Posted on November 23, 2009 by David Kopans

House Passes SGR Reform Bill

On November 19, 2009, the House of Representatives passed the Medicare Physician Payment Reform Act of 2009 ("H.R. 3961"). The bill reforms the Medicare physician payment formula, called the Sustainable Growth Rate ("SGR"). Under the current formula, Medicare payment rates for physicians' services will be cut by about 21 percent in 2010 and additional cuts would occur annually.

The Congressional Budget Office ("CBO") summarized H.R. 3961's changes to the SGR as follows:

  • The update for 2010 would be the percentage increase in the Medicare economic index (MEI), which is 1.2 percent, as specified in the final rule.
  • Beginning in 2011, there would be separate target growth rates and conversion factor updates for two categories of service: evaluation, management, and preventive services, and all other services.
  • The new SGR formula would take into account spending for each category of service since 2009 or—beginning in 2014—for the past five years. (The current SGR formula takes into account spending since 1996.)
  • Finally, only physician services, and not other services provided incident to the physician visit (such as laboratory services), would be counted in each category.

As noted above, consistent with the Centers for Medicare and Medicaid final rule for the 2010 physician fee schedule (publication date: November 25, 2009), H.R. 3961 amends 42 U.S.C. 1395w–4(d)(4)(A) to eliminate the discretion of the Secretary of the Department of Health and Human Services to include physician-administered drugs within the definition of "physicians' services" for the purposes of SGR calculations. Physicians' services are currently defined to include:

"other items and services (such as clinical diagnostic laboratory tests and radiology services), specified by the Secretary, that are commonly performed or furnished by a physician or in a physician's office, but does not include services furnished to a Medicare+Choice plan enrollee." (emphasis added)

Under the proposed definition, such services would be defined to include only:

"other items and services for which payment under this part is made under the fee schedule under this section, for services for practitioners described in section 1842(b)(18)(C) on a basis related to such fee schedule, or for services described in section 1861(p) (other than such services when furnished in the facility of a provider of services), but does not include services furnished to a Medicare+Choice plan enrollee." (emphasis added)

The CBO estimated that H.R. 3961 would increase physician payments over the next 10 years by about $195 billion.

H.R. 3961 was received in the Senate on November 20, 2009.

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