Repeal the SGR and enact a permanent solution that supports physicians

Congress is closer than ever to repealing Medicare’s sustainable growth rate (SGR) formula. Competing plans, with traction, are on the table. The leaders of American medicine are convening this weekend in our nation’s capital.

The Coalition of State Medical Societies — representing nearly 160,000 members in nine states — calls on Congress to act decisively, but not rashly.

Congress must act now to repeal the flawed SGR formula used to pay physicians who care for Medicare patients and enact a permanent solution. Medicare patients and their physicians need and deserve a more stable and predictable program.

The annual SGR merry-go-round has hurt many physician practices and continues to threaten the care for an increasing number of patients. The fact is, the SGR formula has flat-lined physician payments for 12 years. Yet the cost to run a practice during the same time has escalated almost 30 percent. This continued uncertainty and financial pressure is forcing some physicians to make the difficult decision to either opt out of Medicare, limit the number of patients they treat, or retire early.

Meanwhile, other health care providers, such as hospitals and pharmaceuticals, all have had significant annual payment increases. Physicians are on the frontline of America’s health care system; neither they nor their patients should be penalized by the SGR. Without physicians, Medicare would not be a real health care program. The SGR must be repealed, and a new and better system must be implemented. If not, physicians face a steep payment cut of 24 percent in less than two months — Jan. 1, 2014.

SGR repeal and reform legislation

Earlier this year, the House Energy and Commerce Committee passed HR 2810, the Medicare Patient Access and Quality Improvement Act of 2013, with strong bipartisan support to abolish the SGR. Instead of freezing payments, HR 2810 creates a two-phase plan to eliminate the SGR and provide five years of stable payment updates. It then transitions to a new quality reporting system that links physician pay to a set of physician-endorsed quality measures, while allowing doctors to opt into alternative payment models.

Under a new proposal, the Senate Finance and House Ways and Means committees recommend repealing the SGR, but also freezing physician payments for at least two years. During this time, the current fee-for-service system will continue with Physician Quality Reporting System, meaningful use, and value-based payment modifier incentives up to 8 to 10 percent. New alternative payment models allowing 5 percent bonus payments will be created with physician input, but they must all involve downside financial risk.

Future payments must keep pace with practice costs

Inadequate future payments will harm access to care. Medicare physician payments already lag 23 percent behind. It’s conservatively estimated that operating costs could increase 22 percent by 2023. Why are physicians expected to run a business where costs have increased more than 50 percent without adequate payment increases? No business can withstand this upside-down balance sheet.

New payment models should not be limited to accepting full financial risk

The Finance/Ways & Means proposal provides a 5 percent payment increase to physicians who accept insurance-type risk for their patients. Only large physician groups with large Medicare and commercially insured patient populations can offset these risks. New payment systems also must include nonrisk-bearing models to help more physicians participate in Medicare.

Small practices need time and financial resources to transition to new systems

Small physician practices, especially in rural areas, cannot make this transition without adequate time and financial assistance. Plus, in 2015 many of Medicare’s new reporting requirements kick in. Physicians could face payment cuts of more than 7 percent if they don’t comply.

Few small physician practices have the resources needed to keep up with these requirements. While the Finance/Ways & Means proposal eliminates the individual penalties and creates a different 8-10 percent bonus pool for meeting these requirements, there are still penalties for those who don’t comply. Small practices need more time and resources to continue moving toward full participation. For instance, only 30 percent of small practices have systems that meet the meaningful use criteria.

Continuing the value-based payment modifier could selectively penalize physicians who treat disadvantaged patients because their patients are unable to comply with recommended care. The modifier must properly adjust for risk factors including patients’ socioeconomic status and education level, and patient responsibility factors, such as decisions to forego care. It also must continue to be risk-adjusted for illness severity and cost-adjusted for differences in geographic practice costs and subspecialties.

Moving forward

Now is the right time to repeal the SGR — it’s critical the SGR’s replacement not continue to threaten the viability of physicians’ practices or add new bureaucratic burdens to physicians and their staff. It must provide the opportunity for predictable annual payment increases for physicians.

Over the past 12 years, Congress has recognized the value that hospitals, nursing homes, home health services, durable medical equipment, and other health care professionals provide Medicare patients. They ALL have received annual payment updates. Physicians should too. Before any future updates are given, Washington needs to repeal the SGR and replace it with a system that helps physicians remain in the program today and for tomorrow’s baby boomers.

Coalition of State Medical Societies recommendations

  • Repeal the SGR formula.
  • Provide appropriate updates to sustain physician practices.
  • Provide more time and assistance for small practices to transition to new models. 

The Coalition of State Medical Societies consists of the state medical societies in Arizona, California, Florida, Louisiana, New York, North Carolina, Oklahoma, South Carolina, and Texas.

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