Opinion
VIEWPOINT
Robert Steinbrook, MD Department of Internal Medicine, Yale School of Medicine, New Haven, Connecticut.
The Repeal of Medicare's Sustainable Growth Rate for Physician Payment In April 2015, Medicare's sustainable gro w th rate (SGR)
grum bling and publicity about concierge medicine, only
form ula fo r controlling physician paym ent was perm a
about 6 6 0 0 physicians and o th e r professionals had
nently repealed and replaced w ith a far-reaching pack
opted out o f the Medicare program; psychiatrists and oral
age o f reform s.1The repeal, approved by Congress w ith
surgeons (dentists only) accounted fo r more than half
strong bipartisan support in both the House o f Repre
o f th e opt-outs.2
sentatives and the Senate and long awaited by many
The M edicare Access and CHIP R eauthorization
physicians, annulled a budget cap th a t was enacted in
Act o f 2015 (HR 2) provides physicians and other health
1997. The legislation averted a reduction in Medicare's
care professionals w ith stable fee updates fo r 5 years
paym ent rate fo r physician and o th e r health p rofes
( c u rre n t le ve ls th ro u g h Ju n e 2015, an u p d a te o f
sional services o f 21.2% that would otherwise have taken
0.5% fo r th e last 6 m onths o f 2015, and an increase o f
e ffe ct on April 1,2015.
0 .5% per year fo r 2016 th ro u g h 2019). For 2015 to
The repeal o f th e SGR means th a t th e tem porary
2018, the current payment system remains unchanged.
measures to override the grow th rate formula w ill no lon
In 2019, a new incentive payment program, term ed the
ger dom inate Medicare policy discussions, as th e y have
Merit-Based Incentive Payment System, or MIPS, w ill
fo r the last decade. The replacem ent o f th e SGR should
replace and consolidate 3 existing incentive paym ent
also a cce le ra te th e m o v e m e n t aw ay fro m u n c o n
programs: the Physician Quality Reporting System, the
strained fee-for-service payments and tow ard co n tin
value-based payment modifier, and the meaningful use
ued payment reforms. Many physicians, no doubt, would
o f e le c tro n ic h e a lth records. P aym ents to in d iv id
prefer regular paym ent updates, not updates based on
ual clinicians would be subject to adjustm ent depend in g on w h e th e r th e y p a rtic ip a te d in MIPS or approved alternative paym ent
The repeal of the SGR means that the temporary measures to override the growth rate formula will no longer dominate Medicare policy discussions, as they have for the last decade.
m e c h a n is m s . A lte r n a tiv e p a y m e n t mechanisms include accountable care organizations (ACOs), medical homes, b u n d led -p a ym e n t arrangem ents, and o th e r m odels being evaluated by th e CMS In n ova tio n Center. Such m odels involve a risk o f financial loss and a qual ity measurement component.
com plex measures o f q u ality and value. The m om en
U nder MIPS, th e pa ym e n t rates in 2019 w ill be
tum in Washington fo r continued payment reforms, how
maintained through 2025 but w ith positive and nega
ever, is strong. The repeal o f th e SGR is the carrot; the
tiv e a d ju s tm e n ts based on th e c o m p o s ite p e rfo r
far-reaching paym ent reforms th a t th e legislation facili
mance score o f each eligible physician or o th er health
tates are th e stick. In 2013, Medicare paid $68.6 billion for services pro
Corresponding Author: Robert Steinbrook, MD, Department of Internal Medicine, Yale School of Medicine, 333 Cedar St. 1-456 SHM, PO Box 208008, New Haven, CT 06520 (robert [email protected]).
