The American Journal of Surgery (2014) 208, 597-600

Association of Women Surgeons

Repeal of the Sustainable Growth Rate: an overview for surgeons Naveen F. Sangji, M.D., M.P.H.* Department of Surgery, Massachusetts General Hospital; Division of Advocacy and Health Policy, American College of Surgeons, Boston, MA, USA

KEYWORDS: Sustainable growth rate; Medicare; Health policy; Physician payment; Advocacy; Repeal

Abstract BACKGROUND: The Medicare sustainable growth rate (SGR) formula is used to control Medicare spending on physician services. Under the current SGR formula, physicians face an almost 24% cut to the Medicare fee schedule on April 1, 2015. The US House Way & Means and Energy & Commerce Committees and the Senate Finance Committee released jointly proposed legislation to permanently repeal the SGR, and transition Medicare physician payment to a value-based payment method. This review summarizes the key components of the proposed legislation, and discusses some of the political challenges ahead. DATA SOURCES: House Committees on Energy & Commerce and Ways & Means, and the Senate Committee on Finance staff write-ups. CONCLUSIONS: Physician Medicare reimbursement will move from a volume-based model to a value-based model over the next decade. Surgeons should remain engaged with the political process to ensure repeal of the SGR. Ó 2014 Elsevier Inc. All rights reserved.

In recent years, Medicare spending has been widely acknowledged to be unsustainable. In an attempt to control costs, the 105th Congress enacted the Balanced Budget Act of 1997 (Public Law 105-33: Title IV, Subtitle F, Sections 4501–03), which established a formula to update the physician fee schedule based on 2 factors: the Medicare The author was a Health Policy Fellow for the American College of Surgeons (ACS) Division of Advocacy and Health Policy (DAHP) at the time of submission of this manuscript. John Hedstrom, JD, Deputy Director of the ACS DAHP assisted with editing of the manuscript. She was funded through the E. A. Codman Fellowship at the Massachusetts General Hospital Department of Surgery. * Corresponding author. Tel.: 11-617-726-7611; fax: 11-617-7243499. E-mail address: [email protected] Manuscript received February 8, 2014; revised manuscript April 12, 2014 0002-9610/$ - see front matter Ó 2014 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.amjsurg.2014.06.010

Economic Index and the Update Adjustment Factor.1 The gross domestic product per capita from the previous fiscal year was used in these calculations for each subsequent year until 2003.1 Since 2003, the average growth rates in per capita gross domestic product have been used instead.2 In 2002, physicians suffered an almost 5% cut under the sustainable growth rate (SGR). Subsequently, physicians have faced even more drastic cuts, which have been delayed by Congress through short-term patches known as the ‘‘doc fix’’ at a cost of nearly $150 billion over the past decade.3 These patches have resulted in minimal or no annual updates for at least 10 years. Sequestration resulted in another 2% cut. The true value of reimbursement has fallen drastically over the past 2 decades when inflation adjustment is taken into account. The inflationadjusted decline in income is estimated at 8.2% between 1995 and 2003 for surgical specialists.4

598 Table 1 Bill

The American Journal of Surgery, Vol 208, No 4, October 2014 Key components of the House Committees on Ways & Means and Energy & Commerce, and the Senate Finance Committee SGR

Provision

Proposed legislation

SGR Value-Based Performance Payment

Permanently repeals the SGR Combines current incentive programs Physician Quality Reporting System, value-based modifier, and meaningful use of EHRs into a single new program, the MIPS Updates to be based on MIPS assessment categories such as quality and resource use starting in 2018 Not budget neutral; all physicians may receive updates if above the performance threshold .5% annually for 5 years (2014–2018) Additional adjustments based on MIPS (2018–2023) 5% bonus for physicians with significant proportion of Medicare revenue through APMs (2018–2023) 1% annual updates for providers in APMs (starting 2024) .5% annual updates for all other providers (starting 2024) Target for identifying misvalued services .5% of estimated fee schedule expenditures (2015–2018) Target amount to be redistributed in the fee schedule $15 million annual funding from 2014 to 2018 for measure development Physician organization participation encouraged Program to determine criteria for advanced radiologic imaging to be established by November 2015

Annual updates APMs

Valuation of services Quality measure development Appropriate use criteria

APMs 5 Alternate Payment Models; MIPS 5 Merit-Based Incentive Payment System; SGR 5 sustainable growth rate. Source: SGR Repeal and Medicare Provider Payment Modernization Act of 2014.

