The SGR fix helps the value-based care evolution

The incentives in the permanent “doc-fix” legislation, which now has overwhelming bipartisan support from both houses of Congress and the president, will not, by themselves, drive physicians toward value-based compensation schemes.

But what incentives won't do, the rapidly changing Medicare and private insurance marketplace—coupled with the ongoing changes in physician-employment patterns and the changing demographics of the physician workforce—will. By early next decade, independent physician practices that stick to fee-for-service medicine will find it increasingly difficult to earn a living and attract talent.

The legislation repealing the outdated formula for setting Medicare physician pay is not generous. It offers a pay increase of 0.5% a year over the next four years, followed by no increase for the next six years. That guarantees physician income from Medicare will lose ground to inflation over the next decade.

To make up for some of those lost earnings, the legislation offers a 5% bonus from 2020 to 2024 if physician practices by 2019 derive at least 25% of their Medicare revenue from accountable care organizations,bundled payments or other value-based reimbursement models. In the out years, the bonus goes to 0.75% of revenue per year.