A House of Representatives subcommittee has approved legislation reforming physician payments through Medicare. The bill passed out of the Energy and Commerce subcommittee on health by voice vote on Tuesday, after a two-day markup.

The measure would repeal the sustainable growth rate, replacing the mandated annual physician reimbursement cuts with a pay-for-performance model. Under this system, physicians will receive a 0.5% annual update, with additional reimbursement available to high-performing providers starting in 2019. The bonus pay would be based on quality measures in existence or new ones that would be developed. Underperforming doctors would see reimbursements reduced.

The proposal also includes provisions to encourage alternative payment models and increase care coordination.

A variety of healthcare organizations have endorsed the bill, but providers are still waiting to see how this proposal would be funded. The SGR was passed in 1997, but Congress has repeatedly prevented the cuts from taking effect. To pay for these extensions, spending has been curbed elsewhere, reducing certain reimbursements for long-term care facilities.

Lawmakers from both parties expressed optimism about the bill’s chances after releasing a draft last week. The House Ways and Means Committee has also been working on an SGR alternative, and that committee may review the bill before it proceeds to the full House.