jama.com
p ro fe ssio n a l on a 0 - to 1 0 0 -p o in t scale. MIPS w ill assess perform ance in 4 categories: quality, resource
vided by physicians and o th er health care professionals
use, m eaningful use o f electronic health records, and
in the traditional fee-for-service program; this spend
clin ica l p ra c tic e im p ro v e m e n t a c tiv itie s . T he new
ing covered 1.1 billion services for 32 million beneficiaries.2
incentive paym ents w ill be com plicated and m any o f
Under the SGR mechanism, if the g ro w th in the volume
th e details remain to be worked out. The adjustments,
o f services exceeded th e target g ro w th rate, the yearly
however, are designed to be o ffse ttin g in aggregate so
update to fees was to be reduced w ith a "conversion fac
th a t th e re w o u ld be no e ffe c t on overall p aym ents
to r" to bring spending in line w ith the target. Congress
b e yo nd an a d d itio n a l $ 5 0 0 m illio n th a t w o u ld be
has only allowed such a negative update to happen once
m ade a v a ila b le each ye a r fro m 2 0 1 9 to 2 0 2 4 to
(in 2 0 0 2 ), and over th e years has passed 17 short-term
reward exceptional perform ance.3
patches to override the form ula. The patches imposed
O f to ta l p h ysicia n s p e n d in g in fe e -fo r-s e rv ic e
adm inistrative burdens on th e Centers fo r Medicare &
Medicare in 2015, about 25% is likely to be related to
Medicaid Services (CMS) and clinicians, and th e y cre
b e n eficiarie s assigned to an ACO.3 The US D e p a rt
ated uncertainty fo r health care professionals and ben
m en t o f Health and Hum an Services (HHS) aims "to
eficiaries about uninterrupted access to care. In 2013,
have 85% o f all M edicare fe e -fo r-se rvice paym ents
8 76 0 0 0 clinicians billed M edicare th ro u g h th e fee
tie d to q u a lity o r value by 2016, and 9 0 % by 2018"
schedule (573 0 0 0 physicians and 303 0 0 0 other prac
and "to have 3 0 % o f Medicare payments tied to qual
titioners, including nurse practitioners, physician assis
ity or value th ro u g h a lte rn a tive p a ym e n t m odels by
tants, therapists, and ch iro p ra cto rs).2 Despite vocal
th e end o f 2 016 and 5 0 % o f p a ym e n ts by 2018."4
JAMA May 26,2015 Volume 313, Number 20
2025
Opinion V iew point
CMS is already engaging com m ercial payers and states, such as
The act also requires th a t electronic health records be in te ro p
M aryland and its a ll-payer approach, to s u p p o rt pa ym e n t and
erable by th e end o f 2018 and prohibits the deliberate blocking o f inform ation sharing between electronic health records from d iffe r
delivery system reform s.5 Under th e new legislation, clinicians w h o receive a substantial
ent vendors, changes th a t many clinicians and patients w ould w e l
portion o fth e ir revenues from approved alternative payment mecha
come. A recent report from th e Office o f th e National Coordinator
nisms w ill not be subject to M IPS. Instead, th e y w ill receive a 5% bo
fo r Health Inform ation Technology noted th a t although th e federal
nus each year from 2019 to 2024. In 2026, th e paym ent rules fo r all
governm ent "has invested over $28 billion to accelerate th e devel
clinicians change again, w ith payment rates under the alternative pay
opm ent o f health inform ation technology," there are "business in
m en t mechanism increasing by 0.75% per year and rates fo r others
centives fo r some persons and entities to exercise control over elec-
increasing by 0.25% per year.
