SGR Repeal/Replace Proposal

government_400A bi-partisan group of members from both the House and Senate have released a draft proposal for repealing and replacing the Sustainable Growth Rate (SGR) formula. The group included the Chairmen and Ranking Minority Members of the House Ways and Means Committee and the Senate Finance Committee. These are two of the primary Committees with jurisdiction over the SGR issue.

This is an important next step in the process of permanently replacing the flawed SGR formula.  If enacted, this proposal would dramatically alter the way physician fee schedule payments are determined.  The financial and administrative implications for physicians are very significant.  For physicians wishing to continue to receive Fee-for-Service payments from Medicare, the amount of data that physicians will be asked to compile and report will be significant.

Because of the new data reporting requirements, it appears that there may be a strong incentive for providers to move to what the proposal refers to as alternative payment models (APMs).

Although not specifically stated in the summary released by the Committee leadership, it would appear that the phrase alternative payment model is a proxy for Accountable Care Organizations or Bundled Payments.  There appears to be a strong desire on the part of the authors of this initiative to want to move physicians from a payment model that places financial risk for clinical decision making on the payer (i.e. fee-for-service) to one where financial risk for clinical decision making is shifted to the provider.

Prior to adoption of the SGR formula for determining annual adjustments in physician fee schedule payment, physicians could expect an annual inflationary adjustment in their fee-for-service payments.  Since the adoption of the SGR, physicians have been threatened with ever increasing cuts in physician fee schedule payments and even when Congress stepped in to prevent these draconian cuts, the annual adjustments approved by Congress have been either non-existent or so nominal that the increases hardly kept pace with medical inflation.

Under the bi-partisan proposal, there will be no automatic annual adjustments in the physician fee schedule for 10 years.  Beginning in 2024, providers still in the fee-for-service system would receive a 1% annual inflationary adjustment.  Providers enrolled in one of the “to be approved” Medicare APMs would get a 2% inflationary update beginning in 2024.

There will be no inflationary updates for fee for service providers from 2014 to 2017.  The only changes in fee-for-service payments during that 3-year period would be for “misvalued” codes.


  1. Beginning in 2017, annual updates to the fee schedule would be physician specific and they would be “performance based” incentive adjustments – called the Value-Based Performance Program (VBP).  Physician scores on a prior year (not specified) would be used to determine the incentive adjustment.
  2. Performance based incentive adjustments would be based on a composite score, which would be a combination of:
  • Quality Score
  • Resource Use Score
  • Clinical Practice Improvement Activity
  • EHR Meaningful Use

3. Payment reductions for failure to report (PQRS) or meaningfully use EHR; and the Value-       based modifier penalties would be repealed.

4.  Physicians with low APB scores would see a reduction in their payments for that year.

5.  The VPB payment incentive (and penalties) program would be expanded to include PAs and NPs in 2018 and all others (subject to Secretarial discretion) paid under the fee schedule,    beginning in 2019.

Incentive payment scoring can occur either at an individual level or at the group level for providers who belong to a group.  There is a special process that could be used by “facility-based” professionals to determine their quality score.  Providers would receive “timely” updates indicating how they are doing through the course of the year.

As noted earlier, the overall goal of the initiative appears to be to encourage providers to move to an APM.  Physicians who receive a significant percentage of their Medicare revenue through a risk-sharing Alternative Payment Model, will receive an automatic 5% annual increase in payments between 2016 and 2021.

The proposal would also direct the GAO to undertake a study of the Relative Value Scale Update Committee (RUC) process for determining the “valuation of physician services.”  Concern has been expressed that organized medicine exercises too much control over the RUC process and as a consequence, efforts to adjust so-called “misvalued” codes have been undermined by physician specialty organizations.

Information for determining value would be obtained from “selected health professionals” rather than from physician organizations.  The proposal makes a vague reference to providers who submit the requested information being eligible for additional compensation.  However, should a provider fail to assist in the data gathering effort, they would be assessed a penalty – a 10% payment reduction.

