On Thursday, October 31, 2013, the Senate Finance Committee and the House Ways and Means Committee released a draft discussion of their proposal to permanently fix the sustainable growth rate (SGR) formula, which Medicare uses to reimburse physicians and other health care professionals.  (More information on the SGR is available here.)  This discussion draft is similar to legislation that unanimously passed out of the House Energy and Commerce Committee in July 2013.  (More information on the Energy and Commerce legislation is available here.)

The discussion draft would prevent the imposition of the SGR cuts (estimated to be 24 percent for 2014), but does not call for any payment increases through 2023.  Beginning in 2024, health care professionals who participate in advanced alternative payment models (see below) would be eligible for a two percent update, while all other health care professionals would receive a one percent update.  The Energy and Commerce Committee legislation called for a 0.5 percent increase in reimbursement over 5 years.

The discussion draft also seeks to adjust reimbursement based in part on performance.  Beginning in 2017, penalties that would have been assessed under three quality incentive programs – the Physician Quality Reporting System (PQRS), the Value-Based Modifier, and the Electronic Health Record (EHR) Meaningful Use program – would be made available to health care professionals who have demonstrated ability to deliver high-quality healthcare.

In addition, the discussion draft encourages health care professionals to participate in alternative payment models (APMs) that involve two-sided risk and measure the quality of care provided (e.g., patient-centered medical homes, accountable care organizations (ACOs), etc.).  Providers who obtain a significant portion of their revenue from such APMs would be eligible for bonus payments.

Finally, the discussion draft contains provisions designed to encourage care coordination for individuals who have complex chronic care needs by developing new payment codes for these services beginning in 2015.  The discussion draft seeks to improve the accuracy of the valuation of services provided to beneficiaries and sets a target for the identification and revaluation of misvalued services.  Under the proposal, professionals would be required to consult with appropriate use criteria when ordering advanced imaging and electrocardiogram services.

Interestingly, like the Energy and Commerce Committee legislation, this discussion draft does not contain any offsets.  The Congressional Budget Office (CBO) previouslyestimated a ten year freeze to physician payments would cost $139.1 billion; the Energy and Commerce legislation was estimated by CBO to cost $175 billion over ten years.  While this discussion draft has not yet been officially scored by CBO, sponsors reportedly have been working to reduce the overall score of their proposal relative to the Energy and Commerce Committee’s legislation.

So far the discussion draft has received positive feedback from the House Energy and Commerce Committee.  The American Medical Association (AMA) and American Medical Group Association (AMGA) have issued statements indicating they are pleased the issue is moving forward and are currently reviewing the discussion draft.