tro n ic h e a lth in fo rm a tio n in w ays th a t u n re a so n a b ly lim it its
A m o n g o th e r provisions, th e act also fu lly fu n d s th e C h il
availability and use."8
dren's Health Insurance Program (CHIP) through September 2017
Now th a t the SGRhas been repealed, it is likely th a t policy con
and expands th e pu b lic a va ila b ility o f u tiliz a tio n and p aym ent
versation about physician payments will move on to other outstand
data fo r physician services. The legislation p ro te cts physicians
ing issues, such as the balance o f payments between primary care and
against m alpractice suits by sp e cifyin g th a t th e q u a lity o f care
other services and continued delivery system reforms, including popu
standards in MIPS or other guidelines or standards in Medicare or
lation-based payments, w ith no fee-for-service com ponent.2,5 The
o th e r federal health program s cannot be used in m alpractice or
SGR fix, however, should not be viewed as a perm anent solution to
p ro d u ct lia b ility cases.6 It continues th ro u g h Septem ber 2015 a
the ferm ent over the physician paym ent system and uncertainties
d e la y in fu ll e n fo rc e m e n t o f M e d ica re 's " 2 -m id n ig h t" rule,
about beneficiaries' access to care. Until the details o f the measures
announced in 2013 and the subject o f ongoing disputes between
o f quality and value and incentive payments become available, it is
hospitals and CMS. The rule assigns inpatient status and Medicare
uncertain if physicians will consider them reasonable and fair. In 2025,
P art A coverage to all h o sp ita l stays o f th is le n g th o r longer,
the $ 5 0 0 million in annual updates fo r exceptional performance and
assuming medical necessity supports such a stay. Stays shorter
the 5% annual bonus are scheduled to expire, "resulting in a pay
than 2 m idnights are generally considered observation and there
m ent reduction fo r most physicians," as the CMS Office o f the A ctu
fore not covered by Medicare Part A. Over the 2015-2025 period,
ary has noted.3 The m om entum fo r payment reform and the specific
the CMS Office o f th e Actuary estimates th a t th e net costs o f the
payment mechanisms notw ithstanding, physicians are likely to ad
legislation to th e federal g o ve rn m e nt w o u ld be $102.8 b illio n .3
vocate fo r Medicare payment updates th a t at least keep up w ith in
The Congressional B udget O ffice estim ates th a t th e legislation
flation and the cost o f living. At some point, the cumulative effect o f
w ould increase federal budget deficits by $141.0 billion.7 The cost
the new payment updates w ill not keep up w ith physician costs, un
o f the physician paym ent update and the CHIP extension are o ff
less the volume and cost o f services substantially decrease, which is
set in part by o ther savings. For example, starting in 2018, prem i
the same underlying issue as w ith the old payment updates. The SGR
ums fo r Medicare Part B and Part D w ould increase fo r some high-
formula lasted 18 years. W ithin the decade, its replacement is likely
income beneficiaries.
to be under scrutiny as well.
ARTICLE INFORMATION Published Online: April 17,2015. doi:10.1001/jama.2015.4550. Conflict of Interest Disclosures: The author has completed and submitted the ICMJE Form for Disclosure o f Potential Conflicts o f Interest and
3. Spitalnic P. Office o f the Actuary. Centers for Medicare & Medicaid Services. Estimated financial
/2015/03/31/us/politics/house-provision-offers -doctors-more-protection-against-malpractice
effects o f the Medicare Access and CHIP Reauthorization Act o f 2015 (HR 2). http ://w w w .cms.gov/Research-Statistics-Data-and-Systems /Research/ActuarialStudies/Downloads/2015HR2a
7. Congressional Budget Office. Cost Estimate and Supplemental Analysis fo r H.R. 2, the Medicare Access and CHIP Reauthorization Act o f 2015.
.pdf. April 9,2015. Accessed April 14.2015.
https://www.cbo.gov/sites/default/files/cbofiles
4. Burwell SM. Setting value-based payment goals: HHS efforts to improve U.S. health care. N EnglJ Med.
/attachments/hr2.pdf. March 25,2015. Accessed
2015;372(l0):897-899.
8. Office o f the National Coordinator fo r Health
5. Rajkumar R, Conway PH, Tavenner M. CMS: engaging multiple payers in payment reform. JAMA.
Information Technology. Report to Congress: report on health inform ation blocking. http ://w w w
none were reported. REFERENCES 1. The Medicare Access and CFIIP Reauthorization Act o f 2015. FIR 2. https://www.congress.gov/bill /114th-congress/house-bill/2. Accessed April 16,
2014;311(19):1967-1968.
2015. 2. MEDPAC. Report to the Congress: Medicare Payment Policy, http://medpac.gov/documents /reports/march-2015-report-to-the-congress
-suits.html?_r=0.
6. Pear R. House provision offers doctors more protection against malpractice suits. New York
April 12, 2015.
.healthit.gov/sites/default/files/reports/info _blocking_040915.pdf. April 2015. Accessed April 12,2015.
Times. March 30,2015. http://www.nytim es.com
-medicare-payment-policy.pdf?sfvrsn=0. March 2015. Accessed April 12.2015.
2 02 6
JAMA
May 26,2015
Volume 313, Number 20
jama.com
Copyright of JAMA: Journal of the American Medical Association is the property of American Medical Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.
