SGR Formula, Medicare Reimbursements in Limbo

Once again, providers and practice administrators are in limbo about the status of Medicare payments. In late March, Congress moved closer than they ever had before, but stopped just short of repealing and replacing Medicare’s sustainable growth rate (SGR) physician payment formula. The $200-billion deal up for consideration would stave off a 21.2% cut to Medicare payment rates and extend the Children’s Health Insurance Program (CHIP) while repealing the nearly 20-year-old formula.

After the US House of Representatives passed the surprise bipartisan SGR legislation, pressure then mounted on members of the US Senate to sign and approve the deal as well before leaving on spring break. The March 31 deadline to pass the bill came and went, however, with members of Congress heading home for a 2-week holiday recess. Prominent senators have shared their optimism that the issue will be addressed upon their April 13 return, although concerns of filibusters and opposition are surfacing. Practice managers and administrators, wary from past experience, are remaining cautious, and have been urged to prepare a contingency plan for whatever may come next until a final bill is approved.

“There is still time to work out a product that, in its entirety, is something members of both parties in both chambers can support,” said Sen Ron Wyden (D, Oregon), the ranking member of the Senate Finance Committee, in a written statement on March 19, 2015. “This involves major issues of health policy and we are just not there yet.”

Without a signed deal, the patch enacted in 2014 to the SGR formula expired on March 31, and the Centers for Medicare & Medicaid Services (CMS) must proceed as if the 21.2% cuts to Medicare payments have taken effect. Under current law, however, it does not actually have to pay out April 1 claims under any fee schedule until April 14 at the earliest. In the past, CMS has held claims for longer than the 14 days in anticipation of congressional action on the SGR formula, and that might well happen again. Practices should expect to receive updates from CMS regarding the status of their claims, when to expect payment, and under what fee schedule.

Next Steps

Medicare is required to annually publish each November the actual Medicare conversion factor, the SGR update, and allowed expenditures for physicians’ services for the upcoming year. For years, the rise in physician services expenditures has resulted in an ever-increasing SGR correction against the targeted expenditures, and an annual announcement of a double-digit reduction in physician services rates—21.2% this year—scheduled for each April 1. Each year, the medical community rises up, decrying the unsustainability of double-digit rate reductions in the physician fee schedule, and each year, at the last minute, Congress has passed a patch that modifies the actual fee schedule adjustment from what is required under the actual SGR formula.

With the recent bipartisan legislation passed in the House, providers who would like to see Medicare’s SGR payment formula repealed must wait and see what happens when the Senate returns from recess. In the meantime, though, there are a few steps providers can take to stay informed and ensure their practices are prepared for potential reimbursement delays:

  • Prepare for delayed Medicare reimbursements for claims dating from April 1 forward; expect, at a minimum, the usual 14-day delay for electronic claims
  • Prepare for the possibility that CMS may hold payments for a further period of time in anticipation of some modifying action by Congress; this may require practices to obtain a line of credit to offset the loss in cash flow for several weeks as they wait for Medicare payments
  • Watch for updates from CMS, the medical community, and the press; even if Congress does take action, CMS may delay payments a few extra days to allow for fee schedule updates in its system.

Having come this far, it would seem as though the long-awaited repeal of the SGR formula may actually happen this year. However, a number of issues and concerns could affect action by the Senate, and nothing is guaranteed. Providers should continue to stay informed, and prepared, for whatever the outcome might be.

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