Controversial Sustainable Growth Rate (SGR) Formula Repealed

by | Last updated Dec 7, 2023 | Published on Jun 17, 2015 | Healthcare News

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This April, the Senate approved to repeal the sustainable growth rate (SGR) formula for determining Medicare reimbursements. This controversial Act had been a great challenge to physician billing as it induced considerable reimbursement cuts for Medicare doctors. The Senate passed a new legislation, the ‘Medicare Access and CHIP [Children’s Health Insurance Program] Reauthorization Act of 2015,’ which repeals the SGR formula and replaces it with an annual 0.5% reimbursement from July 1, 2015 through 2019. Apart from that, physicians who choose to participate in ‘alternative payment models’ will receive a bonus of 5%. The legislation also consolidates the existing quality and incentive payment programs with Medicare such as Physician Quality Reporting System, Value-based Modifier and Meaningful Use incentive programs into a new Merit-based Incentive Program (MIPS).

The SGR formula calculated an amount for a year on the basis of four factors such as the estimated percentage change in fees for physicians’ services, the estimated percentage change in the average number of Medicare fee-for-service beneficiaries, the estimated 10-year average annual percentage change in real gross domestic product (GDP) per capita and the estimated percentage change in expenditures due to changes in law or regulations. If the Medicare spending reaches higher than this predetermined amount, reimbursements for physicians would be cut accordingly in the following year to make up for the overspending. This affected Medicare physician payment drastically and physicians even became reluctant to accept Medicare patients. We had reported earlier that most of the healthcare providers were hoping for the elimination of SGR formula.

Most of the medical societies and organizations are now happy with the SGR repeal and strongly support the Senate. Physician practices need not bear the burden of uncertainty resulting from impending yearly payment cuts. The repeal may facilitate the implementation of innovative care models that improve care quality and lower costs. The new law can ensure stable and appropriate compensation for Medicare physicians and allow them to focus more on patient care.

The new legislation has several other significant provisions such as:

  • Provides $20 million annually from 2016 to 2020 in order to help smaller practices participate in MIPS or alternative practice models
  • Extends funding for CHIP through fiscal year 2017
  • Extends the “two-midnight rule” for Medicare coverage through fiscal year 2015
  • Declares a national objective to achieve widespread health information exchange through interoperable electronic health record (EHR) technology by the end of year 2018

Natalie Tornese

Holding a CPC certification from the American Academy of Professional Coders (AAPC), Natalie is a seasoned professional actively managing medical billing, medical coding, verification, and authorization services at OSI.

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