VIEWPOINT
Robert Steinbrook, MD Department of Internal Medicine, Yale School of Medicine, New Haven, Connecticut.
The Repeal of Medicare's Sustainable Growth Rate for Physician Payment In April 2015, Medicare's sustainable gro w th rate (SGR)
grum bling and publicity about concierge medicine, only
form ula fo r controlling physician paym ent was perm a
about 6 6 0 0 physicians and o th e r professionals had
nently repealed and replaced w ith a far-reaching pack
opted out o f the Medicare program; psychiatrists and oral
age o f reform s.1The repeal, approved by Congress w ith
surgeons (dentists only) accounted fo r more than half
strong bipartisan support in both the House o f Repre
o f th e opt-outs.2
sentatives and the Senate and long awaited by many
The M edicare Access and CHIP R eauthorization
physicians, annulled a budget cap th a t was enacted in
Act o f 2015 (HR 2) provides physicians and other health
1997. The legislation averted a reduction in Medicare's
care professionals w ith stable fee updates fo r 5 years
paym ent rate fo r physician and o th e r health p rofes
( c u rre n t le ve ls th ro u g h Ju n e 2015, an u p d a te o f
sional services o f 21.2% that would otherwise have taken
0.5% fo r th e last 6 m onths o f 2015, and an increase o f
e ffe ct on April 1,2015.
0 .5% per year fo r 2016 th ro u g h 2019). For 2015 to
The repeal o f th e SGR means th a t th e tem porary
2018, the current payment system remains unchanged.
measures to override the grow th rate formula w ill no lon
In 2019, a new incentive payment program, term ed the
ger dom inate Medicare policy discussions, as th e y have
Merit-Based Incentive Payment System, or MIPS, w ill
fo r the last decade. The replacem ent o f th e SGR should
replace and consolidate 3 existing incentive paym ent
also a cce le ra te th e m o v e m e n t aw ay fro m u n c o n
programs: the Physician Quality Reporting System, the
strained fee-for-service payments and tow ard co n tin
value-based payment modifier, and the meaningful use
ued payment reforms. Many physicians, no doubt, would
o f e le c tro n ic h e a lth records. P aym ents to in d iv id
prefer regular paym ent updates, not updates based on
ual clinicians would be subject to adjustm ent depend in g on w h e th e r th e y p a rtic ip a te d in MIPS or approved alternative paym ent
The repeal of the SGR means that the temporary measures to override the growth rate formula will no longer dominate Medicare policy discussions, as they have for the last decade.
m e c h a n is m s . A lte r n a tiv e p a y m e n t mechanisms include accountable care organizations (ACOs), medical homes, b u n d led -p a ym e n t arrangem ents, and o th e r m odels being evaluated by th e CMS In n ova tio n Center. Such m odels involve a risk o f financial loss and a qual ity measurement component.
com plex measures o f q u ality and value. The m om en
U nder MIPS, th e pa ym e n t rates in 2019 w ill be
tum in Washington fo r continued payment reforms, how
maintained through 2025 but w ith positive and nega
ever, is strong. The repeal o f th e SGR is the carrot; the
tiv e a d ju s tm e n ts based on th e c o m p o s ite p e rfo r
far-reaching paym ent reforms th a t th e legislation facili
mance score o f each eligible physician or o th er health
tates are th e stick. In 2013, Medicare paid $68.6 billion for services pro
Corresponding Author: Robert Steinbrook, MD, Department of Internal Medicine, Yale School of Medicine, 333 Cedar St. 1-456 SHM, PO Box 208008, New Haven, CT 06520 (robert [email protected]).
