Congress’ Permanent ‘Doc Fix’ leads to Significant Change in Medicare Reimbursement for Physicians

By Margaret R. Knaust and Michael A. Igel

Late in the night on April 14, hours before a 21% percent permanent cut to Medicare physician payments was scheduled to go into effect, Congress passed the long-awaited permanent “doc fix,” eliminating Medicare’s sustainable growth rate formula (“SGR”). President Obama signed the bill into law on April 16. The passage of this bill provides much needed stability to the Medicare physician fee schedule, but significantly changes the manner in which physicians will be paid for services provided to Medicare beneficiaries.

The SGR was designed to counter the tendency toward spending growth driven by Medicare’s fee-for-service model. It automatically reduced Medicare physician fees if physician spending exceeded a target based on overall economic growth. The current legislation replaces the SGR with an approach focused on rewarding high-performing providers while supporting alternative payment models such as accountable care organizations and patient-centered medical homes.

From July 1, 2015 through December 31, 2019, physician payment rates will increase by 0.5% annually. For 2019-2025, Medicare physician payment rates will be set at the 2019 rate and physicians will be eligible for a complex incentive program, the Merit-Based Payment Incentive System (“MIPS”).

The MIPS will evaluate physicians using four performance categories:

• Quality;
• Resource use;
• Clinical practice improvement activities; and
• Meaningful use of certified EHR technology.

Physicians’ performance in these categories will be reflected in a composite performance score of 0-100. Physicians with scores exceeding performance thresholds can have their rates increased. Those who fail to meet performance thresholds are at risk for having their rates decreased.

The Secretary of Health and Human Services will specify the quality measures to be used in determining the MIPS payment adjustment and to update the measures list as appropriate. The Secretary also will be responsible for developing the methodology for assessing the performance of each provider and the formula for calculating payment adjustments. Technical assistance would be available to small practices and practices in health professional shortage areas.

We anticipate that the law will include additional compliance requirements that will have a significant impact on physician reimbursement. Johnson Pope’s Health Care Group is monitoring the impact of the new law, and will provide additional information as regulations are released.

The full text of the bill is available at:

https://www.congress.gov/bill/114th-congress/house-bill/2/text