Medical Billing Blog

MBR Explains: The Sustainable Growth Rate

Posted by Scott Shatzman on Fri, Nov, 01, 2013 @ 10:11 AM

SGR resized 600The Medicare Sustainable Growth Rate (SGR) is the current method used by the Centers for Medicare and Medicaid Services (CMS) to control spending by Medicare on physician services, through ensuring that the yearly increase in the expense per Medicare beneficiary does not exceed the growth in GDP.  It was introduced in 1997 as part of the Balanced Budget Act of 1997. And, for the first couple years, it worked relatively well. That is because Medicare expenditures in those years did not exceed the target amount, allowing doctors to receive modest pay increases. But in 2002, the situation changed. Medicare expenditures exceeded the target expenditures set in the previous year, so Congress was required by statute to balance payments to match the target SGR.  Doctors across the nation reacted with contempt as Congress attempted to enact a 4.8% pay cut. Congress eventually relented and passed stopgap legislation to prevent the scheduled cut, thereby temporarily suspending the reduction for a matter of weeks. Weeks then turned into months and months into years, and now physicians face a 26.5% cut under the SGR.  Virtually no one believes Congress will allow the SGR to lower pay by such an amount, but doctors have sent a strong message to lawmakers that the annual ritual of enacting a last minute, transitory solution that only defers the increase to a later date needs to stop.

 

As Democrats and Republicans continue to argue over the Affordable Care Act, members of both parties are currently working on a solution to fix the formula that pays doctors who treat Medicare patients. The sustainable growth rate formula will hopefully we replaced with a formula that would pay doctors based on how healthy they keep their patients and not on how many tests, procedures and visits they perform. Recommendations from the House Energy and Commerce Committee, the House Ways and Means Committee and the Senate Finance Committee have been released. All plans would freeze payments for 10 years, but would allow doctors and other health care providers to earn bonuses on performance. However, none of the committees have proposed a way to pay for the estimated $140 billion cost of a permanent fix.

 

The current stopgap measure expires on December 31, 2013.

**Doctors will face a moderate Medicare pay cut this year. A two percent reduction to physicians and other Medicare providers (including hospitals) will go into effect on April 1st, 2014. These cuts are part of a larger series of automatic cuts in federal spending, called sequestration, that went into effect on March 1st, 2013. **