jama.com
p ro fe ssio n a l on a 0 - to 1 0 0 -p o in t scale. MIPS w ill assess perform ance in 4 categories: quality, resource
vided by physicians and o th er health care professionals
use, m eaningful use o f electronic health records, and
in the traditional fee-for-service program; this spend
clin ica l p ra c tic e im p ro v e m e n t a c tiv itie s . T he new
ing covered 1.1 billion services for 32 million beneficiaries.2
incentive paym ents w ill be com plicated and m any o f
Under the SGR mechanism, if the g ro w th in the volume
th e details remain to be worked out. The adjustments,
o f services exceeded th e target g ro w th rate, the yearly
however, are designed to be o ffse ttin g in aggregate so
update to fees was to be reduced w ith a "conversion fac
th a t th e re w o u ld be no e ffe c t on overall p aym ents
to r" to bring spending in line w ith the target. Congress
b e yo nd an a d d itio n a l $ 5 0 0 m illio n th a t w o u ld be
has only allowed such a negative update to happen once
m ade a v a ila b le each ye a r fro m 2 0 1 9 to 2 0 2 4 to
(in 2 0 0 2 ), and over th e years has passed 17 short-term
reward exceptional perform ance.3
patches to override the form ula. The patches imposed
O f to ta l p h ysicia n s p e n d in g in fe e -fo r-s e rv ic e
adm inistrative burdens on th e Centers fo r Medicare &
Medicare in 2015, about 25% is likely to be related to
Medicaid Services (CMS) and clinicians, and th e y cre
b e n eficiarie s assigned to an ACO.3 The US D e p a rt
ated uncertainty fo r health care professionals and ben
m en t o f Health and Hum an Services (HHS) aims "to
eficiaries about uninterrupted access to care. In 2013,
have 85% o f all M edicare fe e -fo r-se rvice paym ents
8 76 0 0 0 clinicians billed M edicare th ro u g h th e fee
tie d to q u a lity o r value by 2016, and 9 0 % by 2018"
schedule (573 0 0 0 physicians and 303 0 0 0 other prac
and "to have 3 0 % o f Medicare payments tied to qual
titioners, including nurse practitioners, physician assis
ity or value th ro u g h a lte rn a tive p a ym e n t m odels by
tants, therapists, and ch iro p ra cto rs).2 Despite vocal
th e end o f 2 016 and 5 0 % o f p a ym e n ts by 2018."4
JAMA May 26,2015 Volume 313, Number 20
2025
Opinion V iew point
CMS is already engaging com m ercial payers and states, such as
The act also requires th a t electronic health records be in te ro p
M aryland and its a ll-payer approach, to s u p p o rt pa ym e n t and
erable by th e end o f 2018 and prohibits the deliberate blocking o f inform ation sharing between electronic health records from d iffe r
delivery system reform s.5 Under th e new legislation, clinicians w h o receive a substantial
ent vendors, changes th a t many clinicians and patients w ould w e l
portion o fth e ir revenues from approved alternative payment mecha
come. A recent report from th e Office o f th e National Coordinator
nisms w ill not be subject to M IPS. Instead, th e y w ill receive a 5% bo
fo r Health Inform ation Technology noted th a t although th e federal
nus each year from 2019 to 2024. In 2026, th e paym ent rules fo r all
governm ent "has invested over $28 billion to accelerate th e devel
clinicians change again, w ith payment rates under the alternative pay
opm ent o f health inform ation technology," there are "business in
m en t mechanism increasing by 0.75% per year and rates fo r others
centives fo r some persons and entities to exercise control over elec-
increasing by 0.25% per year.
