Is a fix to the broken Medicare payment system finally in sight?

The sustainable growth rate formula, long been derided as faulty payment mechanism, could soon be replaced.

Under current law, physician fees in Medicare are slated to be reduced by 21% in January 2010 and by about 5% for the subsequent 4 years. This jaw-dropping reduction rate is the result of the sustainable growth rate (SGR), the flawed formula for setting Medicare physician payment rates. Legislation has overridden the SGR's results over the past 4 years, but the prospect of year after year of unsustainable rate reductions has finally prompted Congress to look at another mechanism for the Medicare fee schedule.

The draft health reform bill being developed by the leading Chairmen in the House of Representatives proposes to fundamentally and permanently reform the SGR. The proposed reform eliminates accumulated deficits under the existing SGR. It would provide a defined update for 2010 to allow a new system to be developed.

The SGR would then be replaced with a new formula that:

• Removes items such as drugs and laboratory services not paid directly to practitioners from spending targets;

• Allows the volume of most services to grow at the rate of GDP plus 1% point per year (compared with GDP without any adjustment (as compared to GDP without adjustment today);

• Allows the volume of primary and preventative services to grow at GDP plus 2% per year, and;

• Encourages coordinated care by allowing Accountable Care Organizations to be responsible for their own growth paths, irrespective of reductions or increases that apply elsewhere in the system.

This blog will continue to follow proposals to reform the SGR. Although a relatively little-known component of the health-care reform debate, coming up with a viable alternative to the SGR is vital for maintaining the economic health of community oncology practices that provide care to more than 70% of our cancer patients.