The sustainable growth rate (SGR) is the method used by the Centers for Medicare & Medicaid Services (CMS) to control Medicare's spending on physician services. Generally, the SGR was designed to ensure that the cost per Medicare beneficiary does not exceed the growth in real gross domestic product (GDP). If yearly expenditures exceed the SGR target amount, the conversion factor will decrease physician fee schedules accordingly for the following year. On March 1 of each year, the physician fee schedule is updated and adjusted to meet the SGR target, which can be suspended or adjusted by Congress, as has been done in the past.

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act (PPACA) into law. During that period of sweeping reform, the long-term strategy for dealing with the SGR and theMedicare fee schedule was once again kicked aside, a political football that most policymakers acknowledge is fatally flawed but few want to tackle, especially when the price tag for what's known on Capitol Hill as the "doctor fix" would cost taxpayers in excess of $200 billion. Although the SGR ticks up and down by percentage points, one reality remains: a physician fee cut of more than 21% looms unless Congress acts to avert it.

The SGR Oncology Problem

The SGR is more than another wonky term in the lexicon of health-care reform-leaders in oncology warn it portends a fiscal crisis for the cancer care community with no solution at hand. According to David Eagle, MD, President of the Community Oncology Alliance (COA), additional cuts to already financially challenged oncology practices will sharply reduce access to care. "COA's Components of Care survey found that in 2008, Medicare paid only 57% of actual infusion costs. That is a huge payment shortfall, one of the reasons practices across the country are joining hospital groups, closing satellite facilities, and cutting staff, or closing altogether. If the SGR cuts go through, this trend will accelerate with disastrous results," Dr. Eagle said.

Asked whether the SGR needs to be fixed or eliminated, Dr. Eagle responded, "It needs to be scrapped. The concept behind SGR is wrong, it holds physicians responsible for the overall growth in health-care spending even though the vast majority of costs input are far beyond our control, such as new and expensive technologies that today's well-informed patients demand as part of their care."

Independent Commission?

After Congress voted in 2010 to increase the federal debt ceiling, most policy experts feel that legislators will attempt to put a longer-term "patch" in place, possibly 3 to 5 years. However, many in Congress want to wash their hands of the SGR altogether by handing control of Medicare issues over to an independent entity. Joseph S. Bailes, MD, Past Chair of ASCO's Government Relations Council, told The ASCO Post, "In the health-care reform bill, there's an Independent Medicare Payment Advisory Board, known as IPAB, which is broadly charged with reviewing Medicare with an eye toward increasing efficiencies and reducing costs, etc, without harming services. In my view, an independent group with authority to make recommendations that Medicare could implement without Congressional action is worrisome. We've always worked with Congress on oncology issues, such as equitable reimbursement for practice services and therapeutics. Losing political interaction with legislators is problematic, not just for oncology but for medicine in general."

Dr. Bailes said that a lack of knowledge about the true costs of providing cancer care is one of the underlying problems. "Over the years, trying to convey actual oncology practice costs to policymakers has been a contentious process. At ASCO, we commissioned a survey by the Gallup Organization to provide evidence of actual practice expenses to Congress. That survey was used in 2004 to revamp some chemotherapy administration codes. However, as a general rule, the costs that Medicare uses are determined by a survey conducted by the AMA, in which community oncology is underrepresented by data that do not capture the true costs and complexity involved in delivering high-value cancer care."

The SGR Cost-Control Myth

Enacted in 1997, the Congressional Budget Office (CBO) and Congress originally expected the SGR to lower physician payments below levels of the previous method, the Medicare Volume Performance Standard (MVPS). At first, payment rates for physicians kept pace, but by 2002, the increase in volume and complexity of services produced a larger-than-expected cut in payment rates, 4.8%. And, as we now know, that was only the beginning.

"The SGR has not worked in controlling costs, and we're left holding this giant bill that no one wants to pay. Congress continues to 'patch' the SGR, but it refuses to fix it. Now we're left with the worst of both worlds-you've not controlled costs and you've placed the entire Medicare program on the precipice of collapse," said ASCO CEO Allen S. Lichter, MD.

Dr. Lichter pointed out that Medicare's SGR problem has a disproportionate effect on the oncology community. "The current challenges in Medicare reimbursement affect every specialty, but they hit oncology especially hard. For one thing, almost 50% of all cancer patients are Medicare beneficiaries, so we are vastly overrepresented in the CMS payer model. Second, Medicare bundles oncology services and drug reimbursement in related fee codes, so when the agency has these several week suspensions between the next SGR patch, it costs community oncology practices around the country hundreds of thousands of dollars in lost drug reimbursements. No other specialty is affected in that manner," he said.

"Studies show that the United States has the best cancer care delivery system in the world. But, to be fair, costs of providing oncology services are rising at an unsustainable rate, and we cannot carry on with a business-as-usual mentality. However, the government cannot address the cost issue with a sledgehammer approach, bashing oncology with a 20% to 30% cut in payment. That will end the Medicare program as we know it," Dr. Lichter added. ■

Editor's note:
As The ASCO Post went to press, both houses of Congress approved a measure to postpone the SGR-driven Medicare physician fee cuts scheduled for January 1st. Upward of 23%, the payment cuts would have had dire consequences for community oncology practices. According to Joseph S. Bailes, MD, the SGR game is not over, simply postponed. "The flawed formula remains and it will require substantial 'pay for' to fix. It will also require substantial political will."
Watch for continued coverage of this important issue in future editions of The ASCO Post.