The brave new world of the SGR repeal

Tags: ragle, president's letter, legislature, medicare, medicare access and CHIP reauthorization act, MACRA, sgr, affordable care act, direct primary care

By Dale Ragle, MD
TAFP President, 2014-2015

On April 16, 2015, President Obama signed the Medicare Access and CHIP Reauthorization Act of 2015, which phases out Medicare’s flawed sustainable growth rate payment formula over the next 10 years. The so-called “doc fix” enjoyed bipartisan and bicameral support in Congress, a rare phenomenon these days, as well as support from most major medical organizations, including AAFP and the American Medical Association. In spite of broad support, the bill took more than a year of tweaking and survived innumerable negotiations between both political parties and the White House, a testament to the adage that “the devil is in the details.”

The SGR formula tied Medicare expenditures to the gross domestic product. Since demand and utilization of health care services do not rise and fall directly with the ebbs and flows of the general economy, the SGR often threatened to cut physician fees year after year. Perennially, Congress passed special legislation to delay the fee cuts, often only finding they have to repeat the action in the following year.

MACRA did a lot more than just repeal the SGR. It put into action a series of new quality measures following the lead of the Affordable Care Act in rewarding quality care over quantity. The new law will revolutionize the way Medicare, and ultimately commercial payers, will reimburse physicians.

MACRA creates two new payment models for physicians, both of which will incentivize quality, cost containment, and value. One creates a pay-for-performance model, in which fee schedules and bonus payments will be tied to a physician’s performance on predetermined quality measures. A physician may also participate in alternative payment models, which involve various levels of risk contracting. These may include capitation, bundled payments, and shared savings arrangements.

Some of this may seem like history repeating itself. Capitation and bundled payments were tried in the 80s and early 90s and they failed, largely due to flawed payment formulas and poor quality measures. The hope is, with advancement of better technology, better data, and better outcome measures, the new payment models will work. This remains to be seen.

Most of us will agree that the old payment system needed to be improved. The SGR repeal, while doing away with the old system, does not clearly define the new one. The idea is to progress toward value-based payment systems. This is a step in the right direction, but it is really only a small first step. We must continue to push for payment models that reward those of us who deliver quality, evidence-based care and advocate for rewarding quality and cost effectiveness. Repeal of the SGR must not simply be a cost-saving measure. It must also be a quality-enhancing measure.

The new payment systems will not occur suddenly, but will be phased in over the next 10 years. This was done to prevent a 21 percent cut in the Medicare fee schedule. You have a little time to respond to the changes, but one thing is certain: you must begin to plan your strategy.

The SGR repeal will indeed usher in a brave new world. As family physicians, now is the time to seize the moment and show policy makers we are up to the task of delivering better outcomes at a reasonable cost. You must stay involved and educate yourself about the changing landscape. There are links on the home page of to help you get started.

For those of you who wish to remain independent, I would encourage you to read the article in the spring 2015 issue of Texas Family Physician, “Back to the future with Direct Primary Care,” which you can find at There are other links on our home page to help you with the changes to come. I encourage you to explore them and talk with others in your community. Together we can make these changes work for our patients and for us.

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