1998 sustainable growth rate could mean lean 1999

In attempting to fix flaws in the way Medicare reimbursement is adjusted annually, the Health Care Financing Administration (HCFA) may have opened a new can of worms. The reason: Introdu cing a new sustainable growth rate (SGR) concept tied to the Gross Domestic Product has the potential to hold spending by physician practices to an incredibly low standard that cannot be sustained.

Here’s why: HCFA estimates the sustainable growth rate for 1998 will be 1.5%, and that spending for physician services will increase 2.9% during the year. This leaves a gap of 1.4% between the two numbers. Subtract that 1.4% from the projected 2.2% rise in the Medical Economic Index for 1998, and the updated 1999 single conversion factor would only be 0.8%. This conversion factor is part of the new SGR, created to replace the current Medicare Volume Performance Standard (MVPS) system.

If that happens, "the SGR will hold physician expenditures to levels that will be extremely difficult to achieve," argues Jamie Wilson, communications specialist for the Washington, DC-based American Society for Internal Medicine. In fact, "very low updates that don’t keep pace with inflation, and possibly even some reductions, may be the future norm under this formula."

The sustainable growth rate concept was created during last year’s budget talks as a way to correct problems in the way Medicare reimbursements for physician practices have historically been adjusted, similar to the way your practice might look at salaries of its employees every year to give raises based on cost-of-living increases and performance.

The sustainable growth rate was designed to replace the MVPS, which attempted to control spending by giving physicians an annual service volume target. If a physician exceeds the MVPS volume target for a given year, say by 2%, the physician’s payments for next year are reduced by 2%. Volume that falls below the target is rewarded with a corresponding increase in payment. Because of the recent nationwide shift toward lower-intensity medical care, the volume of surgical services consistently falls below HCFA’s target, and surgical reimbursements have increased. For the same reason, primary care services typically exceed HCFA’s targets, resulting in cuts in primary care payments.

By shifting to one conversion factor and one MVPS, however, disparities would be spread out over all physicians, preventing one group from benefiting at another’s expense, say proponents of the sustainable growth rate measurement. The measure also is intended to strike a balance between volume and cost for surgical and non-surgical care.

Following are HCFA’s predictions of significant effects of these changes:

• Overall payments to physician practices will increase because increased payments for nonsurgical services will exceed the decreases in payments for surgical procedures.

• Medicare coverage changes for screening mammography, colorectal cancer screening, screening Pap smears, and screening pelvic exams will cause increases in Medicare expenditures on preventive services.

• "Incident to" reimbursement for services for nurse practitioners and physician assistants will increase fro 65% to 85% of the medicine physician fee schedule.