in payment for medical services."

If the legislation is adopted, family physicians will be able to make long-range plans, fully implement team-based care, improve coordination among a patient's health team members via electronic health records, extend office hours and make other changes that are key components of the PCMH, according to the AAFP.

The AAFP also supports the bill's validation of the additional Medicare payment for care coordination, which will compensate eligible physicians for services provided outside a traditional face-to-face encounter that are particularly important to patients with more than one chronic condition. The Academy supports making PCMH practices eligible for these payments, as well.

"By establishing alternative payment that supports comprehensive and coordinated care through models such as the patient-centered medical home, this legislation has paved a way for better care and less cost," said Blackwelder. "Multiple studies have shown the PCMH improves the quality of care, reduces preventable hospitalizations and other intensive services, and helps lower the cost to the patient, the community and the health care system."

The legislation also appropriates $40 million annually for five years to help small physician practices make the transition to new payment methods, another provision for which the AAFP expressed strong support. By taking this step, Congress recognizes the significant investment physician practices must make as they transition to the PCMH model or an accountable care organization, said Cain.

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