Fitch: SGR replacement reinforces move toward value-based care

Congress repealing the flawed sustainable growth rate formula has several implications for acute-care hospitals and other healthcare providers, according to Fitch Ratings.

The U.S. Senate passed a bipartisan "doc fix" bill on Tuesday, repealing the sustainable growth rate formula and ending the yearly ritual of Congress passing short-term patches to stall Medicare reimbursement cuts to physicians. The U.S. House passed the legislation in March. The bill is now headed to President Barack Obama's desk, and he has already indicated he will sign the legislation.

The legislation calls for a new payment plan that eventually bases physician payments on their participation in value or incentive-based payment models. The SGR replacement reinforces the need for healthcare organization to have a strategy in place to address the shift away from the fee-for-service payment model, according to Fitch. However, since the new plan doesn't directly tie physician payments to advanced payment models until 2026, Fitch doesn't expect the shift to be accelerated.

Due to the focus on advanced payment models under the legislation, Fitch expects joint ownership models between hospitals and physicians to increasingly become more popular. "This model is not new for [the] industry but offers particular benefits in a world of evolving payment models," according to Fitch.

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