On Friday, April 17, President Barack Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015, repealing the “sustainable growth rate” formula or “SGR” which was set by Congress in 1997 to control Medicare spending by limiting annual increases in physicians’ reimbursements. Although the removal of the SGR formula is the most notable effect of the bill, the new law also includes potentially more important revisions to rates for Medicare health care services in 2015 and beyond, as well as the implementation of payments based on performance and a number of other changes.
Many health care providers, medical associations and advisory groups had been calling for the repeal of SGR for years. The SGR links Medicare spending for physician services to growth of the overall economy. For the first few years, the SGR payment was in place, Medicare expenditures did not exceed the target, so no cuts were imposed. But in 2002, physician payments were reduced by 4.8 percent, which caused outrage. Since then, Congress has passed 17 short-term bills to block cuts that would have resulted under the SGR formula, thereby increasing the size of the fix needed the next time.
In the absence of the SGR, physicians will now receive a 0.5 percent bump in each of the next five years (through 2019) at the same time Medicare transitions to a payment system based on the quality of services provided, rather than the quantity. This transition comes as no surprise and follows in line with the Department of Health and Human Services’ (HHS) announcement in January (Historic Announcement: HHS Sets Clear Goals and Timeline for Shifting Medicare Reimbursements from Volume to Value) that outlined explicit goals for increasing alternative payment models and value-based payments.
Existing payment incentive programs will be combined into a new “Merit-Based Incentive Payment System” under which eligible professionals (including physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists) will receive annual payment increases or decreases based on their performance.
The bill sets out a structure on how to move to value-based payments, but the detailed development of the new payment programs is left to the regulators to draft guidance and regulations. A “Physician-Focused Payment Model Technical Advisory Committee” will provide comments and recommendations to regulators on physician-focused payment models. The American Medical Association’s (AMA) CEO James L. Madara, MD, noted that the AMA’s efforts over the past years has been on repealing the SGR and now they will shift their focus to ensuring that the payment reforms replacing it are properly implemented.
The bill includes a number of additional provisions impacting physicians and other health care providers. Some of these include, but are not limited to:
- Two additional years of funding for the State Children’s Health Insurance Program (CHIP) through FY2017, a federal-state program that provides insurance for low-income children whose families earn too much money to qualify for Medicaid;
- Extension of the two-midnight Medicare rule through FY2015. Under the two-midnight rule otherwise medically necessary hospital stays are covered only if a beneficiary remains in a hospital over two midnights, and generally denied if expected to require less than a two-midnight stay;
- Delays by one year to FY2018, scheduled reductions in Medicaid “disproportionate share” payments to hospitals that care for large numbers of people who are uninsured or covered by Medicaid;
- Directs the Secretary of HHS to provide Medicare data to qualified clinical data registries to facilitate quality improvement or patient safety;
- Declares it a national objective to achieve widespread exchange of health information through interoperable certified electronic health records technology nationwide by December 31, 2018;
- Requires valid prescriber national provider identifiers on all pharmacy claims;
- Requires medical review of all spinal subluxation services by a chiropractor;
- Requires bid surety bonds and state licensure for entities submitting bids under a competitive durable medical equipment and prosthetics, orthotics, and supplies acquisition program;
- Directs the Secretary of HHS to develop a plan to revise the incentive to encourage greater participation by individuals to report fraud and abuse in the Medicare program; and
- Post-acute providers, such as long-term care and inpatient rehabilitation hospitals, skilled nursing facilities and home health and hospice organizations will receive base pay increases of 1 percent in 2018, which is about half of what was previously expected.
Despite the SGR repeal, CMS notified providers that “a small volume of claims” will be temporarily paid using the reduced rate until CMS is able to update its systems, but those providers will be reimbursed after CMS re-processes their claims.
PLDO will be monitoring this bill’s implementation closely, and providing guidance to our clients on its impact to them and their practices. If you have questions about this new law or other health care concerns, please call Attorney Jillian Jagling at 401-824-5100 or email We welcome your comments, questions and suggestions.