As ‘Doc Fix' Cost Rises, Hospitals Tell Congress to Find SGR Funding Elsewhere

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By Nathaniel Weixel

Feb. 4 — Just days after the Congressional Budget Office increased the cost for permanently replacing the Medicare sustainable growth rate, leading hospital groups and health systems sent a letter Feb. 3 to the Senate Finance, House Ways and Means and House Energy and Commerce committees, calling for the rejection of any additional cuts to providers as a way to pay for the fix.

“Doctors must be reimbursed properly for their work to create a sound ecosystem for patients, regardless of which type of payment model applies,” the letter said. “However, it is unsustainable and unacceptable for hospitals to take on any further financial burden in order for this to be accomplished. We urge the committees to recognize the operational realities facing community hospitals.”

Groups including America’s Essential Hospitals, the American Hospital Association, the Federation of American Hospitals and the Premier healthcare alliance signed the letter.

Search for Permanent Fix

Lawmakers are once again searching for the perfect formula to permanently fix Medicare's physician payment system. Congress has passed 17 “patches” to the SGR. If the current patch expires March 31, Medicare payments to doctors would be reduced by 21 percent.

There was bipartisan, bicameral support for a permanent fix in 2014, with the proposed SGR Repeal and Medicare Provider Payment Modernization Act (H.R. 4015, S. 2000), but the process has bogged down because lawmakers haven't been able to agree on how to pay for it.

Lawmakers have said they are supportive of the policies that were in the bipartisan, bicameral bill. But there have been no new confirmed proposals on offsets for the bill. Republicans have proposed structural changes to Medicare, while Democrats have said if offsets are needed, war funds should be used.

“For too long, the annual action of ‘patching' the SGR has resulted in postponement of a sustainable and predictable remedy, escalated the budgetary cost of an eventual solution and resulted in significant and damaging Medicare and Medicaid cuts to hospitals. These cuts have contributed in part to the nearly $122 billion in reductions imposed on hospitals since 2010,” the hospital groups wrote.

The current patch, the Protecting Access to Medicare Act of 2014, was signed into law in April 2014.

Cost Increase

The Congressional Budget Office Feb. 2 raised the cost of a permanent fix. According to the CBO, the legislation (H.R. 4015, S. 2000) to replace the SGR would cost $174.5 billion from 2015 to 2025.

That's a nearly $30 billion jump from the $144 billion 10-year estimate that the CBO made in November 2014. 

However, the CBO said some of the offsets in the current patch have since expired. For example, the previous estimate didn't include the budgetary effect of the provision in the current patch that would sunset bonus payments for providers who participate in alternative payment models.

The CBO's latest document estimated that freezing physician payment at the current rate through 2025 would cost $137.4 billion, while offering doctors a 1.0 percent hike from April to December 2015, and an additional 1.0 percent each year through 2025 would cost $191.8 billion.

The CBO also examined the costs of potential fixes, including:

  •  freezing payment levels through the end of 2015 ($5.9 billion, but an 18 percent payment cut in 2016);
  •  freezing payment rates at current levels through FY 2016 ($15.4 billion combined in 2015 and 2016, and a 15 percent payment cut in 2017);
  •  a 1.0 percent update for April through December of 2015 ($6.2 billion); and
  •  a 1.0 percent update for April through December 2015, as well as the entire calendar year 2016 ($17.6 billion combined in 2015 and 2016).


To contact the reporter on this story: Nathaniel Weixel in Washington at

To contact the editor responsible for this story: Brian Broderick at