SGR and Physicians

The beast within grows. Its white fangs and long curled talons seem like a caricature in a sci-fi movie, than real life. But there it is, the Gryphon, baring its teeth encrusted beak and its hawkish eyes under the brown and white ruffled feathers that spell dominance. The creature is restless, as its deep-dark eyes dart from side to side.

The SGR seems oddly to fit the image of this beast. Born of a thought for containment, as a dovish sort of benevolent bird, flitting about from tree to tree, it has eaten off the forbidden fruit of procrastination and turned into this giant beast of hawk-like demeanor with a reptilian cold-blooded calculating mind-set.

What is SGR (Sustained Growth Rate) formula after all?

The Medicare Sustainable Growth Rate (SGR) is currently used by the CMS Centers for Medicare and Medicaid Services in the United States to control spending by Medicare on physician services. The SGR was enacted by the Balanced Budget Act of 1997 to amend Section 1848(f) of the Social Security Act and replaced the Medicare Volume Performance Standard (MVPS). CMS previously used MVPS in an attempt to control costs. Generally, this is a method to ensure that the yearly increase in the expense per Medicare beneficiary does not exceed the growth in GDP.

“Every year, the CMS sends a report to the Medicare Payment Advisory Commission, which advises the US Congress on the previous year's total expenditures and the target expenditures. The report also includes a conversion factor that will change the payments for physician services for the next year in order to match the target SGR. If the expenditures for the previous year exceeded the target expenditures, then the conversion factor will decrease payments for the next year. If the expenditures were less than expected, the conversion factor would increase the payments to physicians for the next year.”

The four factors involved in these calculations include:

               1. The estimated percentage change in fees for physicians’ services.

               2. The estimated percentage change in the average number of Medicare fee-for-service beneficiaries.

               3. The estimated 10-year average annual percentage change in real GDP per capita.

               4. The estimated percentage change in expenditures due to changes in law or regulations.

As one can guess, given this oddly figured attempt to control healthcare costs, the physicians are being used as the “sacrificial lambs.” While on one side there is a “push” to invest in conforming to regulatory requirements and added jungle of complexity, which any kindergarten student will tell you, adds to the costs of care, the other side is hell-bent on “you can’t raise prices!”  The only thing close to reality would be telling McDonald Restaurants to have seating for hundred customers in each restaurant and hire 20 extra employees to service the stations and oh but you (McDonald) cannot raise the prices of hamburgers. Hmm…

And here is a real world personal example: When I first started practicing medicine, I had one employee. She was the front-office and did everything else except practice medicine. Then as time expanded and as needs grew, my office expanded the workforce to two and then three and before, I had a chance to realize it, I had 10 workers staffing a one-physician facility. There was a billing person, a coder, an insurance pre-qualifier, two nurses, a chart filer, a front office receptionist, an office manager and two laboratory technicians. Not to mention other contractors for computer services, OSHA regulatory compliance, COLA and CLIA regulatory compliances. So all in all, keeping this large workforce to continue providing healthcare services required a larger revenue stream. The SGR creators on the other hand remained distant and oblivious to the external forces enacted by the congressional experts that were constantly shaping and adding the streams of burden on a physician’s abilities. The simple act of comprehension seemed oddly absent in the mix of these “experts.” The one hand continues to harvest “nothing” while the other hand continues to “seed” something; simultaneity of complex idiocy.

While the Congress and the Executive branches have been reviewing the burgeoning “big” data based on a falsified premise, and believing in it’s virtues they have nevertheless continued to “kick the can down the road.” Already in arrears for -27.4% over the past decade, there is very little “stomach” to stomach the potential “backlash” from the physician and patient advocacy groups. Both will lose a large number of care-givers and care-needy numbers. And if the new movement of rising numbers of “hospitalists” (physicians employed by the hospitals to render inpatient care) is a comfort to society, the SGR follows the physician wherever he goes and that brings the hospital revenues under scrutiny and potential pressure. The AHA lobbyist are already at it, spinning their intellectual wheels to find the cure for this contagion. And the beat goes on...

