Medicare Payment Reform

STS Request to Congress

  • Please ask members of the Joint Select Committee on Deficit Reduction to include in their proposal to Congress a permanent repeal of the Sustainable Growth Rate formula for Medicare physician payments. A new payment model should reward providers for patient outcomes based on risk-adjusted quality outcomes data and the efficient use of limited resources.

The new Medicare payment model should:

  • Allow physicians to share the savings generated by their quality improvement efforts;
  • Mandate and incentivize the development and utilization of clinical data registries;
  • Require the Centers for Medicare and Medicaid Services (CMS) and other payers to make administrative (cost) data available to registries for use in their analyses;
  • Address barriers imposed by federal and state privacy regulations; and
    Utilize registries and other resources to generate comparative effectiveness research and post-market surveillance of drugs and medical devices.


STS believes:

  • Any modernization of the physician payment system should ensure that individual medical specialties can—and have incentive to—control the growth rate of their services and payments by identifying the most effective and appropriate treatment for the patient.
  • As the STS National Database and registries of other specialties have demonstrated, sharing outcomes data allows physicians to change their practice patterns to achieve more efficient care delivery and increased patient value.


The Sustainable Growth Rate (SGR) formula was created to control Medicare spending by setting an annual target for allowable spending growth. Whenever the target is exceeded, the additional spending must be recouped (“paid back”) in future years. This results in payment cuts for all physician services. It is well recognized that one of the fundamental problems with the current Medicare physician payment system is that it only rewards the provision of more services and more complicated procedures. This structural flaw has contributed significantly to previously scheduled payment cuts, most of which have been averted by Congress.

This year, if Congress fails to act, Medicare physician payments are scheduled to be slashed by 29.5 percent. Today, it is estimated that averting currently scheduled cuts would cost nearly $300 billion over the next ten years. If Congress continues to follow the past practice of pushing cuts into the future, the cost will near $600 billion in only a few short years. STS stands ready to work with Congress to find a permanent solution to this problem that will prevent the continued threat of future payment cuts and continued off-budget spending.

Take Action Now: Write your elected officials and ask for a permenant repeal of the SGR