Replacing the SGR: A Physician-centered Approach?

Finding new ways to reimburse physicians is a critical next step in reforming America’s healthcare system. Since 2002, physicians have faced potentially devastating payment cuts that have resulted from the fl awed payment formula known as the sustainable growth rate (SGR). In 1997, the SGR was mandated by Congress in an attempt to stabilize federal spending and to balance the budget. Each year, target expenditures are established that take into account things like changes to physician service fees and the number of Medicare beneficiaries. If actual expenditures exceed that target, cuts to physician payments the subsequent year must take place to off set the difference.

While Congress typically passes short-term legislative patches to avoid these cuts, this approach to Medicare reimbursement is untenable. This year, physicians can expect to receive a 25% cut in Medicare payments if Congress fails to act. And in order to provide a permanent solution, Congress must find $139 billion.

Because of the high price tag and the general divisiveness in Congress, an alternative approach to reimbursing physicians has not been given serious thought — until recently. Earlier this year, the House committees on Energy & Commerce and Ways & Means released a framework for reforming the Medicare payment system. Much like the trend toward patient-centered care, paying America’s physicians may also be moving toward an individualized approach.

The current congressional proposals promise to give physicians a variety of reimbursement options, rather than taking a one-size-fitsall approach to replacing the SGR. Enabling physicians to choose how they get paid is a fresh take on a system that has long been shackled by formulaic considerations rather than improving the quality of patient care.

So how would this proposal work? First Congress must decide the payment models from which physicians can select. Once these options have been decided, physicians would receive stable payments for several years to give them time to decide which option would work best for their practice. Physicians can continue to be paid under the feefor-service (FFS) system or they can choose to participate in an alternative payment model that utilizes team-based care to streamline healthcare delivery. The FFS system will also see some changes during this time to integrate quality and performance measures so that future payment updates can take these considerations into account.

Throughout this process, the committees have engaged key stakeholders, like Th e Endocrine Society, to ensure the alternative payment models that are selected can benefit all specialties. Th e Society has long advocated for payment reform to better account for the undervaluation of the evaluation and management services that endocrinologists most often provide. The Society has also been supportive of both the SGR repeal and for physicians to be able to select a reimbursement option that is most suitable for their practice.

In comments to the committees regarding this framework, the Society has stressed the importance of working with physician organizations to ensure that there are relevant quality measures for all physicians. The Society also believes that providing flexibility during the selection process of an alternative payment model is a critical step in incentivizing physicians to try out new mechanisms for reimbursement. Comments on implementation, EHR adoption, clinical improvement activities, alternative payment models, and resource utilization were also included in the comment letter, which can be found at

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