Leaders of the Senate Finance Committee and the House Ways and Means Committee have released a discussion draft of a bill that would replace the sustainable growth rate (SGR) formula, which was intended to control the growth of payments to physicians under Medicare. It is the second major proposal this year that would repeal the SGR and the second such effort that omits a means of paying for it. Passage of an SGR repeal would remove the need for the frequent legislative “doc fixes” that have been a short-term patch preventing SGR-mandated cuts to Medicare physician payments. Unlike preceding bills that would end the need for annual doc fix legislation, one of the distinguishing features of this proposal is its focus on using adoption of electronic health records (EHRs) systems as an incentive. Under the proposal, up to one-quarter of the score used to adjust payments to Medicare providers would be based on how well a provider meets certain standards for meaningful use of EHRs. Meaningful use requirements range from maintaining basic information on patient demography and vital signs to ensuring electronic access to external and internal drug formularies. Such a requirement could be a problem for pathologists, who have limited direct interaction with patients and generally use laboratory information systems, not EHRs. The College of American Pathologists previously urged the Centers for Medicare and Medicaid Services (CMS) to grant pathologists a full five-year exception from meeting current meaningful use requirements of EHRs. CMS has granted pathologists a hardship exception from penalties in 2015, but the exception is only for one year at a time, up to five years. Through September, CMS spent nearly $3.95 billion on incentive payments to Medicare providers to encourage adoption of EHRs. The House-Senate bill is clearly trying to leverage this investment. The latest doc fix proposal has the potential to boost growth and solidify market share in the EHR market for vendors with proven track records of achieving meaningful use for their clients. Nearly 53 percent of the physicians who have received meaningful use incentive payments use software from five companies: Epic Systems Corp., Allscripts Healthcare Solutions Inc., eClinicalWorks LLC, NextGen Healthcare Information Systems Inc., and General Electric Co. Previous Legislation Like H.R. 2810, a proposal approved earlier this year by the House Energy and Commerce Committee, the House-Senate proposal includes no plans for how to pay for the repeal of the SGR. In September, the Congressional Budget Office (CBO) scored the costs of H.R. 2810 at $175.5 billion from 2014 through 2023. CBO’s score of H.R. 2810 offers some hints at how a score of the new proposal could look. In that estimate, CBO indicated that the 10-year cost of the automatic annual updates to physician payments would be $63.5 billion, more than 36 percent of the total estimate. The new House-Senate proposal does not provide for any annual updates. Without an automatic update provision, H.R. 2810 would have scored at $112 billion over 10 years. This suggests that this newest proposal could be less costly than the House-passed bill. The Medicare Payment Advisory Commission (MedPAC) testified in May before the Senate Finance Committee on replacing the SGR. In its testimony, MedPAC resubmitted its 2011 recommendations on how to pay for a replacement of the SGR. Under MedPAC’s framework, drugmakers and physicians would shoulder the majority of the burden of paying for the repeal and replacement. What’s Ahead The committees requested public comments on their proposal by Nov. 12. The bipartisan, bicameral nature of this proposal, in addition to the existence of a previous bipartisan bill in the House, gives it a better chance at passage than most other proposals. Further, while a “grand bargain” budget deal seems unlikely, based on the comments of House and Senate budget conferees, it is possible that a smaller agreement on the budget could include a deal to repeal and replace the SGR. However, until a concrete proposal is unveiled to pay for this legislation—which could cost as much as $200 billion—the bill will not proceed and lawmakers will face another doc fix in December. Takeaway: A new proposal to replace the sustainable growth rate formula used to determine Medicare payment for physicians would include electronic health record adoption as an incentive, which could be a problem for pathologists who generally don’t use EHRs.