Physician Payment: Congressional Health Subcommittees Agree on Physician SGR ''Fix''

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By Larry Goldberg

This article is adapted from Goldberg's February 6 “Washington Perspectives,” Larry Goldberg Consulting, Oakton,Va. He can be reached at or (703) 385-2003.  

The three congressional health subcommittees with Medicare jurisdiction--Senate Finance, House Ways and Means and House Energy and Commerce--have agreed in principle on a physician sustainable growth rate replacement plan (H.R. 4015, S. 2000).


The agreement is still a long way from enactment. Both chambers have to vote to accept. The important offsets--that is, the “pay-fors”--to pay for the changes have yet to be defined. While the agreement is very important to the overall change in physician payments, there is much concern as to what, to whom and from where the payment offsets will come from.

Finally, the Pathway for SGR Reform Act of 2013 contained a number of so-called extender provisions impacting other providers. These items too, will most likely be included in any final SGR bill.

The following is a brief summary of HR 4015:

Sec. 2. Repealing the Sustainable Growth Rate (SGR) and Improving Medicare Payment for Physicians' Services

Provides stable updates for five years and ensures no changes are made to the current payment system for four years. In 2018, an incentive payment program is established that would focus the fee-for-service system on providing value and quality.

The incentive payment program--a Merit-Based Incentive Payment System (MIPS)--would consolidate the three existing incentive programs, continuing the focus on quality, resource use, and meaningful electronic health record (EHR). Further, this section provides financial incentive(s) for professionals to participate in tests of alternative payment models (APMs).

Stabilizing Fee Updates  

The SGR mechanism is permanently repealed, averting a 23.7 percent SGR-induced cut scheduled for April I, 2014. Professionals will receive an annual update of 0.5 percent in each of 2014 through 2018. The rates in 2018 will be maintained through 2023, while providing the opportunity to receive additional payment adjustments through the MIPS.

In 2024 and subsequent years, professionals participating in APMs that meet certain criteria would receive annual updates of one percent, while all other professionals would receive annual updates of 0.5 percent.


The update for all of 2014 comes as no surprise. Past Congressional history has supported such increases. It does, however, refute one of the Congressional Budget Office's (CBO) major assumptions made earlier this week, that Congress would revert any physician payment increases to the 2013 SGR payment amounts. Just proves once again, how difficult it is to project any future actions.

Consolidating Current Law Programs into a Unified MIPS  

Payments will be adjusted based on performance in the unified MIPS starting in 2018 The MIPS streamlines and improves on the three distinct current law incentive programs:

• The Physician Quality Reporting System (PQRS) that incentivizes physicians to report on quality of care measures;

• The Value-based Modifier (VBM) that adjusts payment based on quality and resource use in a budget-neutral manner; and

• Meaningful use of EHRs (EHR MU) that entails meeting certain requirements in the use of certified EHR systems.

Professionals to Whom MIPS Applies  

The MlPS will apply to: doctors of medicine or osteopathy, doctors of dental surgery or dental medicine, doctors of podiatric medicine, doctors of optometry, chiropractors, physician assistants, nurse practitioners, clinical nurse specialists and certified registered nurse anesthetists beginning in 2018.

MIPS Assessment Categories  

1. Quality. Measures used for this performance category will be published annually in a final measures list.

2. Resource Use. The resource use category will include measures used in the current VBM program.

3. Meaningful Use. Current EHR Meaningful Use requirements, demonstrated by use of a certified system, will continue to apply in order to receive credit in this category. To prevent duplicative

reporting, professionals who report quality measures through certified EHR systems for the MIPS quality category are deemed to meet the meaningful use clinical quality measure component.

4. Clinical Practice Improvement Activities. Professionals will be assessed on their effort to engage in clinical practice improvement activities. Incorporation of this new component gives credit to professionals working to improve their practices and facilitates future participation in APMs. The menu of recognized activities will be established in collaboration with professionals.

Composite Performance Score  

Professionals will receive a composite performance score of 0-100 based on their performance in each of the four performance categories listed above. Professionals will only be assessed on the categories, measures, and activities that apply to them. Scoring weights for performance categories, measures, and activities may be adjusted as necessary, to account for a professional's ability to successfully report on such category measure or activity and to ensure that individuals are measured on an equitable basis.

MIPS Payment Adjustment  

Each eligible professional's composite score will be compared to a performance threshold. The performance threshold will be the mean or median of the composite performance scores for all MIPS eligible professionals during a period prior to the performance period. Professionals will know what composite score they must achieve to obtain incentive payments and avoid penalties at the beginning of each performance period.

Payment adjustments will follow a linear distribution. Eligible professionals whose composite performance scores fall above the threshold will receive positive payment adjustments and eligible professionals whose composite performance scores fall below the threshold will receive negative payment adjustments.

• Negative adjustments--Negative payment adjustments will be capped at four percent in 2018, five percent in 2019, seven percent in 2020, and nine percent in 2021. These negative payment adjustments will fund positive payment adjustments to professionals with composite performance scores above the threshold.

• Zero adjustments--Eligible professionals whose composite performance score is at the threshold will not receive a MIPS payment adjustment.

