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What Is the Sustainable Growth Rate (SGR) and How Does It Impact Physicians?
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A continuing financial threat to doctors who treat Medicare patients comes from the sustainable growth rate (SGR) formula, which was created by the Balanced Budget Act of 1997 as an attempt to slow the growth in Medicare spending.

Doctors are reimbursed for more than 7,000 separate activities and treatments based on amounts set forth in the Medicare fee schedule. The SGR takes into account the growth in the nation’s output of goods and services (gross domestic product or GDP), the increase in the number of patients treated, and the intensity of treatment (numbers of procedures, tests and screenings per patient).

The SGR aims to adjust reimbursements through a very complex formula to prevent spending from growing faster than the general economy. The hope is that spending can be slowed so that Medicare does not consume an ever-growing share of the federal budget.

The calculations from the SGR invariably lead to a finding that reimbursements to doctors should be reduced by cutting fee payments. Doctors then protest, and Congress invariably postpones the scheduled cut in reimbursements. The fear is that cuts in physician reimbursement will result in doctors dropping some of their Medicare patients and refusing to take any new ones. The American Medical Association (AMA), representing physicians, wants this problem permanently fixed.

There have been several short-term patches designed to stave off pay cuts since SGR was introduced. Congress passed the most recent patch on Jan. 1, 2013, as part of the American Taxpayer Relief Act of 2012. That patch freezes fees until January 1, 2014, when fees are scheduled to be cut by 26.5 percent.

A one-year fix would cost $25 billion, and a permanent repeal of the formula would cost taxpayers $138 billion, according to the Congressional Budget Office.

While doctors got temporary relief, they aren't happy with their annual parade to Congress asking for help. "We are deeply disappointed that Congress chose to just do another patch -- kicking the can, growing the problem and missing a clear opportunity to protect access to care for patients," AMA President Dr. Peter Carmel said in a statement before the congressional votes. "Shortly after the coming elections, access to care for seniors and military families will again be threatened by an even larger cut, and members of Congress will need to take swift action to end the broken formula."


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