New Medicare Payment System will be Quality Based

A bipartisan effort to overhaul the Medicare payment system for physicians has concluded, reaching a deal that would repeal the Sustainable Growth Rate (SGR) formula, a budget cap passed in 1997 to control physician spending.

Also known as the “doc fix”, the SGR has cost Congress nearly $150 billion since 2003 in short term patches designed to avoid unsustainable cuts. The most recent patch is set to expire on March 31, 2014.

The new legislation would give physicians annual 0.5% bumps to payments over the next 5 years as the quantity-of-care-based system transitions to one focused on quality of care and accountability.

These efforts, similar to those found in the private sector, attempt to both improve medical care and lower costs.

"This is a positive move compared to the short term fixes of the past. I applaud the emphasis on value based care and improved reimbursement," Ed Shahady, MD, Clinical Professor of Family Medicine at the University of Miami told Consultant360. 

The new plan would improve the current fee-for-service system in a number of ways focused on rewarding value of care over volume.

It would incentivize care coordination, improve payment accuracy, reduce inappropriate care through physician-developed guidelines, and develop quality measure to properly rate performance.

It would also encourage providers to move to alternate payment models and establish a Technical Advisory Committee to review physician-developed APMs and encourage that at least 25% of Medicare revenue come through APMs by 2018.

The American Medical Association has come out in support of the legislative action, warning that if the current SGR patch expires doctors would face a 24% cut in Medicare reimbursements.

"The SGR has been a thorn in the side of physicians for years and medical associations have been fighting for it's repeal and replacement with a more rational method of reimbursement," said Stephen Brunton, MD, of the Primary Care Education Consortium.

"The hope is that a system based on quality rather that quantity will contribute to the positive transformation of American medicine."

–Michael Potts