Locke Lord QuickStudy: Doc Fix Statute Contains a Lot More than SGR Repeal

Locke Lord LLP
April 17, 2015
On April 16, 2015, the President signed the Medicare Access and CHIP Reauthorization Act of 2015, commonly known as the “Doc Fix.” As has been extensively reported, the Act repeals the Sustainable Growth Rate or (SGR) adjustment to the Medicare physician fee schedule which, had it not been repealed, would have substantially cut physician payment rates for 2015 and beyond.  As a result, the long-running drama over the enactment of short-term fixes to the SGR has been cancelled.  The SGR has been replaced by modest fixed rate increases through 2019, a general rate freeze from 2020 to 2025. The Act is also another step forward in the shift from a fee-for-service payments to a pay-for-value payment system.  The Act eliminates the uncertainty caused by annual SGR “patches” and marks a major change in Medicare payment policy for physicians and other clinicians.  Further, it aligns physician payment with accountable care and with risk-based payment models.

The long run cost of SGR repeal has been partially covered by two kinds of spending reductions (often called “offsets”):  (1) premium increases for higher-income Medicare beneficiaries; and (2) payment reductions for long term care hospitals and payment delays for acute care hospitals.  Most of the cost of SGR repeal, however, has not been offset and will increase the federal deficit.

Less well known are the Act’s other significant changes to the Medicare program.  These include, among others:  

  • Two new kinds of incentive payments for physicians and other clinicians; 
  • A key amendment to Medicare’s civil monetary penalty statute; and 
  • A requirement that CMS develop a new identifier for Medicare beneficiaries to replace the use of Social Security Numbers.  


More Movement to Pay for Value in Fee- for-Service Medicare
Starting in 2019, Medicare will replace the annual update adjustment factor with two kinds of incentive payments:  one incentive payment system for physicians that participate in Alternative Payment Models (APMs) and the Merit-Based Incentive Program (MIPS) for all others.  The MIPS is very complex, and will be the subject of extensive rulemaking and sub-regulatory guidance, especially in the selection of quality and clinical improvement indicators.

Under MIPS, physicians and other clinicians will be evaluated in four categories of performance:  quality; resource use; meaningful use of electronic health record technology; and engagement in clinical practice improvement activities.  MIPS will replace the current PQRS, VBM and Meaningful Use programs starting in 2019.

Significantly, MIPS will incorporate both negative and positive adjustments, such that physicians with poor MIPS scores could suffer payment reductions.  Also, MIPS scores will be publicly disclosed in a manner that identifies individual physicians.

The APM incentive offers an alternative to the MIPS.  Starting in 2019, physicians who receive a significant share of their revenues from a payment model that involves risk of financial loss, use of certified electronic health record technology, and a quality measurement program will not participate in the MIPS, and instead will be eligible to receive a five percent annual bonus from Medicare.  The Act sets a low initial threshold for the revenue derived from APMs, and increases those thresholds in steps from 2021 and 2023.  Clearly, the government is trying to create an incentive for physicians to participate in APMs.

Other Medicare Changes
The Act contains a variety of other provisions regarding Medicare program integrity and administration.  Notable provisions include the following.

  • Expanded Uses of Medicare Data - The Act expands the authority of Medicare Qualified Entities to create and sell non-public, de-identified analyses of claims data to physicians, medical societies, and hospital associations for quality improvement or to develop alternative payment models.  The Qualified Entity program, created under section 10332 of the Affordable Care Act, allows organizations certified by the Secretary to receive standardized extracts of Medicare claims data under Parts A, B, and D for the evaluation of the performance of providers and suppliers.  The Act also permits the Secretary to make Medicare data available to data registries to support quality improvement and patient safety.
  • Narrower Construction of CMP Violations - The Act will amend the Medicare Civil Monetary Penalty statute to make it easier for hospitals to enter into co-management arrangements with physicians.  Under current law, the Civil Monetary Penalties Act prohibits a hospital from making any payment to a physician that would cause the physician to limit services to a Medicare beneficiary, without regard to medical necessity.  The Act will limit the civil penalty provisions of the Social Security Act to situations in which hospitals make payments to physicians to limit services that are “medically necessary,” potentially permitting new kinds of physician incentive programs.
  • Greater Protection of Medicare Beneficiaries’ Identities - The Act also will require the removal of Social Security Numbers from Medicare identification cards, and require CMS to study the use of a beneficiary identifier that is not a Social Security Number or derivative thereof for use external to the Department of Health and Human Services.  The Act also requires CMS to study the use of “smart cards” for Medicare beneficiary identification.  While these initiatives may help protect beneficiaries and reduce medical identity fraud, it is likely that they will come with significant implementation costs.


For more information on the matters discussed in this Locke Lord QuickStudy, please contact the author.