SGR Formula Effect Prepared by: Lisa Patrick, MD Mount Sinai School of Medicine.
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Transcript of SGR Formula Effect Prepared by: Lisa Patrick, MD Mount Sinai School of Medicine.
![Page 1: SGR Formula Effect Prepared by: Lisa Patrick, MD Mount Sinai School of Medicine.](https://reader030.fdocuments.us/reader030/viewer/2022032705/56649dd45503460f94acb63e/html5/thumbnails/1.jpg)
SGR Formula Effect
Prepared by:Lisa Patrick, MD
Mount Sinai School of Medicine
![Page 2: SGR Formula Effect Prepared by: Lisa Patrick, MD Mount Sinai School of Medicine.](https://reader030.fdocuments.us/reader030/viewer/2022032705/56649dd45503460f94acb63e/html5/thumbnails/2.jpg)
What is the SGR?
• The Sustainable Growth Rate (SGR) was implemented in 2003 to control Medicare spending on physician services
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Objectives
• Define the equation
• Examine the problem
• Discuss the impact
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How Medicare Pays Physicians
• Each– Patient Encounter– Procedure
• Is assigned a relative value unit (RVU)
![Page 5: SGR Formula Effect Prepared by: Lisa Patrick, MD Mount Sinai School of Medicine.](https://reader030.fdocuments.us/reader030/viewer/2022032705/56649dd45503460f94acb63e/html5/thumbnails/5.jpg)
Relative value units (RVUs)
• Relative value assigned to services
• Orthopedic procedures > chest tube > incision & drainage > laceration > lumbar puncture
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Who assigns a service its RVU?
• Resource-Based Relative Value Scale Updates Committee (RUC) – Includes two emergency physicians – Designates an RVU to each billing code
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How are RVU’s assigned?
• Three Variables – Work = value of physician’s work– PE = value of non-physician clinical labor
expenses – MP = amount of medical liability for the
service
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More Factors
• Geographic Adjustment (GPCI)
• Conversion Factor (CF) – In 2008, CF = $38.0869
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The Whole Equation
• [(Work RVU x Budget neutrality adjustor (0.8806)* x Work GPCI) + (PE RVU x PE GPCI) + (MP RVU x MP GPCI)] x CF
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Who assigns the conversion factor?
• Calculated annually by the Center for Medicare and Medicaid Services (CMS)
• SGR as target
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SGR: Four Variables
1. Fees for physicians’ services,
2. Number of Medicare fee-for-service beneficiaries,
3. Gross domestic product (GDP) per capita, and
4. Expenditures due to changes in law or regulations
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The Problem
• Physician reimbursement by Medicare is tied to the GDP
• But GDP is NOT tied to the cost of running a practice
![Page 13: SGR Formula Effect Prepared by: Lisa Patrick, MD Mount Sinai School of Medicine.](https://reader030.fdocuments.us/reader030/viewer/2022032705/56649dd45503460f94acb63e/html5/thumbnails/13.jpg)
The Problem
• Physician costs keep rising
• While the Gross Domestic Product falls with recessions and does not track costs
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The Problem
• Congress must act annually to override payment cuts dictated by the SGR
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The Problem
• Annual threatened cuts harm practices
– Delays upgrades / capital purchases
– Reduces accepting providers
– Requires large lobbying efforts
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Where do we go from here?
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The Problem Revisited
• The SGR takes into account GDP and NOT actual physician costs
• As the GDP decreases, conversion factor decreases, which reduces physician reimbursement
• Congress must act annually to override
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Future impact
• Payment rates to fall 41% over the next nine years*
• The cost of a practice is expected to increase by nearly 20 percent*
• *2007 Medicare Trustees Report
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Future impact
• 25% of Medicare patients looking for a new physician had difficulty finding one*
• *2005 Medicare Payment Advisory Commission (MedPAC) survey
• 67% of physicians say they will decrease or stop seeing new Medicare patients if the scheduled eight years of cuts under the SGR take place**
• **2006 AMA Member Connect Survey
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Conclusion
• Necessity for long-term solution
• Overcome perception of problem: “too difficult to solve”