Family physician Jeff Harwood, M.D., of New London, Ohio, has been in private practice for the past 22 years. For much of that time, Harwood has dealt with the ongoing saga of the sustainable growth rate (SGR) formula -- the perpetual cycle of looming Medicare payment cuts and last-minute congressional interventions required to block impending reductions.
For Harwood and thousands of other family physicians, the SGR serves as a constant reminder of a flawed Medicare payment system, a recurring problem that continues to drain time, energy and other resources away from the practice of medicine.
"The SGR causes recurring stress, and it is eating up a lot of our political capital," says Harwood, a solo family physician. "It is the same topic year after year, and you get burned out fighting it. It causes you to lose faith in the whole federal legislative agenda.
"I am frustrated and fed up with having to think about it all of the time."
Harwood's refrain reflects a sentiment shared by family physicians throughout the United States. And it's a perspective that frames much of the debate about the SGR and Medicare physician payment.
"I think our members are completely entitled to be frustrated," says AAFP President Glen Stream, M.D., M.B.I., of Spokane, Wash. "It is absolutely nonsensical that Congress has delayed finding a permanent solution to the SGR for so long."
Congress created the SGR as part of the Balanced Budget Act of 1997, and, from the outset, the intent of the measure was clear -- keep Medicare expenditures for physician services on a sustainable trajectory and in line with growth in the nation's gross domestic product (GDP). To accomplish this, the SGR employs an annual fee update based on expenditure targets to limit the fiscal impact of physician services.
In the early years of the SGR, volume growth fell below the SGR target, leading to payment updates that were at or below the Medicare economic index. Since 2002, however, volume growth increased and per-capita GDP slowed, leading to payment reductions as actual expenditures exceeded the corresponding SGR target.
- The ongoing threat of reductions in Medicare payments to physicians continues to create uncertainty and anger in the physician community.
- Family physicians explain how this uncertainty poses a direct threat to patient access to care.
- Meanwhile, AAFP President Glen Stream, M.D., underscores the importance of member involvement in trying to repeal the sustainable growth rate formula.
Congress typically waits until the 11th hour to pass legislation blocking payment reductions called for by the SGR formula, creating anger and uncertainy in the physician community and making it difficult for family physician practices to engage in long-term planning, according to FPs interviewed by AAFP News Now.
"When you don't know if the cut is actually going to happen and your revenues will go down, it is hard to plan for the future, make enhancements to your practice and pursue medical home transformation," says Stream.
In 2010 alone, Congress intervened five times to block impending SGR payment reductions. On three of those occasions, Congress allowed the cuts to go through before passing legislation to retroactively rescind them.
In late 2011, Congress managed to pass a two-month Medicare payment patch two days before Christmas, barely averting a 27.4 percent cut scheduled to take effect on Jan. 1. However, physicians now are facing that 27.4 percent reduction on March 1 unless Congress acts to block it.
Elizabeth Pector, M.D., of Naperville, Ill., had been a family physician for more than 20 years when she decided to become a nonparticipating physician with Medicare in 2008. With this type of arrangement, Pector required her Medicare patients to pay her upfront, leaving Medicare responsible for reimbursing patients after the physician visit.
For Pector, the decision to become a Medicare nonparticipating physician was not made lightly. But like many family physicians, she was frustrated with low Medicare payment levels and the constant threat of steep pay cuts posed by the sustainable growth rate (SGR) formula. By becoming a nonparticipating physician, Pector was able to charge slightly more than the typical Medicare fee schedule.
But she soon discovered that her nonparticipating status created some unintended consequences.
"There was a lot of confusion, and a few people left us," says Pector, the owner of a practice with two FPs.
In addition, some of her Medicare patients could not afford to pay upfront.
"If a practice does go nonparticipating, I think the lesson I have learned is you have to be very well-coordinated, with the office front desk understanding not only that they have to ask for payment upfront, but how much they have to ask for upfront," says Pector. "Your billers also have to make sure to bill for it correctly."
This year, Pector decided to rejoin Medicare as a participating physician, although she still has some reservations.
"I am not happy to be back in Medicare because the SGR problem has still not been resolved," she says.
Pector describes her time as a nonparticipating physician in Medicare as a worthwhile experiment. "But I don't think it was financially worth it because I had too much dissatisfaction from patients, too much confusion among staff, and I was in a geographic area where other doctors accept Medicare," she says. "So if someone was unhappy with us, they were likely to find a physician in the area who was willing to see them without charging them upfront."