The vitriol continues about the “rich doctors” and their lifestyles of big houses  and expensive cars, as the clarion call to rally the masses in support of the impending cuts continues. Yet even this weary class-envy seems not to bring in the desired angst from the populace, for they fear a loss of “something” for themselves. The “warfare” against physicians continues while the public “servants” fly around under Rolls Royce powered jets from halls of congress to their districts and are wined and dined by corporate magnates to enforce the cuts so that larger portions of the insurance premiums become the incremental added share-value. Ah! But I digress!

So here we are delaying the inevitability based on the faulty premise to begin with. Yet this delay diverts the consequences from now to the future where the pain will be greater and survivability not insured. This persistent delay will rear its ugly head as a rampant inflation of a dislocated reality where healthcare will suffer at the alter of fewer physicians and many “compliance czars” that mete out the marginalized healthcare.

Ron Shinkman of Fierce Health Finance states,

“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.”

US Federal Debt ~ Projected

United States Public Debt

Let us briefly cast our view on the world of finance, it is akin to the “doc-fixes” that have been implemented over the past ten years. There is no appetite for risk. No appetite for new beginnings, just the same old “kick the can,” experience. The Non-risk takers have ensconced themselves and now lord over the risk-takers. “Nothing can be done that rattles any person,” is the rallying cry. The political correctness sting is on. And what this begets is a future that follows. Greece is a perfect example of this glorified pervasive European dysfunction that seems so desirous in the United States. Greece is only a “Nein!” away (no more free Euros from the working class) from devolving into anarchy and chaos, followed closely by Spain and then Italy. A US debt to the tune of $16, 337,000,000,000.00 where almost $950,000,000,000 are paid out as interest annually is 104% of the GDP (Gross Domestic Product). And should you desire to know, Greece is at 178.4%. Spain is at 90.4% and although that might be comforting to some, it is also wiser to know that Brazil and Mexico both defaulted with debts to GDP ratios of 50%.

The Greek Debt to GDP

Greece GDP

Getting back to the Mediscare called SGR formula, the essence of this ensuing debacle lies squarely on the inefficiencies of a bureaucracy that allows for exploitation by the bad elements in society, A payment formula based more on the “lobbyists-determinant” rather than the actual cost and a “ivory-tower” controlled by the non-risk-takers who manage the levers of control, compare and contrast.

Are there inefficiencies in healthcare? Yes!

Are there better methods of delivery of healthcare? Yes!

Are there efficiencies that can be exploited to benefit the system? Yes!

The one-word answers exist in the Risk-Taker realm but not in the exploiting bookish world of “experts.” Just like an economist (Nobel Laureate or not) who has never balanced a checkbook will never know the levers that govern the real world. The consequence of an action is never contemplated by these rarified few. An expert high up in this “high-up” world of  “do this…” has no concept of how medicine is really practiced or for that matter how the world really works or the costs that are incurred and what will be the rip-tide consequences of that "do this..." They just sit and profess…

Ignoring these precarious risks, with vacant eyes, of the beast that lurks is forbearance of what is to come.

Meanwhile the fangs and talons get bigger and bigger and the tail whips and whips hungrier and hungrier...

References:

SGR Formula

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SustainableGRatesConFact/index.html?redirect=/SustainableGRatesConFact/

Medicare Volume Performance Standard (MVPS)

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SustainableGRatesConFact/downloads/sgr2010f.pdf

Medicare beneficiary expense and the GDP

http://blogs.wsj.com/health/2008/07/10/why-medicare-pay-cuts-for-doctors-will-be-back/

SGR and the “Cliff” ~ Ron Shinkman

SGR faces its own fiscal cliff - FierceHealthFinance - Health Finance, Healthcare Finance http://www.fiercehealthfinance.com/story/sgr-faces-its-own-fiscal-cliff/2012-12-11#ixzz2GSwwKnpC

The Sovereign Debt Crisis: A modern Greek tragedy (Federal Reserve Bank of Saint Louis)

http://www.stlouisfed.org/publications/cb/articles/?id=2264