SGR Out; Value In

May 3, 2016


The traditional way of updating Medicare payment rates for physicians—called the Sustainable Growth Rate formula, or SGR—will soon be history, replaced by a system that links payment updates to the value and quality of care physicians provide Medicare patients. The Centers for Medicare & Medicaid Services (CMS) recently proposed the change as a result of the 2015 law that repealed the SGR formula, which had often resulted in proposals for deep payment cuts that Congress routinely overturned.


In its place, CMS is proposing a two-part payment update program that is intended to reward physicians based on value rather than volume. Physicians can select either of the following:


  • Merit-based Incentive Payment System (MIPS): This system would consolidate and streamline the current Medicare quality and value-based payment programs for physicians, including value-based purchasing and the Medicare Electronic Health Record Incentive program. It would allow physicians to select from a variety of quality and performance measures they believe are most appropriate for the type of care they provide. Using these measures, CMS would then judge performance in four overall categories: cost, quality, clinical practice improvement, and use of EHR technology. Physicians would receive positive, negative, or neutral adjustments in their payment levels. In the first year, the adjustments would be limited to 4%, either up or down. In later years, this would grow to 9%. CMS would begin measuring physician performance in 2017, with payment adjustments beginning in 2019.
  • Advanced Alternative Payment Models (APMs): Instead of participating in MIPS, physicians can choose to participate in Advanced Alternative Payment models and qualify for a 5% annual incentive payment, which would begin in 2019. These models include patient-centered medical homes that have been expanded under Medicare, including the recently proposed Comprehensive Primary Care Plus (CPC+) program. They also include those Medicare accountable care organizations that accept both financial risk and reward for providing coordinated, high-quality, and efficient care. These include the Track 2 and Track 3 Shared Savings ACOs and Next Generation ACOs.


The proposed regulations are open for comment until June 27, 2016. See Medicare fact sheet on the proposals.