SGR faces its own fiscal cliff

All but lost among the concerns of the impending fiscal cliff is how the sustainable growth rate (SGR) formula will be addressed.

It's been a given that Congress will intervene and keep the cuts from taking effect; the American Medical Association (AMA) and the other physician lobbies have been able to get this done like clockwork for nearly a decade now. The last and only time there was an SGR-related cut in the formula's 15-year history was in 2002.

As a result, doctors are facing a 27.5 percent cut in payments for the care they provide--the accumulation of a decade of cost deficits that have never been addressed. It's a deeply ludicrous cut and will never happen, but it exists solely because of past inaction.

Meanwhile, as the Affordable Care Act takes greater hold in 2014 and the years after, there is likely going to be more pressure to keep the healthcare cost curve down. If Massachusetts, the ACA's original home, is any guide, inflation is going to move up from its current historical lows pretty quickly.

A variety of health policy experts have noted the SGR tug-of-war has kept the physician community from focusing on properly implementing reform.

"Unlike what Medicare has done in every other sector of payment, it has just left physicians in this very strange world," Gail Wilensky, the former Medicare administrator and chair of the Medicare Payment Advisory Commission (MedPAC) recently told MedPage Today. "Everything has moved and physicians have just stayed in the same manner without any kind of experimentation going that changes how they get paid."

And the SGR will not be a physician problem exclusively.  Given doctors are joining accountable care organizations or similar structures in record numbers, the SGR is quickly becoming a hospital problem as well.

Primary care physicians also are not the only ones who are facing fiscal distress over impending rate cuts. Pathologists were left stunned when the Centers for Medicare & Medicaid Services recently cut reimbursement rates for one of their most common analytical services by 52 percent--draconian is the term I've heard bandied about by lab executives.

Moreover, it is almost certain that it will go into effect early next year without Congressional intervention. And given that many larger hospitals operate extensive labs to service their patients, that too is another looming problem they must confront.

MedPAC has proposed its own fix, most notably freezing payments for a decade, and making some cuts in payments to specialty physicians. Not surprisingly, this proposal is unpopular with doctors.

The AMA and some of the other physician lobbies have suggested their own fix, which not surprisingly would bump up payments for doctors. This is not likely going to be popular in a supposed time of fiscal austerity.

Of course, Congress has to approve any of these changes. And if you haven't been dwelling in a cave for the past decade, that deliberative body makes a group of sleep-deprived kindergartners look comparatively harmonious and nonpartisan.

Should the fiscal cliff drama linger well into 2013, it is entirely possible that the SGR will be dealt with in a stronger way. But I don't expect that to happen. It is far more palatable for everyone involved to fix the fiscal cliff, likely with some short-term solutions. And it is far simpler to just make another fix to the SGR and give the doctors a modest payment bump.

But the looming economic realities mean the physicians, hospitals and politicians, much like a Looney Tunes character, will look down sometime soon and see that there is nothing but air beneath their feet. And they will either craft a cunning solution, or wave bye-bye before they plunge into the ground and then try to waddle away, rendered by their fall as flat as a pancake. - Ron (@FierceHealth)