This blog post was originally published on Monday, Feb. 17, 2014, for the Acumen Nephrology Blog.

Recently lawmakers announced a bipartisan deal, which would repeal and replace one of the challenges Medicare providers have faced for over a decade: the Sustainable Growth Rate (SGR).

The SGR emerged from the Balanced Budget Act of 1997 as a mechanism to curb spending by Medicare on physician services. The basic idea was to tie increases in Medicare spending on physician services to increases in the country’s gross domestic product (GDP). The formula, however, is flawed and the result is an annual threat of drastic double-digit reductions in payments to physicians by Medicare. The short-sighted solution is what has come to be called the “doc fix.”

(American Medical Association pushes for permanent SGR fix on anniversary of first patch)

Every year at the 11th hour, legislators craft a bail out that prevents the SGR from being invoked, saving the country’s Medicare providers from unsustainable cuts in Medicare fees. The temporary doc fix in place today averted a global 24% cut, and it is due to expire at the end of March. These temporary fixes have cost the country about $150 billion over the past decade.

The Fix
The legislation proposed is cleverly titled the SGR Repeal and Medicare Provider Modernization Act. The Act would not only eliminate the SGR, it would provide a 0.5% annual increase in Medicare physician payment between 2014 and 2018. While 0.5% does not sound like much, the legislation also proposes sun setting the existing penalty arms of several of the incentive programs that find their way into this blog (PQRS, Meaningful Use, and the Physician Value-Based Payment Modifier).

As written in the Act, the penalty phases of PQRS and Meaningful Use would expire at the end of 2017. Taken together, the small bump in pay combined with a penalty holiday for a few years certainly sounds like a wonderful idea. In fact the entirety of organized medicine, from the AMA to the RPA, the American College of Physicians and the American College of Surgeons have all endorsed the Act  and are encouraging members to contact their Congressional representatives and ask them to lend their support to the bill’s passage. Of course not everyone is on board. Jeff Goldsmith for one thinks this is a big mistake and shares as much in his insightful blog post.

The Cost
One of the reasons we find ourselves in this mess every year is a permanent fix is estimated to cost around $125 billion. In the past, Congress has had no appetite for such a large meal, and how they will actually fund this is not entirely spelled out in the Act, but there are hints. The Act requires the creation of a “Merit-Based Incentive Payment System” or MIPS, which will begin in 2018. Of course the devil is in the detail as they say, but on the surface MIPS will basically consolidate the quality aspects of our old friends PQRS, Meaningful Use, and the Value-Based Payment Modifier. However, MIPS does not end with the quality piece. Providers will be evaluated on resource utilization, on whether or not they continue to use and EHR in a meaningful way, and finally on whether or not they are participating in clinical practice improvement activities.

Winners and Losers
MIPS will clearly have winners and losers. Medicare providers with a low MIPS composite score will face a 4% penalty in 2018, a 5% penalty in 2019, 7% in 2020, and a whopping 9% haircut in 2021. Folks maintaining a middle-of-the-road score will see no change in reimbursement in later years, and Medicare providers who excel will receive a positive payment adjustment, described in one summary of the bill as “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.”

Paradigm Shift
Apologies for using such a worn out phrase, but what appears to be taking shape is another big step in the direction of value-based purchasing. Our government appears to be directing CMS to migrate closer to a reimbursement system that rewards the efficient delivery of quality, and pays for that reward by penalizing those who cannot deliver. This all makes sense on paper, and consolidating the three existing incentive program feels like a breath of fresh air, but as always, we will need to pay close attention to the details.