• Positive adjustments--Eligible professionals whose composite performance scores are above the threshold will receive positive payment adjustments. Eligible professionals with higher performance scores will receive proportionally larger incentive payments up to a maximum of three times the annual cap for negative payment adjustments.

o Additional Incentive Payment--An additional performance threshold for exceptional performance will be set at the 25th percentile of the range between the initial performance threshold and 100 (e.g., if the performance threshold is a score of 60, the additional performance threshold would be a score of 70) or the 25th percentile of actual composite performance scores for MIPS eligible professionals with composite scores at or above the initial performance threshold (i.e., 75 percent of professionals who receive a positive payment adjustment would receive an additional payment adjustment). Eligible professionals with composite scores above the additional performance threshold will receive an additional incentive payment. Aggregate additional incentive payments will be capped al $500 million per year for each of 2018 through 2023

Sec. 3. Priorities and Funding for Quality Measure Development

The Secretary, with stakeholder input, is required to develop and publish a plan for the development of quality measures for use in the MIPS and in APMs, taking into account how measures from the private sector and integrated delivery systems could be utilized in the Medicare program. The plan, which must be finalized by May 1, 2015, will prioritize outcome measures, patient experience measures, care coordination measures, and measures of appropriate use of services, and consider gaps in quality measurement and applicability of measures across health care settings.

Funding will be $15 million annually in 2014 to 2018 for professional quality measure development. The funding will remain available through fiscal year 2021.

Sec. 4. Encouraging Care Management for Individuals with Chronic Care Needs

In order to encourage the management of care for individuals with chronic conditions, at least one payment code for care management services will be established for professionals treating such individuals.

Sec. 5. Ensuring Accurate Valuation of Service Codes Under the Physician Fee Schedule
Potentially Misvalued Codes

The list or criteria the Secretary can use to identify potentially misvalued services is expanded to include codes: that account for a majority of spending under the physician fee schedule; with substantial changes in procedure time; for which there may be a change in the site of service or a significant difference in payment between sites of service: services that may have greater efficiencies when performed together: or, with high practice expenses or high cost supplies.

The legislation sets an annual target for identifying misvalued services of 0.5 percent of the estimated amount of fee schedule expenditures in 2015, 2016, 2017, and 2018. If the target is met, that amount is redistributed in a budget-neutral manner within the physician fee schedule.

If the target is not met, fee schedule payments for the year are reduced by the difference between the target and the amount of misvalued services identified in a given year. If the target is exceeded, the amount in excess of the target is credited toward the following year's target.

Beginning with the 2015 physician fee schedule, total downward relative value unit (RVU) adjustments for a service of 20 percent or more (as compared to the previous year) will be phased-in over a two-year period.

Sec. 6. Promoting Evidence-Based Care

The Secretary is required to establish a program that promotes the use of appropriate use criteria (AUC) for advanced diagnostic imaging. In consultation with stakeholders, and no later than November 15, 2015, the Secretary will specify one or more AUC(s) from among those developed or endorsed by national professional medical specialty societies, taking into account whether such criteria have stakeholder consensus, are evidence- based, and are based on publicly available studies. The Secretary would not be permitted to develop or initiate the development of clinical practice guidelines or appropriate use criteria.

Prior Authorization  

Beginning with 2017, and in consultation with stakeholders, the Secretary will identify ordering professionals with low adherence to applicable AUC(s) (“outliers”) based on two years of data. Beginning January 1, 2020, outlier physicians shall be subject to prior authorization for applicable imaging services. Not more than five percent of ordering physicians can be subject to prior authorization. The legislation provides CMS with $5 million in each of 2019, 2020, and 2021 to carry out the prior authorization program.

Sec. 7. Empowering Beneficiary Choices through Access to Information on Physician Services

Not later than July 1, 2015, for physicians and July 1, 2016, for other professionals, in addition to the quality and resource use information that would be posted through the MIPS, the Secretary is required to publish utilization and payment data for professionals on the Physician Compare website.

Sec. 8. Expanding Claims Data Availability to Improve Care

Consistent with relevant privacy and security laws, the Secretary is required to make data available, for a fee that covers the cost of preparing the data, to requesting qualified clinical data registries to support quality improvement and patient safety activities. Providers identified in public reports will have an opportunity to review and submit corrections.

Sec. 9. Reducing Administrative Burden and Other Provisions

• Allow professionals who opt-out of Medicare to automatically renew at the end of each two-year cycle.

• Requires regular reporting of opt-out physician characteristics.

• Requires that Electronic Health Records (EHR) be interoperable by 2017 and prohibits providers from deliberately blocking information sharing with other EHR vendor products.

• Requires the Secretary to issue a report recommending how a permanent physician hospital gain-sharing program can best be established.

• Requires GAO to report on barriers to expanded use of telemedicine and remote patient monitoring.

• Requires the Secretary to publish information used to establish the multiple procedure payment reduction policy for imaging.


There is expectation that HR 4015 will be completed and enacted by March 31 inasmuch as the temporary physician payment extension expires on April 1.

HR 4015 appears to contain numerous and complicated issues that have yet to be resolved. The timeframe is very ambitious.

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