By the end of 2013, physicians faced a 24.4% cut to the fee schedule (23.7% after adjustments). In December 2013, the cost to permanently repeal the SGR was projected to be approximately $117 billion over 10 years compared with an estimate of $139 billion in early 2013 and $271 billion in August 2012.5 This price tag of $117 billion was the lowest estimate that has ever been. More importantly, this estimate was significantly less than the cumulative cost of the short-term patches over the past decade. Therefore, there was significant political momentum throughout 2013 to permanently repeal the SGR and replace it with a sustainable physician payment system. In this environment, the House Ways & Means and the Senate Finance Committees, and the House Energy & Commerce Committee proposed bipartisan legislation to permanently repeal the SGR.

The SGR Repeal and Medicare Provider Payment Modernization Act of 2014 The House Committees on Energy & Commerce and Ways & Means, and the Senate Finance Committee each proposed legislation in 2013 to permanently repeal the SGR and reform physician payment. The bills passed unanimously in each of the respective committees. The Senate Finance bill (S. 1871: SGR Repeal and Medicare Beneficiary Access Act of 2013) was estimated to cost $150.4 billion over 10 years.6 It included a 10-year payment freeze for providers until 2023, with subsequent 1% annual updates (2% for those participating in Alternate Payment Models instead of traditional fee-for-service). It also included budget neutral performance incentives with higher performing providers receiving payments that would be

offset by cuts to lower performing providers.7 The House Ways & Means Legislation (H.R. 2810: Medicare Patient Access and Quality Improvement Act of 2013) was built on legislation from the House Energy & Commerce Committee. It initially included a payment freeze for 10 years.8 In response to strong opposition from surgical and medical professional societies, the committee modified the bill to include .5% updates through 2018. The House Energy & Commerce bill (H.R. 2810) would have repealed the SGR at a cost of $153.2 billion over 10 years.9 The Energy & Commerce proposal included .5% positive updates for 10 years. Starting in 2019, the update would be adjusted by gains or losses of up to 1% based on reporting of quality and outcomes.10 Each of the bills included targets for identifying misvalued services up to 3% over 3 years. The savings would either be redistributed in the physician fee schedule in a budget neutral manner or result in an overall cut. The House Ways & Means and Senate Finance bills included budget neutral performance-based bonus and cuts to physicians. These would have resulted in physicians with higher performance levels getting bonuses that would be offset by cuts to lower performing physicians in competition with each other, rather than based on a uniform threshold or performance benchmark. In December 2013, the American College of Surgeons (ACS), along with 15 additional surgical specialty organizations, formally opposed the draft legislation from the Senate Finance and House Ways & Means Committees.11 These specialty societies deemed the 10-year payment freeze unsustainable and cited concern about the potential negative impact of a budget neutral bonus and cuts system for physicians. The American Medical Association promised to ‘‘strongly urge’’ positive updates, without opposing the bill.12 In response, the House Ways & Means

N.F. Sangji

Repeal of the sustainable growth rate

Committee amended their legislative language to include .5% updates for the first 3 years. The ACS and 10 surgical subspecialty organizations subsequently revoked their opposition to the proposed legislation.13 The House Ways & Means and Senate Finance bills passed unanimously in their respective committees. Before Congress went into recess, another short-term patch was passed that delayed the SGR-imposed cuts to April 1, 2014, and allowed a .5% update for 3 months.14 On February 6, 2014, the House Committees on Energy & Commerce and Ways & Means, and the Senate Finance Committee released unified legislation from the 3 committees that includes various aspects of the previously proposed bills. The SGR Repeal and Medicare Provider Payment Modernization Act of 2014 (S. 2000, H.R. 4015) repeals the SGR, and proposes a transition to value-based payment over 5 years, with annual .5% physician payment updates during the 5year transition period through 2018.15 Subsequently, the Health and Human Services Secretary will determine the thresholds above which high performing physicians will receive payment updates. The performance levels will be based on reported outcomes in a newly created clinical data registry program, which combines the currently existing reporting systems (Table 1). These updates are not budget neutral. Therefore, all physicians with reported outcomes above the established threshold may receive updates without cuts to other physicians. Congressional Budget Office scored the cost of the legislation at approximately $138 billion over 10 years (2014 to 2024).16 Table 1 outlines some of the key proposals included in the bill.

