On February 6, 2014,  a group of House and Senate lawmakers announced a bipartisan agreement that would repeal Medicare’s sustainable growth rate (SGR) formula for physician payments and replace it with a value-based payment system.

The SGR formula was passed into law in 1997. However, lawmakers report that since 2003, Congress has spent almost $150 billion in short term patches (or “doc fixes”) to avoid and delay unsustainable cuts imposed by the SGR. The most recent doc fix is set to expire April 1.

The bipartisan agreement repeals the SGR and replaces it with a 0.5% annual payment increase for physicians for five years. The increase is meant to stability in physician payments and help physicians transition to a new model of care based on quality, value, and accountability.

According to a summary of the agreement, the new payment system will consolidate Medicare’s three existing quality programs into a streamlined and improved program that will:

1. Improve payment accuracy for individual provider services;

2. Incentivize care coordination efforts for patients with chronic care needs;

3. Introduce physician developed clinical care guidelines to reduce inappropriate care;

4. Require development of quality measures in collaboration with physicians and stakeholders;

5. Incentivize movement to alternative payment models; and

6. Expand use of Medicare data for transparency and quality improvement.

Lawmakers on the Senate Finance Committee, House Ways and Means Committee, and house Energy and Commerce Committee discuss the new agreement in a press release available here.