Yet Again, the SGR Comes Knocking and, This Time, with a 27.4% Cut to Physician Services

The Balanced Budget Act of 1997 enacted the much-despised Medicare sustainable growth rate (“SGR”), which was established to control Medicare spending on physician services. To achieve the SGR target, each year in its report to the Medicare Payment Advisory Commission, the Centers for Medicare and Medicaid Services (“CMS”) includes a conversion factor that will change the payment for physician services for the next year to match the target SGR. According to CMS:

The SGR targets are not direct limits on expenditures. Payments for services are not withheld if the SGR target is exceeded by actual expenditures. Rather, the fee schedule update, as specified in section 1848(d)(4) of the [Social Security] Act, is adjusted to reflect the comparison of actual expenditures to target expenditures. If expenditures exceed the target, the update is reduced. If expenditures are less than the target, the update is increased. Under the statute, the update for a year is determined by comparing cumulative actual expenditures to cumulative target expenditures (referred to as “allowed expenditures” in the statute) from April 1, 1996 through the end of the year preceding the year at issue. For instance, the 2010 update reflects a comparison of cumulative actual to cumulative target expenditures from April 1, 1996 through December 31, 2009. Target expenditures for each year are equal to target expenditures from the previous year increased by the SGR.

As can be expected, when the SGR and, by extension, the conversion factor fall into the negative percentages (i.e., where physicians will experience a decrease in reimbursement for their services), controversy ensues. Almost every year in this millennium, physicians have been faced with the threat of decreased reimbursement for their services. Each of these years, Congress has implemented a “doc fix” (oftentimes last minute) wherein it temporarily prevents the implementation of the SGR. However, this temporary delay only temporarily silences opponents of the SGR who are calling for a permanent fix. In December 2010, President Obama signed into law the Medicare and Medicaid Extenders Act of 2010, which delayed the SGR until January 1, 2012. Now, nearly one year later, we are faced, yet again, with the SGR as 2012 is quickly drawing nearer.

In the 2012 Final Physician Fee Schedule, CMS announced that physician payments in 2012 will be cut by 27.4%, which is less than the proposed-29.5%. Conversely, outpatient services will experience a 1.9% increase in reimbursement and ambulatory surgical centers will experience a 1.6% increase. According to the American Medical Association, “without congressional intervention, Medicare physician payment rates will be cut about 40 percent by 2016.”

For more information on the Physician Fee Schedule, please contact Adrienne Dresevic, Esq., Carey F. Kalmowitz, Esq. or Abby Pendleton, Esq. at (248) 996-8510, (212) 734-0128, or (770) 804-6475 or visit the HLP website.