Replacing the Sustainable Growth Rate

The House Energy and Commerce Committee, House Committee on Ways and Means, and the Senate Finance Committee reached a bipartisan agreement (the SGR Repeal and Medicare Provider Payment Modernization Act, H.R. 4015) to repeal and replace the Sustainable Growth Rate (SGR) formula. Highlights of the bill are published in a one-page summary.

Key outcomes of the agreement include1 :

  1. Repeals the SGR and provides stability and 5 years of payment updates
    While providers hope for a permanent solution, this agreement provides for five years of consecutive 0.5% pay increases.

  2. Improves the existing fee-for-service system by rewarding value over volume and ensuring payment accuracy.
    Consolidates three existing quality programs and includes physicians and other stakeholders in the development of quality measures.

  3. Incentivizes movement to alternative payment models (APMs).
    Provides a 5% bonus to providers who receive a significant portion of their revenue from an APM or patient centered medical home.
    Establishes a Technical Advisory Committee to review and recommend physician-developed APMs based on criteria developed through an open comment process.

  4. Expands the use of Medicare data for transparency and quality improvement.
    Includes posting data on the Physician Compare website and 
    Allows qualified entities to provide analysis and underlying data to providers for purposes of quality improvement

The legislation now advances to the House and Senate for consideration as the current compromise payment patches expire on March 31 triggering a 24% reduction to physician payments in accordance with the current SGR formula. The persisting challenge regarding the repeal of the SGR is how to fund it. The legislation advancing to both chambers does not offer measures to offset funding necessary for the repeal.


1 Repealing and Replacing the Sustainable Growth Rate. Energy & Commerce Committee. Feb. 6, 2014.

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