Political Landscape In an effort led by the ACS and specialty organizations in 2013, 259 members of Congress from both parties signed on to a letter sponsored by Representatives Bill Flores and Dan Maffei to permanently repeal the SGR.17 There has been great momentum in Congress, with support from physician organizations and professional societies as well as patient advocacy organizations, to permanently repeal the flawed SGR formula and eliminate the threat of dramatic cuts to Medicare physician payment. The bicameral, bipartisan legislation released in February 2014 is promising for a permanent repeal of the flawed SGR. Seventeen surgical specialty societies including the ACS formally supported this legislation in a joint letter to the leadership of the House and Senate Committees that drafted this legislation.18 It is clear that advocacy by physicians, specifically by surgeons and our professional societies, has influenced the bicameral, bipartisan legislation. Elimination of the 10-year freeze and the budget neutral component of the value-based performance payments are a direct result of efforts by our societies. The challenges ahead include achieving political consensus on the bill outside the committee membership, and determining the ‘‘pay-fors’’ or ways to offset the cost of the legislation. Identifying the pay-fors is proving politically

599 contentious. On March 6, 2014, this bill was introduced by Republicans to the House floor with a repeal of the individual mandate in the American College of Surgeons as the proposed pay-for.19 This passed in the Republican-controlled House 238-181 in a vote split along party lines. The Senate, which at press time is controlled by the Democrats, is unlikely to pass this bill. Physician organizations continued to encourage legislators to reach bipartisan consensus on pay-fors. However, the April 1, 2014 deadline for SGR cuts approached without a solution. On March 26, 2014, the 17th SGR patch was introduced in the Protecting Access to Medicare Act of 2014 (H.R. 4302).20 Physician organizations including the Affordable Care Act and the American Medical Association opposed this patch for concerns that it would derail the efforts for a permanent repeal.21 This legislation passed in the House in an unusual voice vote (typically role call is requested for votes on significant legislation) and subsequently in the Senate 64-35. President Obama signed it into law on April 1, 2014 (Public Law 113-93).20 The current SGR patch delays the 24% Medicare payment cuts to April 1, 2015. This allows Congress time to work in a bipartisan manner to identify pay-fors for the bipartisan, bicameral legislation proposed to permanently repeal the SGR. There are several possibilities for pay-fors. The American Association of Retired Persons has formally recommended that the Senate and House Committees institute drug rebates for Medicare Part D and speed up the introduction of generic drugs in the market to pay for the legislation and lower Medicare expenditure.22 This is likely to be vociferously opposed by the pharmaceutical industry. Any cuts to hospital or nursing home payments are just as likely to be opposed by organizations lobbying for those entities. The overseas contingency operation funds have been identified as another possible source but opposed by the Congressional Budget Office.23 It is currently unclear how the cost of this legislation will be offset. However, the next few months should be an exciting time, with full repeal of the SGR finally within sight. Continued surgeon-led advocacy efforts will remain crucial to ensure the success of this important reform.

References 1. 105th Congress. Public Law 105–33: Balanced Budget Act of 1997. 1997. Available at: http://www.gpo.gov/fdsys/pkg/PLAW-105publ33/ pdf/PLAW-105publ33.pdf. Accessed January 28, 2014. 2. 108th Congress. H.R. 1 (108th): Medicare Prescription Drug, Improvement, and Modernization Act of 2003. 2004. Available at: https:// www.govtrack.us/congress/bills/108/hr1/text. Accessed January 28, 2014. 3. The U.S. Senate Committee on Finance, News Release. 2014. Available at: http://www.finance.senate.gov/newsroom/chairman/release/? id5a2dae81f-8dfa-42a6-b2ff-ae2a1670cd66. Accessed February 7, 2014. 4. H Tu and P Ginsberg. Center for Studying Health Care System Change. Losing Ground: Physician Income, 1995-2003. Tracking

