SGR reform proposal calls for 10-year pay freeze, new incentive program

November 25, 2013

A new proposal to reform the broken Sustainable Growth Rate (SGR) formula has emerged from Congress. It calls for a repeal of the SGR, a 10-year payment freeze and a new performance-based incentive program.

A new proposal  to reform the broken Sustainable Growth Rate (SGR) formula has emerged from Congress. It calls for a repeal of the SGR, a 10-year payment freeze and a new performance-based incentive program.

The plan calls for freezing payment levels through 2023 and creates a value-based performance (VBP) payment program in 2017. Creation of the VBP also would kill reimbursement penalties under the Physician Quality Reporting System, Value-Based Payment Modifier and Meaningful Use penalties at the end of 2016, according to a discussion draft prepared by the House Ways and Means Committee and the Senate Finance Committee, Democratic and Republican leaders in both committees are preparing the plan, dubbed the “SGR Repeal and Reform Proposal.”

The SGR has been a headache for physicians for years. The formula was originally created to help contain the growth in healthcare spending, but instead has called for drastic cuts in physician payments each year, requiring Congress to step in at the last moment and override the cuts. In the last 10 years, Congress has spent almost $150 billion on short-term SGR fixes.

“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,” reads the discussion draft. 

Unless Congress acts by January 1, physician payments will be cut by approximately 24.4% in 2014.

Congressional leaders say their proposal would reform the traditional fee-for-service payment model  and focus on “value over volume” by encouraging physicians to participate in emerging payment models, including Patient Centered Medical Homes and Accountable Care Organizations. 

Groups such as the American Medical Association (AMA), the American College of Physicians (ACP), and the American Academy of Family Physicians (AAFP) all said they were encouraged by the latest proposal.

“The framework released [last month] is an encouraging development, and represents a pivotal step toward stabilizing and improving the Medicare program on behalf of America’s seniors and physicians,” says Ardis Dee Hoven, MD, the AMA president, in a prepared statement.

Charles Cutler, MD, FACP, the chairman of the ACP’s Board of Regents, says he is confident Congress this year can “achieve a historic bipartisan consensus” on repealing the SGR.

AAFP President Reid Blackwelder, MD, FAAFP, said in a statement that the 10-year payment freeze is “disappointing” but that repealing the SGR will allow everyone to concentrate on “better payments for primary care physicians.”