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Washington Highlights

Finance Committee Holds Hearing on SGR Reform

July 12, 2013—The Senate Finance Committee held a July 10 hearing titled “Repealing the SGR and the Path Forward: A View From CMS.”  The hearing continues the committee’s efforts to repeal the sustainable growth rate (SGR) formula and move the Medicare physician payment system away from fee-for-service (FFS) toward a quality-based payment [see Washington Highlights, June 7].

In his opening statement, Finance Committee Chair Max Baucus (D-Mont.) expressed his concern with the “antiquated, inefficient, and flawed” sustainable growth rate formula, which requires a 25 percent cut in Medicare physician reimbursement on Jan. 1, 2014. He stated, “In each of the last 10 years, Congress has prevented these cuts to physicians by passing a patch, but we never addressed the root cause of the problem, the SGR itself.  It is time to repeal this broken formula, and we need to do it this year.”

Chairman Baucus stressed the need to move Medicare from a system that pays for volume to one that promotes and incentivizes quality and value saying, “We need to encourage physicians to coordinate patient care to save money and improve health outcomes.” 

Sen. Baucus also recognized and thanked the stakeholder community for their engagement with the committee on this effort saying, “The response was encouraging. We received 133 letters. Physicians told us they are working to improve their quality of care, to improve communications with patients and to work in teams. They’re trying.”

Citing the significantly lower $139 billion estimated cost of SGR repeal, Ranking Member Orrin Hatch (R-Utah) agreed that the time to act is now saying, “We have a new important consideration to encourage our action. According to [the Congressional Budget Office], the current cost to repeal the SGR has been substantially reduced. We must seize this opportunity and it is up to this committee to find the solution. We must act soon so we can finally put our physicians on a stable financial footing.”

In his testimony, Jonathan Blum, acting principal deputy administrator and director, Center for Medicare, Centers for Medicare and Medicaid Services, offered two issues the committee should consider, “One, how to set a realistic baseline for physician payments, the so-called SGR issue, and two, how to reform the payment system to continue its shift from paying for volume to paying for value.”  Blum agreed with Senators Baucus and Hatch stating, “CBO’s latest estimates for a fully funded fix are at the lowest level in recent memory. This year can be the year that we put the annual SGR issue to rest.”

Finally, Blum cited four principles that should be used in any reform:

  • Provide a period of payment stability for the update factor to be predictable for multi-year period;
  • Continue development of new payment models like accountable care organizations  and primary care medical homes;
  • Study differential payment updates based on physicians’ successful participation in new models; and
  • Make the underlying physician payment system more accurate, focused on primary care and patient care coordination, and more focused on the total quality and value of care.


Len Marquez
Director, Government Relations
Telephone: 202-862-6281

Courtney Summers
Senior Legislative Analyst
Telephone: 202-862-6042



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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806