The SGR Is Finally Fixed Rather Than Patched

Written on April 28, 2015

By: Jim Stroud, CPA

On April 16, 2015 President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015. This legislation not only halts what could have been an impending 21 percent cut to Medicare rates, but also removes the annual threat that Medicare payment rates could be dramatically reduced at each anniversary date in the future. Over the last 17 years, this annual threat has caused anxiety among many physicians, especially those with a high percentage of Medicare patients. Some practices have avoided investments in equipment or software and chosen to not give employees pay raises on the basis of a fear that the impending cuts could materialize. The new law provides for a 0.5 percent increase in Medicare rates on July 1, 2015, and a similar annual increase for 2016-2019. Beginning in 2020, payments will be flattened, with no increase or decrease until 2025.

Acting Quickly
There are two interesting aspects of this legislation. One is the speed and power with which it went through our Federal processes. In late March the House of Representatives passed the bill by a vote of 392-37, on April 14, the second day after a recess, the U. S. Senate passed it by a 92-8 vote, and the President signed it two days later. Given the partisan divisions which have previously impeded legislation, these majorities and this rapid movement were a remarkable statement by our political leaders that this problem needed solving quickly.

Value Based Payments
But the most valuable point for us to consider is that the Act includes a renewed push away from fee for service payments and toward a value based payment model. From 2019-2024, physicians will be eligible for a 5 percent bonus if they receive “a significant percent of Medicare revenue” through an organization like an accountable care organization (ACO). If you have not looked into the latest Medicare launch of its ACO initiative, you need to begin your study. Our president has asked that by 2020, 40 percent of Medicare payments are to be paid on the basis of quality and efficiency of care.

Finally, the Act created the Merit-Based Incentive Payment System (MIPS). When it is launched in 2019, MIPS will serve as the combining system for PQRS, EHR Meaningful Use and the Value Based Modifier program. These new payment models will place demands on a medical practice infrastructure but could also highlight the value of administrative leadership, when the increased payments arrive. We will discuss the particulars of the new Medicare payment structure in our practice management roundtables when the specifics are available.

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