Repealing the SGR

The 113th Congress focused a great deal of its health policy efforts last year on permanently repealing the Medicare sustainable growth rate (SGR) formula and reforming the physician payment system. Proposed legislation was passed out of all three committees of relevance—the Senate Finance Committee, the House Ways and Means Committee (just prior to congressional adjournment in December), and the House Energy and Commerce Committee in July 2013.

During the holidays and into the new year, the committees were scheduled to begin negotiations, internally and with interested stakeholders, including the American College of Surgeons (ACS), to develop a single bipartisan, bicameral bill.

At the close of 2013, Congress passed a two-year budget deal that includes a House amendment to prevent a cut in physician payments under Medicare. Is this a temporary fix, and what can physicians expect in 2014?

Yes, this is a temporary fix. Congress passed a three-month, 0.5 percent increase in the Medicare physician payment rate as a bridge to allow for negotiations on permanent repeal of the SGR. The short-term patch averts the scheduled cut to the payment rate, in excess of 24 percent, on January 1. The cut is now scheduled to take effect April 1, which coincides with the next round of sequestration cuts. Medicare physician payment rates would be cut an additional 2 percent on April 1. Find more information on sequestration and what it means for health care.

How costly would repeal be at this point?

The yearlong collaboration between Congress and interested stakeholders, including the ACS, took flight because the current environment represents the best chance for repeal in a decade, as the estimated cost of eliminating the SGR and implementing a new approach has shrunk to $116 billion, down from nearly $300 billion, according to the Congressional Budget Office (CBO).* Since 2003, Congress has enacted 15 short-term patches to stop the Medicare physician payment cuts, spending more than $146 billion cumulatively. By paying the minimum on the “credit card” for the last decade, Congress has spent more than the current cost of full repeal, and, as many surgeons know, fiscal uncertainty makes it difficult for physician practices to invest in the infrastructure needed to better serve patients.

On October 30, 2013, the Senate Finance and the House Ways and Means Committees released a draft proposal for repealing the SGR and fixing the Medicare physician payment system. The proposal was based on draft legislation that the House Energy and Commerce Committee approved last summer. What provisions in the proposal are of concern to the ACS?

The ACS has identified four critical concerns:

  • The proposal called for a 10-year freeze on payment increases. The College believes that mandate would serve as an unsustainable business model and advocated that any repeal of the SGR include a positive annual update. A freeze does not keep pace with the cost of providing care, nor does it offer physicians the financial ability to invest in the infrastructure necessary to transition to the new system.
  • The proposal’s value-based payment (VBP) program would measure and rank participating physicians’ performance on a composite score system. The ACS strongly opposed the VBP’s tiered model of redistributing payments because the only way for a provider to get a positive bonus payment would be for another provider to take a cut. The ACS has long advocated for incentives based on physicians achieving a threshold or benchmark, so that all providers could strive for and achieve positive updates in reimbursement.
  • The proposal’s alternative payment model (APM) is a positive, incentive-based program that allows participating physicians to avoid the VBP program and its potential penalties. Qualifying physicians would secure a required percentage of revenue in alternative payment models, including Accountable Care Organizations (ACOs), medical homes, or bundled payments. The ACS has concerns with regard to this provision because most, if not all, surgeons fall outside the proposed models—operationally, geographically, or economically—which places surgeons at a disadvantage compared with other providers. The ACS maintains that a process for the approval of other alternative payment models, such as the Clinical Affinity Groups proposed in our Value-Based Update (VBU) proposal, should be in place.
  • The proposal directly targets surgery in its efforts to address the appropriate valuation of physician service codes under the perception that the global payment for surgical procedures is overvalued and pays surgeons too much. In addition, the proposal provides the government with audit powers to request that physicians turn over unspecified practice information and subject those who are unwilling or unable to submit the requested data to a 10 percent penalty on all Medicare payments in the following year. The ACS has tremendous concerns regarding how these cuts would affect patient access to surgical care and believes this provision must be removed.

