SGR PATCH

With only minutes to spare, the United States Senate joined the House of Representatives in passing legislation, the Preventing Access to Medicare Act of 2014, to prevent a 24% reduction in physician fee schedule payments slated to occur on April 1, 2014.  In lieu of this draconian cut, the Congress approved a one-year extension of the current Medicare Conversion Factor (CF) through March 31, 2015.  This means that Medicare will continue to pay for physician services through the remainder of 2014 what it has been paying for services for the first three months of 2014.

Up until the very end, many held out hope that the Congress would approve a permanent fix to the SGR problem but coming to an agreement on how to pay for the SGR fix remained elusive.  Earlier in March, the House and Senate leadership had reached agreement on new policies for replacing the SGR but they were unable to reach agreement on how to save the $130 – $180 Billion necessary to fix the SGR and other Medicare policies in need of correction.

For this reason, the Congress was forced to approve an SGR patch for the 17th time in the last 12 years in order to prevent steep cuts in Medicare physician fee schedule payments.  The total cost of patching the SGR for one year and extending the various programs is approximately $21 Billion.

The Protecting Access to Medicare Act of 2014 would:

(1)        Extend the .5% update to the Conversion Factor that has been in place since January, 2014, through the remainder of calendar year of 2014, and

(2)        Freeze the update to the single conversion factor at 0.00% for January 1, 2015, through March 31, 2015.

In addition to the temporary SGR fix, Congress also approved an extension of various Medicare programs scheduled to expire at Midnight, March 31.  Included among these so-called extenders were:

  • Extends Medicare work Geographic Practice Cost Index (GPCI) floor for 1 year
  • Extends Medicare therapy cap exception process for 1 year
  • Extends Medicare ambulance add-on payments for 1 year
  • Extends Medicare adjustment for Low-Volume hospitals for 1 year
  • Extends Medicare-dependent Hospital (MDH) program for 1 year
  • Extends Medicare Advantage Special Needs Plan for 1 year
  • Extends Medicare Reasonable Cost Contracts for 1 year

In order to “pay for” this legislation, Congress approved a series of changes in the Medicare program intended to save approximately $21 Billion over the next 10 years.  These included:

  • Establish a value-based purchasing program for Skilled Nursing Facilities (-$2 Billion)
  • Reform Medicare Payment policy for Clinical Diagnostic Laboratory tests (-$2.5 Billion)
  • Quality Incentives for developing Appropriate Use and Clinical Decision Making tools for Advanced Medical Imaging (- $200 Million)
  • Medicare misvalued code revaluation (-$4 Billion)
  • Changing the Medicaid Disproportionate Share program (-$4.4 Billion)
  • Revise and Realign Medicare Sequester (-$7.2 Billion)
  • Revise Medicare ESRD Prospective Payment Program (-$1.8 Billion)

The legislation also directs the Secretary of Health and Human Services (HHS) to continue through June 2015, and with a specified limitation, certain medical review activities related to the so-called two-midnight rule.  The two-midnight rule allows Medicare inpatient coverage of hospital stays for which a physician admits a beneficiary to a hospital and where the beneficiary is expected to require care that crosses two midnights.  If the care does NOT cross two midnights, Medicare will generally deny inpatient coverage of the care and instead, pay for the care on an outpatient basis.

The failure to complete action on permanent SGR repeal/replace legislation by the April 1 deadline does not necessarily mean all action on reaching a compromise on a permanent fix will end immediately.  Congress is further along in their efforts to reach a bi-partisan/bicameral solution than at any time in the history of the SGR.