The 2015 Medicare Physician Fee Schedule and SGR Repeal: A Historical Perspective

Understanding the 2015 Medicare Physician Fee Schedule Challenges

On April 1, 2015, the Medicare Physician Fee Schedule (MPFS) faced a significant challenge due to the Sustainable Growth Rate (SGR) methodology. The SGR, a formula previously mandated by law to control Medicare spending on physician services, required a substantial 21% decrease in all MPFS payments beginning on this date.

In response, the Centers for Medicare & Medicaid Services (CMS) took proactive steps to mitigate the immediate impact on Medicare providers and beneficiaries. This involved holding claims paid under the MPFS with dates of service on and after April 1, 2015. Furthermore, all therapy claims that would no longer qualify for the therapy cap exceptions (those using the ‘KX’ modifier) were also held, as the therapy cap exceptions process had expired on the same date.

Without additional legislative action to prevent this negative payment update, CMS was legally obligated to implement the mandated payment reduction.

CMS’s "Rolling Hold" Strategy

To ensure a continued cash flow to providers, albeit at the reduced rate, CMS initiated a "rolling hold" strategy starting April 15, 2015. This involved releasing one day’s worth of held MPFS claims, processing and paying them at the reduced rate on a first-in, first-out basis, while simultaneously continuing to hold newly received claims. This approach maintained a consistent 10-day buffer of held claims, minimizing the number of claims that would require reprocessing should Congress pass legislation to avert the negative update.

It is important to note that claims for services furnished on or before March 31, 2015, were unaffected by this payment cut and were processed and paid under normal time frames. Medicare Administrative Contractors (MACs) were prepared to automatically reprocess any claims paid at the reduced rate if Congress took action to reverse the negative update, requiring no action from providers who had already submitted claims for the impacted service dates.

What Happened Next: The Repeal of SGR and MACRA

The uncertainty surrounding the Sustainable Growth Rate (SGR) formula and its repeated threats of drastic payment cuts led to a landmark legislative change. In April 2015, the Medicare Access and CHIP Reauthorization Act (MACRA) was signed into law, permanently repealing the SGR formula. This significant act brought an end to over a decade of temporary legislative fixes designed to prevent the SGR’s mandated payment reductions.

MACRA established a new framework for physician payment in Medicare, moving away from the volume-based fee-for-service model and toward value-based care. This framework, known as the Quality Payment Program (QPP), primarily offers two pathways for eligible clinicians:

• Merit-based Incentive Payment System (MIPS): This pathway consolidates components of several existing programs into a single program where clinicians can earn payment adjustments based on their performance in four categories: quality, improvement activities, promoting interoperability, and cost.
• Advanced Alternative Payment Models (APMs): These are specific payment models that reward providers for delivering high-quality and cost-efficient care, offering greater financial incentives for participation and risk assumption.

The repeal of the SGR and the implementation of MACRA marked a fundamental shift in how Medicare pays physicians, aiming to improve quality and efficiency in the healthcare system.

The Evolution of Medicare’s Therapy Cap

As mentioned in the historical context of 2015, the therapy cap exceptions process had expired on April 1, 2015, impacting how therapy claims with the ‘KX’ modifier were handled. However, Medicare’s policy on therapy caps has since evolved significantly.

The Bipartisan Budget Act of 2018 permanently repealed the long-standing Medicare therapy caps for outpatient rehabilitation services, which had previously limited annual spending for physical therapy, occupational therapy, and speech-language pathology services. While the hard caps are no longer in effect, certain policies and manual medical review thresholds remain to prevent inappropriate spending.

For current information regarding therapy services and related payment policies, providers should consult **official CMS guidance on therapy services**.

Historical Example: Common Working File (CWF) History Purges (2015)

In April 2015, the Centers for Medicare & Medicaid Services (CMS) issued an informational alert regarding planned history purges on the Common Working File (CWF) Hosts. This serves as a historical example of routine system maintenance conducted by CMS to manage vast amounts of claims data.

On May 2, 2015, CWF Northeast, Southwest, Southeast, Great Lakes, and Mid-Atlantic Hosts conducted a history archive. Similarly, on May 9, 2015, the CWF South, Pacific, Great Western, and Keystone Hosts performed the same activity. These operations resulted in "CWF Dark Days," meaning no access to the Health Insurance Master Record (HIMR) query was available during specific times on those Saturdays.

This historical purge activity maintained claim history as follows:

• Oldest Inpatient Thru Date To Keep On File: 01/01/1966
• Oldest Outpatient Thru Date To Keep On File: 02/01/2013 (27 Months)
• Oldest Part B Thru Date To Keep On File: 05/01/2013 (24 Months)
• Oldest Hospice Thru Date To Keep On File: 01/01/1966
• Oldest Home Health Thru Date To Keep On File: 01/01/1998
• Oldest DMERC Thru Date To Keep On File: 05/01/2013 (24 Months)

For current CWF operational status updates or system maintenance information, providers should refer to **official CMS channels and provider notices**.