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Sustainable Growth Rate (SGR) Repeal and Replacement Summary

Bipartisan legislation passed by Congress contains significant reforms to the Medicare
physician reimbursement system.

The Medicare Sustainable Growth Rate formula (SGR) is a budget cap that was passed into law in 1997 as an attempt
to control federal spending on physician services. Since 2003, Congress has routinely delayed devastating cuts that
jeopardize beneficiary access to psychiatric services in the Medicare program through “patches” to scheduled SGR
reductions. Some of these patches were for a scant few weeks, causing significant instability and administrative
burden for physician practices. In March and April 2015, Congressional leadership conducted breakthrough
negotiations based on recent bipartisan work to bring an end to the SGR once and for all. They have laid the
groundwork for significant changes to Medicare physician reimbursement over the next decade and beyond with the
passage of H.R. 2, the Medicare Access and CHIP Reauthorization Act (MACRA). The provisions of MACRA have
significant implications for the practice of psychiatry and reimbursement of psychiatric services in addition to the
activities of APA.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)

SGR Repeal and Reimbursement Updates

• –  MACRA has permanently repealed the flawed SGR reimbursement formula.
  

• –  A stable period of annual updates (0.5%) is now in place through 2019. The 2019 rate is maintained through
  

  2025, with the potential for additional adjustments through the creation of the new Merit-Based Incentive
  Payment System (MIPS – see below). Beginning in 2019 and ending in 2024, physicians may instead make
  themselves eligible for a 5% incentive payment based on participation in certain alternative payment models
  (APMs).
  

• –  Beginning in 2026, physicians who participate in these APMs will receive a 1% annual update, while all other
  physicians will receive a .5% annual update.
  

  Creation of the Merit-based Incentive Payment System (MIPS)
  

• –  MACRA consolidates several current quality incentive and penalty programs into one system (MIPS) that affects
  

  Part B reimbursement beginning in 2019. The consolidated programs include the Physician Quality Reporting
  System (PQRS), the Value-Based Modifier (VBM), and the Electronic Health Record Meaningful Use program
  (MU). The penalties for these programs will sunset at the end of 2018, before MIPS begins.
  

• –  MIPS contains four categories of “performance assessment” including quality, resource use, meaningful use of
  electronic health records, and clinical practice improvement activities. Weights are assigned to each category to
  create a total composite score of 0-100 for physicians based on their performance in these categories:
  

o Quality measures (30%) will be based on those in existing measurement programs in addition to other
potential measure eligibility pathways, including processes for the Secretary of Health and Human
Services to fund professional organizations to develop additional measures.

o Resource use (30%) will be largely based on the current VBM system with modifications
o Meaningful use of electronic health records requirements (25%) will be largely based on the current meaningful use program.

o Clinical practice improvement activities (CPIAs, 15%) that foster future participation in APMs will be established by the Secretary and must include activities in the following subcategories: expanded practice access, population management, care coordination, beneficiary engagement, and patient safety
and practice assessment. Physicians would not have to perform activities in each of these subcategories
to achieve the highest potential MIPS score. Participation in these activities may meet individual or
institutional requirements, including certain maintenance of certification (MOC) or maintenance of
licensure (MOL) requirements.