In a significant development, the House Ways and Means Committee and Senate Finance Committee each advanced its version of Sustainable Growth Rate reform legislation on Thursday, December 12.  Thus, early next year, lawmakers in both chambers are poised to consider “Doc-Fix” legislation that, if the differences can be reconciled, would replace the Sustainable Growth Rate methodology for physician reimbursement under Medicare.


Shortly following the government shutdown in October, we wrote that the chances for Congress finally to pass legislation permanently replacing the flawed Medicare physician cost control formula known as the “Sustainable Growth Rate” (SGR) were greater than at any other time in recent history. We further noted that following the government shutdown in 1996 Congress was able to come together to pass several significant pieces of legislation, including the FDA Export Reform and Enhancement Act of 1996 and the Health Insurance Portability and Accountability Act (HIPAA), among others.  With regard to SGR, this may happen again.  For full background on the SGR, please refer to our Alert published on October 24.

Thursday’s committee votes set the stage for consideration and votes on both the House and Senate floors in Q1 of 2014 – the closest both chambers have come to passing permanent SGR replacement legislation.  Another key victory for physician groups came in the form of a budget deal negotiated by Republican Paul Ryan, Chairman of the House Budget Committee and Senator Patty Murray, Chairwoman of the Senate Budget Committee. 

The agreement, which raises the top-line spending level from $967 billion to $1.012 trillion in 2014 and from $995 billion to $1.014 trillion in 2015, contained a provision that implements a 3 month delay to the SGR cut scheduled to take effect on January 1, 2014.  The budget bill containing the SGR “patch” was passed overwhelmingly in the House and is expected to pass the Senate this week, giving legislators enough time in the coming months to work out final details and come to a consensus on provisions to pay what is at minimum a $116.5 billion price tag for full repeal of the current physician payment formula.

At the moment, it is not clear how the Senate and House will reconcile their respective, and divergent, versions of SGR repeal legislation, setting the stage for a showdown between the two bodies, as distinct from what has been the more common type of divisions (especially in recent years) between Republicans and Democrats in each chamber.  Significant differences have emerged between the House and the Senate even though both committees started with the same jointly written legislation.  We note some of the main differences below:

House Ways & Means Committee

  • Sets 0.5% pay increase for 3 years.
  • Does not include Medicare “extenders.” – “Medicare extenders” encompass reauthorizations, generally on a piecemeal basis, of various components of the Medicare program.
  • Includes a Value-Based Performance Approach.
  • Includes Medical Malpractice Protection.
  • No Amendments were permitted. 
Senate Finance Committee
  • Maintains flat payment, with no set increase.
  • Includes a number of Medicare “extenders.” – For example: Work Geographic Adjustment, Payment for Outpatient Therapy, Quality Measure Endorsement and Selection.
  • No Medical Malpractice language.
  • Includes Amendments and a Number of Modifications. – For example: Amendment to improve quality, and expand access to community mental health services; Amendment permitting the use of telehealth technology in Alternative Payment Models (APMs), regardless of location of health care professional and Medicare beneficiary; Amendment providing additional technical assistance to Small Rural Practices in the Value Based Performance (VBP) Program.

The House Ways & Means Committee included the 0.5% payment increase in response to objections from a number of physician clinical societies, led by the American College of Surgeons, that had voiced opposition to the SGR replacement bill without such an increase.  The Senate Finance version does not provide for any increase in physician payment rates and therefore is likely to continue to face opposition from some specialty physician groups. 

Ultimately, there are at least three issues lawmakers need to solve to pass any permanent SGR replacement legislation:

  1. How to pay for the proposal?  To fund a full repeal of the SGR, lawmakers will have to propose and successfully pass at least $116.5 billion in pay-fors, possibly cutting reimbursement in other sectors of the health care industry – this will be quite contentious and is a significant hurdle to a final end game.  They may also have to seek to quantify savings from implementing more quality- and outcome-based performance initiatives in lieu of the SGR methodology.
  2. How to reconcile the Senate and House versions? Members of Congress will ultimately have to work together to reconcile differences in their respective legislative proposals and approve a consensus bill.
  3. How to ensure stakeholder support?  Stakeholders such as physician groups seeking important provisions like Medicare extenders or other relevant provisions, including offsets, will need to be satisfied sufficiently, so lawmakers are able to vote for legislation without fear of backlash.


The path to a permanent SGR repeal will be challenging and will require a bi-partisan, bi-cameral and multi-sector stakeholder engagement effort.  Although the task is daunting, the chances for success increased substantially with last Thursday’s Committee actions.  We can only believe that, at the very least, the complex legislative effort to repeal and replace SGR, even if against insurmountable challenges, is worth undertaking.