Congress has forged a long-awaited deal to push Medicare’s payment system for physicians to a value-based model. But lawmakers have only seven weeks to agree on how to pay for it.

Analysts, providers, and Medicare patient advocates are cautiously optimistic that the Sustainable Growth Rate formula repeal deal announced Thursday in Congress is a stride forward in the quest to move U.S. healthcare from a fee-for-service model to value-based payment of doctors.

Figuring out how to pay for it may be a bigger challenge.

Put in place a decade ago, the formula for reducing fee-for-service payments to physicians have never taken effect. Instead, Congress has made postponed it year after year.

If a comprehensive deal or new patch is not adopted by March 31, when the most recent “doc fix” patch Congress passed in December is set to expire, the reimbursement rate for doctors is set to be slashed nearly 25 percent.

The bipartisan SGR repeal and replacement deal announced Thursday calls for a five-year period of stability in the Medicare payment system, with a 0.5 percent annual pay rate hike for doctors. In the last five years of the plan, a series of reforms would be launched to push Medicare physician reimbursement to a value-based model.

“This is a classic case of a system put in place and it didn’t work; but every year it was not addressed, it became more expensive,” said NH Rep. Tom Sherman, (D-Rye), a gastroenterologist at Exeter Hospital who has been championing healthcare reform in the state Legislature.

“The longer Congress didn’t deal with it, the less palatable it became for doctors and other providers. A 25-percent pay cut would put most physicians out of practice, out of business… No business can absorb that kind of pay cut.”

Rich Scheinblum, VP of fiscal services at Monadnock Community Hospital in Peterborough, NH, says it’s critically important to end the uncertainty linked to the cycle of annual SGR extensions and threats of reimbursement cuts.

“Assuming it goes through, at least it will provide some sense of stability over the next five years as our organization grapples with all the changes in healthcare delivery,” Scheinblum said. “Hopefully, both parties will come together on a permanent fix before the legislation expires.”

Transition to Value-Based System
In addition to providing a period of provider payment stability, the SGR repeal deal proposes a series of reforms intended to transform Medicare reimbursement to a value-based system.

Advocates for a value-based system say the fee-for-services model gives physicians an incentive to order unnecessary tests and procedures, which drives up costs. “Doctors were encouraged to fit in as many procedures as possible,” said a legislative aide to US Rep. Allyson Schwartz, (D-PA), who introduced a bill with Congressman Joe Heck, (R-NV), that helped form the framework of the SGR repeal deal.

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