tro n ic h e a lth in fo rm a tio n in w ays th a t u n re a so n a b ly lim it its
A m o n g o th e r provisions, th e act also fu lly fu n d s th e C h il
availability and use."8
dren's Health Insurance Program (CHIP) through September 2017
Now th a t the SGRhas been repealed, it is likely th a t policy con
and expands th e pu b lic a va ila b ility o f u tiliz a tio n and p aym ent
versation about physician payments will move on to other outstand
data fo r physician services. The legislation p ro te cts physicians
ing issues, such as the balance o f payments between primary care and
against m alpractice suits by sp e cifyin g th a t th e q u a lity o f care
other services and continued delivery system reforms, including popu
standards in MIPS or other guidelines or standards in Medicare or
lation-based payments, w ith no fee-for-service com ponent.2,5 The
o th e r federal health program s cannot be used in m alpractice or
SGR fix, however, should not be viewed as a perm anent solution to
p ro d u ct lia b ility cases.6 It continues th ro u g h Septem ber 2015 a
the ferm ent over the physician paym ent system and uncertainties
d e la y in fu ll e n fo rc e m e n t o f M e d ica re 's " 2 -m id n ig h t" rule,
about beneficiaries' access to care. Until the details o f the measures
announced in 2013 and the subject o f ongoing disputes between
o f quality and value and incentive payments become available, it is
hospitals and CMS. The rule assigns inpatient status and Medicare
uncertain if physicians will consider them reasonable and fair. In 2025,
P art A coverage to all h o sp ita l stays o f th is le n g th o r longer,
the $ 5 0 0 million in annual updates fo r exceptional performance and
assuming medical necessity supports such a stay. Stays shorter
the 5% annual bonus are scheduled to expire, "resulting in a pay
than 2 m idnights are generally considered observation and there
m ent reduction fo r most physicians," as the CMS Office o f the A ctu
fore not covered by Medicare Part A. Over the 2015-2025 period,
ary has noted.3 The m om entum fo r payment reform and the specific
the CMS Office o f th e Actuary estimates th a t th e net costs o f the
payment mechanisms notw ithstanding, physicians are likely to ad
legislation to th e federal g o ve rn m e nt w o u ld be $102.8 b illio n .3
vocate fo r Medicare payment updates th a t at least keep up w ith in
The Congressional B udget O ffice estim ates th a t th e legislation
flation and the cost o f living. At some point, the cumulative effect o f
w ould increase federal budget deficits by $141.0 billion.7 The cost
the new payment updates w ill not keep up w ith physician costs, un
o f the physician paym ent update and the CHIP extension are o ff
less the volume and cost o f services substantially decrease, which is
set in part by o ther savings. For example, starting in 2018, prem i
the same underlying issue as w ith the old payment updates. The SGR
ums fo r Medicare Part B and Part D w ould increase fo r some high-
formula lasted 18 years. W ithin the decade, its replacement is likely
income beneficiaries.
to be under scrutiny as well.
ARTICLE INFORMATION Published Online: April 17,2015. doi:10.1001/jama.2015.4550. Conflict of Interest Disclosures: The author has completed and submitted the ICMJE Form for Disclosure o f Potential Conflicts o f Interest and
3. Spitalnic P. Office o f the Actuary. Centers for Medicare & Medicaid Services. Estimated financial
/2015/03/31/us/politics/house-provision-offers -doctors-more-protection-against-malpractice
effects o f the Medicare Access and CHIP Reauthorization Act o f 2015 (HR 2). http ://w w w .cms.gov/Research-Statistics-Data-and-Systems /Research/ActuarialStudies/Downloads/2015HR2a
7. Congressional Budget Office. Cost Estimate and Supplemental Analysis fo r H.R. 2, the Medicare Access and CHIP Reauthorization Act o f 2015.
.pdf. April 9,2015. Accessed April 14.2015.
https://www.cbo.gov/sites/default/files/cbofiles
4. Burwell SM. Setting value-based payment goals: HHS efforts to improve U.S. health care. N EnglJ Med.
/attachments/hr2.pdf. March 25,2015. Accessed
2015;372(l0):897-899.
8. Office o f the National Coordinator fo r Health
5. Rajkumar R, Conway PH, Tavenner M. CMS: engaging multiple payers in payment reform. JAMA.
Information Technology. Report to Congress: report on health inform ation blocking. http ://w w w
none were reported. REFERENCES 1. The Medicare Access and CFIIP Reauthorization Act o f 2015. FIR 2. https://www.congress.gov/bill /114th-congress/house-bill/2. Accessed April 16,
2014;311(19):1967-1968.
2015. 2. MEDPAC. Report to the Congress: Medicare Payment Policy, http://medpac.gov/documents /reports/march-2015-report-to-the-congress
-suits.html?_r=0.
6. Pear R. House provision offers doctors more protection against malpractice suits. New York
April 12, 2015.
.healthit.gov/sites/default/files/reports/info _blocking_040915.pdf. April 2015. Accessed April 12,2015.
Times. March 30,2015. http://www.nytim es.com
-medicare-payment-policy.pdf?sfvrsn=0. March 2015. Accessed April 12.2015.
2 02 6
JAMA
May 26,2015
Volume 313, Number 20
jama.com
Copyright of JAMA: Journal of the American Medical Association is the property of American Medical Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.
