Deadline to overturn flawed reimbursement system is March 31
Memphis-area physicians, like others across the country, are anxiously waiting to see what happens with the proposed Sustainable Growth Rate Repeal and Medicare Provider Payment Modernization Act. For some doctors, it may dictate whether they have a future in private practice. For all doctors, it will affect their practice of medicine, in one way or another.
In 1997, when the Sustainable Growth Rate (SGR) was originally formulated and approved, it was intended to give the federal government an equation by which it could control what was paid to doctors who treated Medicare patients.
Jerome Thompson, MD, a pediatric ENT surgeon on the faculty at the University of Tennessee Health Science Center, also holds an MBA degree in economics from UCLA. His background in both medicine and economics gives him insights into the pending ramifications of the SGR repeal being enacted – or not.
“The formula was supposed to include an annual increase in Medicare expenses,” Thompson said. “But there was a caveat that the amount of increase could not exceed the growth of the Growth Domestic Product (GDP), the market value of all officially recognized goods or services produced within a year within a given country. And therein lies the problem.”
Given the economic downturn that the country has experienced, that doesn’t leave much room for growth for the reimbursement payments.
Mike Cates, executive vice president of the Memphis Medical Society, explains, “In March of every year since 1997, the SGR has been updated. The way a doctor is paid is by calculating relative value units that are converted into dollars. The intention of the implementation of the SGR was to make those costs more predictable so that the government could budget for those costs year to year. The end result has left doctors scrambling to manage their own budgets as the impact has threatened to decrease the amount of reimbursement doctors receive from treating Medicare patients by as much as 24 percent in 2014.”
“The SGR formula is inherently flawed,” Thompson said. “It allows the federal government to cut into physicians’ practices from two different directions. First it allows cuts by specialty for doctors in private practices. Then it allows an overall cut, of 20 percent or more, to all doctors in private practice by reimbursing the hospitals more than they reimburse individual doctors. For example, private practice cardiologists received a 47 percent cut in their Medicare reimbursements for cardiac imaging, while hospitals received only a 2 percent reduction.”
And in the bigger picture, it is not just the amount of Medicare reimbursements that have been taking a dive. Typically, private insurance follows the same path set by Medicare, about a year later. So picturing an annual 20 percent cut from Medicare, with private insurers to follow suit, does not bode well for physicians. Not for their incomes. Not for their patients.
With approximately 20 percent of the U.S. population’s healthcare provided for by Medicare, if the SGR repeal is not successful, the result is likely to be a downgrading of healthcare to a lower-cost provider. Medicare patients can still receive high-quality care, but it will likely be administered through charity at a facility that is either county-subsidized or church-subsidized.
The number of people on Medicare has increased under the new Obamacare health program. Without the SGR repeal, doctors in private practice will continue losing money on every Medicare patient they treat. Subsequently, as has happened with some forms of insurance, those physicians in private practice may have to make the choice to stop seeing Medicare patients or, at the very least, begin reducing their number of Medicare patients. Each physician would be tasked with enacting their own limits. If that happens, those Medicare patients are likely to add to the already overcrowded patient load of emergency rooms at area hospitals. Ultimately, this issue will become another poverty issue that will impact communities.
Indeed, the SGR formula is flawed. Instead of a small, steady growth over the years, it has shown a huge decrease in the reimbursement payments for doctors. In some past years, the federal government has enacted the equivalent of a temporary Band-Aid.
“In 2013, physicians were facing a 21 percent cut in their Medicare reimbursement payments,” Thompson said. “The American Medical Association (AMA) and others in the legislature successfully lobbied and actually got a 2 percent increase.”
Although this action stemmed the bleeding last year, without the proposed SGR repeal, there will still be hemorrhaging in the medical community. So while joint bipartisan committees have come up with a new way to focus on Medicare reimbursements to physicians by proposing the SGR repeal, it still must receive approval from the Senate and the House of Representatives. Then it has to be signed into law by President Obama.
“And the clock is definitely ticking,” Cates said. “The deadline for this deal is March 31, 2014. If the repeal is not successful, the new reimbursement rates will decrease by 24 percent and go into effect on April 1, 2014. If successful, the system will be replaced with stable payment updates of 0.5 percent through 2018. The overall goal is to shift Medicare to a system based on value vs. volume of care.”
