financial managemt

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Kristin

Enacted in 1997 and later repealed in 2015, the Sustainable Growth Rate (SGR) aimed at controlling the growth of Medicare Part B spending for physician services (Hirsch et al., 2016). The premise behind the SGR formula was to drive physician payment rates through Medicare based on economic growth (Gross Domestic Product or GDP). The formula for the SGR target was based on four factors: fees for physicians’ services, the number of Medicare beneficiaries, the gross domestic product, and service expenditures based on changing laws or regulations (Hirsh et al., 2016). These four factors play an intricate part in determining and projecting the physicians’ fee schedule. Using the estimates of the components for this formula helps predict the growth rate and whether or not spending will exceed this rate. The SGR formula is only a prediction. If spending is higher than that predetermined amount, fees will decrease the following year to try and compensate for the difference.  

One of the many flaws with this system is that it is unstable. If there is economic growth and physician spending stays below the target, physicians will see a pay increase. However, if the economy takes a turn for the worse, healthcare organizations will see the repercussions in terms of reimbursement rates. This was the case in 2002, when the government imposed a pay cut of 4.8 percent (Reschovsky et al., 2015). As expected, pay cuts generated angst amongst physicians and ultimately created a threat to patient care.  

As emphasized by Stuart Guterman (2015), the SGR was put in place to counter the spending growth driven by the volume-based fee-for-service reimbursement model, which incentivized volume and intensity. The SGR does not account for or prioritize the quality of care or outcome measures. In 2015, SGR was repealed, and care focus shifted from volume-based to value-based with the creation and implementation of the Medicare Access and CHIP Reauthorization Act (MACRA) (Hirsch et al., 2016). 

References 

Guterman, S. (2015, April 15). With SGR repeal, now we can proceed with Medicare payment reform. Commonwealth Fund. Retrieved from  https://www.commonwealthfund.org/blog/2015/sgr-repeal-now-we-can-proceed-medicare-payment-reform 

Hirsch, J. A., Harvey, H. B., Barr, R. M., Donovan, W. D., Duszak, R., Jr, Nicola, G. N., Schaefer, P. W., & Manchikanti, L. (2016). Sustainable Growth Rate repealed, MACRA revealed: Historical context and analysis of recent changes in Medicare physician payment methodologies. AJNR. American Journal of Neuroradiology, 37(2), 210–214.  https://doi-org.ezproxy.umgc.edu/10.3174/ajnr.A4522 

Reschovsky, J. D., Converse, L., & Rich, E. C. (2015). WEB FIRST. Solving The Sustainable Growth Rate Formula conundrum continues steps toward cost savings and care Improvements. Health Affairs, 34(4), 689–696.  https://doi-org.ezproxy.umgc.edu/10.1377/hlthaff.2014.1429 

Terrence

The Medicare Sustainable Growth Rate (SGR) is a method used by the Centers for Medicare and Medicaid Services (CMS) in the United States to control spending by Medicare on physician services.

Medicare’s physician fee schedule was designed to promote payment equity across services and physician specialties to determine payments for physician services using the resource-based relative value scale (RBRVS). The RBRVS is the physician payment system used by the Centers for Medicare & Medicaid Services (CMS) and most other payers. These fees are the products and services that are conversion factors that translate the relative value into dollars. In other words, the relative values are based on estimates of the resources used to deliver each service to a typical patient compared with the average resources required for all other physician services. And within these services there are three types of resources that account for physician payment: the physician’s time, effort, and expertise, called the work component; practice expenses, that is, office space, nurse’s time, equipment, and other expenses associated with the office; and malpractice premiums. (Assay guidance Manual - NCBI Bookshelf).

In 2020, 62.6 million people were enrolled in the Medicare program, which equates to 18.4 percent of all people in the United States. Around 54 million of them were beneficiaries for reasons of age, while the rest were beneficiaries due to various disabilities. As of 2021, it has been reported that Medicare has served over 63 million beneficiaries, that provided critical access to health care services and financial security for senior citizens, people with disabilities, and people with end-stage renal disease (ESRD). (Jacobs).

The system of administrative pricing for Medicare physician payment, in effect for nearly 25 years, has proven complex, and impractical.

 

Reference:

Assay guidance Manual - NCBI Bookshelf. (n.d.). Retrieved August 20, 2022, from  https://www.ncbi.nlm.nih.gov/books/NBK53196/        

Jacobs, C. (n.d.).  Medicare's Sustainable Growth Rate: Principles for reform. The Heritage Foundation. Retrieved August 20, 2022, from  https://www.heritage.org/health-care-reform/report/medicares-sustainable-growth-rate-principles-reform

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