The Asco Post

Congress Agrees on Repeal of Sustainable Growth Rate

By Ronald Piana
March 1, 2014, Volume 5, Issue 4

Figures:

Ted Okon, Executive Director Community Oncology Alliance

Senator Max Baucus

Matthew Farber, MA

It’s critical to community oncology practices that Congress fix the broken SGR-based Medicare system and pass real payment reform—not just to avert another looming SGR cut, but because oncology is way out in front of actually implementing payment reform.
—Ted Okon, Executive Director Community Oncology Alliance

After years of short-term patches and fixes, it seems that everyone, from the provider community to CMS to lawmakers, is finally ready to enact a long-term solution to the SGR formula.
—Matthew Farber, MA

The U.S. Congress recently did something rarely seen on Capitol Hill: Leaders from both sides of the aisle agreed on a piece of legislation. On February 6, 2014, the House Energy and Commerce and Ways and Means Committees and the Senate Finance Committee announced its agreement on a bill—the SGR Repeal and Medicare Provider Payment Modernization Act—that would repeal the Medicare sustainable growth rate (SGR) formula, hopefully ending the year-by-year threat of physician fee cuts that could severely hamper oncologists’ ability to treat their Medicare patients. Funding for the repeal remains to be resolved, and the bill still needs to be approved by both the House and the Senate.

For more than a decade, ASCO and other major oncology organizations have lobbied on Capitol Hill for repeal of the SGR. “It’s critical to community oncology practices that Congress fix the broken SGR-based Medicare system and pass real payment reform—not just to avert another looming SGR cut, but because oncology is way out in front of actually implementing payment reform. Congress needs to fulfill its responsibility and pass a real fix, not duck and simply patch the SGR once again,” Ted Okon, Executive Director of the Community Oncology Alliance, told The ASCO Post.

A Flawed Mechanism

In short, the SGR is a component of the formula the Centers for Medicare & Medicaid Services (CMS) uses to calculate physician payments for providing services to Medicare patients. Generally, it is a method to ensure that the yearly increase in the expense per Medicare beneficiary does not exceed the growth in gross domestic product. On March 1 of each year, the physician fee schedule is updated accordingly, and if actual expenditures surpass the gross domestic product, physicians’ payments are cut.

Since 2002, when physician payments were cut by 5%, the SGR formula has annually called for reductions in Medicare reimbursements, some as steep as 29%. Congress has enacted 16 “patches” to stop Medicare physician payment cuts. Experts contend that the cumulative cost of these patches has been $153.7 billion, which exceeds the cost of simply repealing the SGR. By repealing the flawed SGR mechanism, Congress has averted a 23.7% cut in physician fees scheduled for this year.

Changes Worth Noting

In a Senate press release, Max Baucus (D-MT), Chairman of the Senate Committee on Finance said, “Congress has spent a decade lurching from one ‘doc fix’ to the next, creating a new, unnecessary threat to seniors’ care each time. Enough is enough. This proposal would bring that cycle to and end and fix the broken system. Our bill makes Medicare’s physician payments more modern and efficient, and it will protect seniors’ access to their doctors.”

Senator Baucus’s reference to a “more modern and efficient” payment system referred largely to sections of the legislation that create a merit-based incentive payment system that will recognize physician performance related to quality measure reporting, resource use, electronic health record–meaningful use, and clinical improvement activities.

Matthew Farber, MA, Director of Economics and Public Policy for the Association of Community Cancer Centers (ACCC), commented to The ASCO Post, “ACCC is happy to see the continued interest by Congress to try and solve the issue of the SGR in the long term. After years of short-term patches and fixes, it seems that everyone, from the provider community to CMS to lawmakers, are finally ready to enact a long-term solution to the SGR formula. Even with the reduced cost, the roughly $120 billion price tag is still the final hurdle that may prove difficult to overcome. We still think this effort is the best chance to pass long-term SGR reform that we have ever had.”

The bill removes the threat of draconian cuts to Medicare providers by ensuring a 5-year period of annual updates of 0.5% during the transition to the new system, which is centered on quality, value, and accountability. In 2018, a new Merit-Based Incentive Payment System, as it will be called, will consolidate the Physician Quality Reporting System, Value-Based Modifier, and “meaningful use” program for electronic health records (EHRs) starting in 2018. Some policy experts question whether abstract terms such as value and accountability will be actionable enough to cover the costs of SGR repeal estimated between $120 and $150 billion.

“As for the bill itself, ACCC is happy to see that Congress has included a positive update for physicians in the first transition phase. Even though a 0.5% update is small, and we would like to see a larger adjustment, the fact that it is an increase, and that it provides certainty after years of unknowns [is appreciated],” stressed Mr. Farber.

Mr. Farber pointed out that the consolidation of various quality reporting mechanisms would hopefully make it easier for providers to achieve benchmarks and thus attain a bonus payment.

“As many members of ACCC are currently researching, or transitioning into new payment models, including medical homes and [accountable care organizations], the bonus payment for participation in alternative payment models may prove to be beneficial. Hopefully the final law will include numerous types of payment modalities, as we have seen many of our members incorporating innovative models into their practices and hospitals. ACCC will be discussing this and other issues during our Capitol Hill day on March 31st,” noted Mr. Farber.

Prepare for Post-SGR Changes

According to a summary offered by the committees that fashioned the SGR repeal bill, the “payment implications” of the current incentive-payment programs would end at the end of 2017. That simply means that Medicare would eliminate scheduled reductions in reimbursement in the form of 3% penalties for failing to comply with the meaningful use criteria, as well as escalating penalties up to 5% in 2019. The 2% penalty for failure to report quality measures per the Physician Quality Reporting System in 2017 would also be dropped.

It is important to realize that during this period of change, the many moving parts of the new SGR repeal bill will be conflated with changes already enacted in the Affordable Care Act, and the oncology community needs to keep fully engaged. For example, the term “meaningful use,” which is part of the Medicare & Medicaid EHR Incentive Programs, is staged in three steps with increasing requirements for participation. Understanding how to comply with the new incentive payment programs is essential for the fiscal stability of community practices as the new legislation unfolds.

Repealing the SGR is certainly a step in the right direction, but altering the current payment system is easier said than done, and the oncology community must remain cautiously optimistic. “While ACCC would like to see larger annual increases, we are pleased that positive updates were included in the final repeal bill. The biggest hurdle to passage remains the price tag—which is now estimated to be roughly $120 billion to $140 billion over 10 years. And legislators have yet to spell out how Congress will pay for this fix,” said Mr. Farber. ■

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