The Secretary of Health and Human Services would also be directed to undertake an analysis of global surgical payments for work, focusing on post-surgical visits.

Finally, it should be noted that the proposal does not address how these changes will be “paid for.”  Under the budget rules governing the Congress, any change in the Medicare program that would increase Medicare expenditures above what had previously been budgeted, must be offset by either additional revenues or cuts elsewhere in the Medicare program.

Currently, the Congressional Budget Office (CBO) says that repealing the SGR and simply freezing payments for 10 years would result in higher Medicare expenditures of approximately $138 Billion.  CBO has not provided an estimate for the cost of this repeal/replace initiative.

To comply with the budget rules Congress must offset the cost of the SGR repeal/replace proposal with additional revenue into the Medicare Trust Fund or cut payments to other providers.

Here is the draft proposal for your review.


Collecting Patient Payments

Shaking handsWith out-of-pocket patient responsibilities increasing, it has become more important than ever that provider front office staff, billing and billing companies collaborate their efforts in collecting patient balances. Statistics for the “average practice” show that a providers accounts receivables (AR) revealed more and more delinquent patient accounts than in the past. Those statistics showed the reasoning for so much AR becoming delinquent was due to things like large deductibles, unpaid co-payments and co-insurances, no active insurance coverage, coordination of benefits issues, missing or lack of complete insurance information, incomplete workers compensation information, etc. This was resulting in large chunks of money being left on the table.

Don’t worry!! There is a solution that will help decrease the number of delinquent accounts. With staff training, incentives, and collaborative effort from front end provider offices and back end billing staff and services, you should start to see results after a few months. Here are few strategies that will assist with lowering delinquent accounts and in the end increase the bottom line.

Check Eligibility Benefits –

Checking eligibility and benefits is something that should be done all the time and every time as a requirement, not an option. This should happen at the same time as the front office takes a co-pay before the patient sees the doctor. If a co-pay can’t be made at the time, inform the billing staff to send a billing for the copay at the same time they submit a claim to the insurance. If a patient participates with coverage the provider is out-of-network with, or the patient has inactive coverage, collect payment upfront before the patient is seen. A fee structure or schedule for self pay patients will help keep consistency and equal treatment for all self pay patients and increase efficiency on front end staff.

Collecting New & Old Balances –

There is no better time to collect than when a patient is standing in front of you at the office. If they’re in the process of paying a copay, try to get them to pay old balances at the same time. For providers using billing services, coordinate balance information from them with your Electronic Medical Records (EMR) or scheduling software so the front desk can see outstanding balances. If the software capability is not available, use reports to keep your front desk staff up to date with any outstanding balances.

Patient Education –

An ever growing demand from patients is transparency in healthcare costs. More and more patients want to know what their costs will be and why are they receiving statements billings. Having a plan in place to educate patients on insurance billing and costs will assist in the patients good will and willingness to pay. Provide patients a frequently asked questions (FAQ) pamphlet for them to read in the waiting room. Post signs and notices around the waiting room and in exam rooms. Terminology is also something patients are confused by. Give them information on definitions and billing concepts for things like Co-pay, co-insurance, deductible, etc. so when they statement comes in the mail they no what to expect.

Coordination of Benefits –

Educating patients on their coordination of benefits will also help in avoiding denied claims and billing errors. If there is ever a change in the patients information (address, spouse info, employment status, auto accidents, etc.) The patient needs to be aware it is their responsibility to contact their insurance carriers to coordinate those benefits and changes.

Verify Patients Address –

With every patient encounter, or at least monthly, verify the patients address and demographic information. This is very simple but usually always overlooked. It also plays a key role in collecting money from patients.

Online access –

For those without online access for making payments and patient account information, now is the time. The American Medical Association conducted a survey in 2011 in which fifty percent of adult patients said they would consider changing doctors if it would give them access to online bill-pay and account information. By 2016 it is estimated that $300 billion will be spent on online transactions.


With the implementation of these strategies and the coordination of front office staff, back end billing or billing services, delinquent accounts and rising AR should begin to show a downward trend within a few months, and show an improvement to your bottom line.