SGR 26.5% Cut Averted for 2013 and 2% Sequestration Cut Delayed until March


1/2/2013 – Late last night, the House of Representatives voted to pass the American Taxpayer Relief Act, also known as the “fiscal cliff” bill, which was passed earlier by the Senate.  The bill delays the Medicare SGR cut of 26.5% for another year and pushes back the 2% sequestration cut for two months.

The bill was passed by the Senate by a 89 to 8 vote and by the House in a 257 to 167 vote. The bill now moves on to the President, who said moments after the House bill passed, that he would sign the bill.

The “savings” to “pay for” the SGR postponement (often referred to in the press as the “doc fix”) come through reductions to other Medicare programs, primarily through cuts which affect hospitals. However, some changes do impact physicians, as shown below.

The bill delays the SGR cut of 26.5% for one year and replaces it with a “zero percent update” to the Medicare conversion factor (used to calculate Medicare Physician Fee Schedule payments).

The bill also pushes back the 2% sequestration cut to physician fees until March 2013. The next Congress, to be sworn in this week, will consider whether to allow sequestration to take place or replace it with other cuts in federal spending and/or higher taxes.

The zero percent update to the conversion factor is not a freeze to the 2012 fee schedule; it only nullifies the 26.5% cut for a year.  RVU and other changes published in the 2013 Medicare Physician Fee Schedule remain in effect, reducing or increasing Medicare payment rates (see our upcoming newsletters for specifics).

The bill also extends by one year several Medicare payment policies that were set to expire on January 1:

  • The existing 1.0 floor on the physician work index
  • Current payment exceptions process for outpatient therapy services
  • Ambulance Add-on Payments for ground including super rural areas through December 13, 2013, and the air ambulance add-on until June 30, 2013.
  • Medicare inpatient hospital payment adjustment for low-volume hospitals and for the Medicare-Dependent hospital program.

Although at least 13 provisions were used to offset the cost of the one-year SGR fix, estimated to be $30 billion, here are the ones that could affect our clients:

  1. Equalize payments for stereotactic radiosurgery services provided under Medicare hospital outpatient payment system (HOPPS). Savings: $0.3 billion.
  2. Equipment Utilization Assumption: Increase the Medicare Part B equipment utilization assumption for advanced imaging services from 75% to 90% effective for 2014 and subsequent fee schedules. Savings: $0.8 billion.
  3. Therapy Multiple Procedures reduction: The reduction for services provided to the same patient on the same day will go from 25% to 50%, beginningApril 1, 2013. Savings: $1.8 billion
  4. Non-Emergency Ambulance Transports:  Reduces payment rates by 10% for individuals with ESRD obtaining non-emergency basic life support services involving transport:  Savings: $0.3 billion