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Report Number 15. 2006. Available at: http://www.hschange.com/ CONTENT/851/#note4. Accessed April 6, 2014. D Pittman. CBO Cuts Cost of SGR Repeal Yet Again. Med Page, 2013. Available at: http://www.medpagetoday.com/ PublicHealthPolicy/Medicare/43322. Accessed January 28, 2014. Congressional Budget Office. S. 1871, SGR Repeal and Medicare Beneficiary Improvement Act of 2013. 2014. Available at: http:// www.cbo.gov/publication/45045. Accessed January 28, 2014. 113th Congress. S. 1871, SGR Repeal and Medicare Beneficiary Improvement Act of 2013. 2013. Available at: https://www.govtrack. us/congress/bills/113/s1871/text. Accessed January 28, 2014. 113th Congress. H.R. 2810 Medicare Patient Access and Quality Improvement Act of 2013. Available at: http://thomas.loc.gov/cgibin/bdquery/z?d113:H.R.2810. Accessed January 28, 2014. Congressional Budget Office. Medicare’s Payment to Physicians: the Budgetary Impact of Alternative Policies Relative to CBO’s May 2013 Baseline Updated for Final Rule. Available at: http://www.cbo. gov/publication/44940. Accessed April 6, 2014. 113th Congress. H.R. 2810 Medicare Patient Access and Quality Improvement Act of 2013. Available at: http://docs.house.gov/ meetings/IF/IF00/20130730/101240/BILLS-113HR2810ih-HR2810. pdf. Accessed January 28, 2014. American College of Surgeons and Specialty Societies. Letter to Chairman Baucus and Ranking Member Hatch. 2013. Available at: http://www.facs.org/ahp/medicare/surgical-coalition-letter-finance.pdf. Accessed January 28, 2014. American Medical Association. Letter to Chairman Baucus and Ranking Member Hatch. 2013. Available at: http://www.amaassn.org/resources/doc/washington/2013-12-10-sgr-senate-financecommittee.pdf. Accessed January 28, 2014. American College of Surgeons and Specialty Societies. Letter to Chairman Camp and Ranking Member Levin. 2013. Available at: http://www.facs.org/ahp/medicare/surgical-coalition-letter-ways-andmeans.pdf. Accessed January 28, 2014.

The American Journal of Surgery, Vol 208, No 4, October 2014 14. Library of Congress Summary. H.J.Res. 59: Continuing Appropriations Resolution, 2014. 2013. Available at: https://www.govtrack.us/ congress/bills/113/hjres59#summary. Accessed January 28, 2014. 15. 113th Congress. S. 2000: SGR Repeal and Medicare Provider Payment Modernization Act of 2014. Available at: http://www.gpo.gov/fdsys/pkg/ BILLS-113s2000is/pdf/BILLS-113s2000is.pdf. Accessed April 6, 2014. 16. Congressional Budget Office. Cost Estimate: S. 2000: SGR Repeal and Medicare Provider Payment Modernization Act of 2014. Available at: http://www.cbo.gov/publication/45148. Accessed April 6, 2014. 17. Letter to Speaker Boehner and Democratic Leader Pelosi. 2013. Available at: http://www.facs.org/ahp/medicare/sgr-sign-on-flores-maffei. pdf. Accessed January 28, 2014. 18. American College of Surgeons and Specialty Societies. Letter to Senators Wyden and Hatch and Representatives Camp, Levin, Upton, Waxman, and Burgess. 2014. Available at: http://www.facs.org/ahp/ medicare/surgical-sgr-support-letter0218.pdf. Accessed April 6, 2014. 19. House Vote #135. H.R. 4015: SGR Repeal and Medicare Provider Payment Modernization Act of 2014. Available at: https://www.govtrack. us/congress/votes/113-2014/h135. Accessed April 6, 2014. 20. 113th Congress. H.R. 4302: Protecting Access to Medicare Act of 2014. Available at: https://www.govtrack.us/congress/bills/113/ hr4302. Accessed April 6, 2014. 21. D Pittman. SGR, ICD-10 delay ready to be signed into law. Public Health and Policy. 2014. Available at: http://www.medpagetoday. com/PublicHealthPolicy/Medicare/45043. Accessed April 6, 2014. 22. AARP. Letter to U.S. Senate Committee on Finance, U.S. House of Representatives Committees on Ways and Means, and Energy and Commerce. 2014. Available at: http://www.ascrs.org/sites/default/ files/aarp_letter_on_sgr_fix_and_prescription_drug_savings_01-2814.pdf. Accessed January 31, 2014. 23. D Elmendorf, Director Congressional Budget Office. Testimony to the House Budget Committee. 2014. Available at: http://www.cbo.gov/ sites/default/files/cbofiles/attachments/CappingWar-RelatedSpending_ RyanLtr.pdf. Accessed April 10, 2014.

Repeal of the Sustainable Growth Rate: an overview for surgeons.

The Medicare sustainable growth rate (SGR) formula is used to control Medicare spending on physician services. Under the current SGR formula, physicia...
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