I understand that the Senate Finance and House Ways and Means Committees released a second version of their joint proposal. Did the second draft include any significant, positive changes?

The APM process was much improved and provided a more viable pathway for surgeons. In addition, the provisions directly targeting global surgery payment and administering a 10 percent penalty for noncompliance were removed. However, the 10-year freeze and VBP’s tiered model remain unchanged.

The ACS and other surgical societies issued a letter in opposition to the Senate Finance Committee bill to repeal the SGR. On the other hand, the House Ways and Means Committee made good-faith changes in its version of the SGR legislation, which addresses some of the College’s concerns and provides more stability for surgeons and the surgical patient. Both committees passed their proposals out of committee on December 5, 2013. Download the letter to the Senate Finance Committee.

In addition to the Senate Finance and House Ways and Means proposal, the House Energy and Commerce Committee issued a plan as well. What does that plan involve?

On July 31, after months of back-and-forth discussions with the College and other stakeholders, the House Committee on Energy and Commerce unanimously approved a bill crafted from the proposal. The Medicare Patient Access and Quality Improvement Act was bipartisan legislation that called for permanently repealing the SGR and developing a new physician payment system based on health care professionals’ proven ability to provide high-quality care to patients. Two critical provisions included: (1) a 0.5 percent increase in the physician payment rate over the next 10 years (and each year thereafter); and (2) a benchmarking/threshold system that allowed all physicians to share in bonus payments if they achieved the requisite score, which measures their quality and resource use. These provisions are in marked contrast to the 10-year freeze and tournament-style payment system in the Senate Finance proposal.

What actions will the College take over the coming months to ensure that the SGR is repealed in a meaningful and equitable manner?

Over the past year, Congress has repeatedly sought to tap the medical community for feedback on numerous issues regarding the physician payment system. The ACS remains committed to permanently repealing the SGR and reforming the physician payment system, as well as streamlining existing quality programs, encouraging alternative payment models, and generally moving to a system that rewards high-quality, efficient care. ACS Advocacy and Health Policy staff will continue to work with Congress to forge a new patient-centric, quality-based health care system.

The ACS website has more information about the College’s position on the SGR.

The SurgeonsVoice program

Last year, the ACS launched SurgeonsVoice, a grassroots program for members. What is SurgeonsVoice?

In partnership with the ACS Division of Advocacy and Health policy staff in Washington, the SurgeonsVoice program launched in October 2013 to enhance grassroots advocacy for recruiting, educating, and motivating Fellows to use their influence to change the dynamic in Washington, DC. SurgeonsVoice helps members build critical relationships with legislators in their home state, and provides members with access to a grassroots advocacy tool kit complete with a comprehensive handbook, issue briefs, and PowerPoint presentations, as well as draft letters to Congress, advocacy and health policy webinars, the latest news and information, and a section for members to tell their stories. Access SurgeonsVoice.com using your ACS member ID and password.

How has SurgeonsVoice affected the debate on repealing of the SGR?

During the protracted efforts to produce legislation to fully repeal the SGR and reform the Medicare physician payment system, the ACS spearheaded a grassroots advocacy campaign to reaffirm the House’s commitment to repeal the SGR using the ACS’ SurgeonsVoice program. As a result, 259 bipartisan members of the House, led by Reps. Bill Flores (R-TX) and Dan Maffei (D-NY), sent a letter to Speaker John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) urging Congress to permanently repeal the flawed Medicare SGR formula and replace it with a system that rewards quality while controlling costs.

With the partisan gridlock in Washington dominating the headlines in 2013, the significance of this achievement must not be underestimated, as more than half of the House is now on record supporting a full repeal of the SGR. This effort also demonstrated the power of SurgeonsVoice and the ability of ACS Fellows to influence legislators through grassroots advocacy.


*Congressional Budget Office. Medicare’s payment to physicians. Available at: www.cbo.gov/sites/default/files/cbofiles/attachments/2013%20SGR%20Options%20-%20Final%20Rule.pdf. Accessed January 2, 2014.

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