The Medicare SGR Decision and Its Impact on Your Practice

October 26, 2012

It's time to come to a final resolution on the Medicare SGR so physicians can stop worrying and start planning for the future.

The pattern has been repeating itself since 2003. It's almost like a broken record that cannot advance. The end of another year approaches, and once again the topic of the Medicare Sustainable Growth Rate (SGR) formula and the pending decrease in payments to physicians is the center of discussion. Each year the legislators convene and decide to place a Band-Aid on the SGR and essentially kick the can down the road again for discussion the year following. The flawed SGR formula is not corrected - rather it is delayed and a small 0.5 percent or 1 percent payment increase is enacted and the issue is essentially tabled for another year.

How many of us in private practice are sick of this repetitive action?

The first time I read about the SGR and the pending decrease in physician payments was in my final year of residency in 2003. I had just finished reading a practice management journal and was actually in process of getting my future private practice set up. The front page of the journal explained how the Medicare reimbursement to physicians would be decreased because of the SGR metric. Not only was I nervous about setting up a new business, but now I was even more nervous to find out that the patients that I would be seeing would potentially come with a lower reimbursement for the services provided?

Exactly what is the SGR? The SGR is the metric used by the federal budget to measure the amount of money spent on healthcare services relative to the nation's gross domestic product (GDP). Essentially, as healthcare spending goes up, the SGR must be adjusted the following year to compensate for the additional expenditures. The straw that breaks the camel's back in this situation is that the SGR must be adjusted further downward based on a sluggish economy.

Decreasing Medicare reimbursements to physicians has many ramifications. Not only does the income from seeing Medicare patients go down, but the other third-party insurance carriers frequently base their payments as a percentage of Medicare. So basically, if Medicare goes down by "x" percent, most payers will decrease their payments by "x" percent as well.

Medical practices are already hurting from this terrible economy. Patients are not keeping their appointments because they cannot pay the copayments and deductibles that result from the professional services delivered. They are delaying screenings, testing, and other diagnostic services. However, they still call the office for medication refills and occupy staff time.

Decreasing payments to physicians will prevent them from purchasing new equipment for their offices, can delay adopting EHR services, and can even force practices to decrease their staffing in the office by either eliminating positions or laying off employees. A recent MGMA survey shows that a large percentage of practices polled state that they are going to decrease the number of appointments for new Medicare patients. If the decrease does go into effect, many practices will decrease their appointment availability for existing Medicare patients as well.

There is no question that we are facing difficult economic times. The looming decrease in physician payments can prevent medical practices from expanding and hiring new employees because we do not know what the future holds for us.

If I were to be asked for the solution to the SGR problem, I would simply ask our legislators to give us a guarantee of at least a small percentage increase each year and at the same time, please remove the fear we have of having our reimbursements decline and this will allow practices to properly plan for the future.