April 2015 SGR Formula

This blog was to be related to the sources for the cost of healthcare in the United States. Do the costs come from physician fees, testing, pharmaceuticals, hospital stays, facility surgical fees, nursing homes, physical therapy or other related services? I will come back to that issue but I wanted to share some thoughts about the Sustainable Growth Rate (SGR) formula.

As many of you are aware, Medicare is technically reducing reimbursement rates for physician services rendered after March 31 by 21%. This cut is triggered by the SGR formula. On March 26, the House of Representatives passed an SGR repeal bill on a bipartisan 392-37 vote. Unfortunately, the Senate left for Spring Recess before voting but they are expected to vote upon their return April 13. The repeal bill raises reimbursement rates .5% in the last half of 2015 and annually through 2019 as payment methods switch from fee for service to fee for value programs. In a letter sent to Congress, over 750 physician memberships organizations across the country urged repeal of the SGR. The repeal bill is not without some controversy in that some feel that a two year extension of the CHIP program is not sufficient and many fiscal conservatives have issues with the fact that this repeal bill does not save money or achieve budget neutrality.

Others say that the 20 “fixes” in the last decade is also not saving money and the long term health improvements, health and productivity savings through the fee for value programs will more than pay for this. As it is April 2 as I write this, our fees have been cut by 21%. However, the Centers for Medicare and Medicaid Services (CMS) cannot pay clean electronic claims any sooner than 14 calendar days after receipt (29 days for hard copy claims). Senate passage of the Repeal Bill (MACRA) and the president’s signature by April 14 would allow CMS to retroactively cancel the 21% rate reduction and pay all claims for services performed after March 31 at pre-April levels.

So what should physicians do during this time of limbo? Here’s what you should NOT do: voluntarily mark down your Medicare claims by 21% (officially, 21.2%) for the work you do on and after April 1, with the hopes of getting it back when the Senate approves the SGR repeal bill. If you do this, CMS is obliged to pay the lesser of the submitted charge or the Medicare approved rate. You can approach your billing one of two ways. Continue submitting Medicare claims at the old rates and hope the Senate passes the repeal bill by April 14. If the new bill does not pass, CMS will begin to pay claims for prior April services at rates reflecting the 21% reduction. If the Senate were to pass the repeal bill at a later dae, CMS would reprocess the shrunken claims at the old rates. In this scenario, your cash flow would be disrupted. The other option is  to hold on to Medicare claims for services rendered beginning April 1 and wait for final passage of the repeal bill — or a temporary delay of the 21% cut — before submitting them.

This approach spares physicians the hassle of having their claims reprocessed if the cut goes into effect for a few days or weeks because the Senate acted after the April 14 deadline. However, your Medicare cash flow gets disrupted for 2 weeks or more. This increase in Medicare accounts receivable may adversely affect your practice and create a need for a line of credit or other financing. Either way, it is good for us to be prepared with an understanding of what potentially will be our new world once the SGR issue is decided. Thanks for reading and have a Happy Easter.

Dr. Sneed

President, Northern Michigan Health Network

NPO Board Member


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