However, Pector continues to worry about the impact of low Medicare payment rates and the SGR on physician practices and patient care. "Our Medicare population is aging, and many physicians --- especially in heavily populated Medicare areas -- will be in a position where they cannot afford to provide care."
Thus, practices may be forced to close or at least close their practices to Medicare patients. At some point, says Pector, Medicare patients will not be able to find physicians.
Not surprisingly, the ongoing threat of Medicare payment cuts has implications for patient access to care. Family physician Ellen Smith, M.D., of Heritage Family Medicine, a multispecialty practice in Lemoyne, Pa., says the SGR creates "chaos every year" for her practice. The practice annually has to confront the question of whether it can continue to accept Medicare patients if the payment cut goes through and stays in effect.
"Our tentative strategy is we will not take any new patients initially, and if it were to happen, we would start weaning off our (current) Medicare patients," says Smith. "But we have to wonder whether we should even be open to Medicare patients because every year we do this song and dance with the SGR."
Meanwhile, Harwood says "the SGR has been kicked down the road so many times I think there is a certain numbness or even expectation on our part that it is going to continue to be kicked down the road."
That is the exactly the mindset that Stream and others in the AAFP are trying to combat.
"Some of our members may feel the SGR has always been fixed, it will get fixed again, and they don't necessarily need to contact their members of Congress," says Stream. "I really want (members) to fight that temptation to not engage because it is entirely possible that without enough pressure, we won't get a good solution.
"Congress needs to hear our message," he adds. "Congress has to be encouraged to come up with a permanent and not a temporary fix."
Stream notes that the AAFP is continuing to urge members to contact their representatives in Washington, and tell them how the impending SGR reduction is affecting their practices.
"This issue is just too important not to make it local and personal for Congress," says Stream.
Harwood has no illusions about how a 27.4 percent cut would affect his solo practice. About 40 percent of his patients are on Medicare.
"It would necessitate me selling my practice to a health system," says Harwood. "As a rural family physician, I already make less than the medium income, and a 27.4 percent cut would be the final nail in the coffin. I am barely hanging on now."
The threat of even a temporary SGR payment reduction poses problems that did not necessarily exist a few years ago. When Congress averted a payment cut five or six years ago, John Bender, M.D., CEO and medical director of Miramont Family Medicine in Fort Collins, Colo., was able to quickly borrow about $70,000 in unsecured funds to cover the shortfall until Congress rescinded the cut.
But, says Bender, borrowing that much in unsecured funds to cover a shortfall likely is no longer an option because the nation's banking regulations have tightened considerably. As a result, he is no longer able to secure loans without collateral.
Miramont Family Medicine is a nationally recognized patient-centered medical home with four locations in Colorado. The practice sees a total of 27,000 patients among the four locations, and about 40 percent are Medicare patients.
"I have five partners," says Bender. "Just like any business, we have to meet our obligations. We have debts to pay. We have accounts payable and accounts receivable." A one-month delay in Medicare payments could mean a shortage of $160,000 for Miramont, an amount Bender and his partners would be hard pressed to cover without a bank loan.
"I am starting to look at Medicare the way bond readers look at treasury bills -- should we downgrade this?" he asks. "Is Medicare really trustworthy enough for me to base my livelihood on?"
Bender is convinced that the SGR is indicative of a flawed payment and delivery system that has done much to drive primary care practices out of business in recent years. "I am in a county where we have had 34 primary care doctors shut their doors in the last 10 years," Bender says. "We've had 169 physicians in the county become hospital employees in just the last two years."
Miramont Family Medicine now is one of only 10 practices in the county that take new Medicare patients, he adds.
Sarah Sams, M.D., of Columbus, Ohio, says the SGR is one of the main reasons why she is no longer in solo practice. Sams operated a solo private practice in Ohio from 2001 until 2007, and she quickly became frustrated with the payment instability created by the SGR.
"Every time you have to borrow money to make payroll, then you have interest to pay back," says Sams, who now works for a family medicine residency program in Columbus. "It just starts to accumulate to the point where it is difficult, because you don't have a large entity behind you to buffer the fluctuations in income.
"There is no other industry I am aware of where someone else sets the fees, and you have no ability to negotiate," says Sams. "Medicare can cut your fees at any moment in time, or they can say, 'We are just not going to pay you for the first two weeks of January while we wait and see what Congress is going to do.'
"What other system does that?"
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