On February 6, 2014, lawmakers reached an agreement to overhaul the Medicare physician payment system. The current sustainable growth rate (SGR) formula requires an annual cut in physician payments, which Congress typically cancels (the “doc fix”). This year, the doc fix is set to expire March 31, and the announced legislation would restructure the underlying physician payment policy. Through a bipartisan collaboration between three House and Senate committees, the legislation provides for a 0.5% increase in physician payment rates annually for the next five years while transitioning the payment system to one based on quality rather than quantity. Notable components of the legislation include a total repeal of the SGR, consolidation of certain Medicare quality payment programs into one program that rewards providers who meet performance thresholds, and a 5% bonus to physicians who voluntarily participate in alternative payment models. However, the announcement lacked any decision on which funding offsets Congress would use to finance the cost of the legislation. As previously reported, Congress is currently considering 65 offsets to incorporate into the legislation. To view a summary of the legislation, please click here.