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Fine Print of Budget Deal Doesn't Bode Well for SGR Overhaul

Evidence-Based OncologyFebruary 2014
Volume 20
Issue SP2

The tiny “raise” touted in the latest temporary fix to Medicare’s Sustainable Growth Rate (SGR), which was wrapped inside the bipartisan budget deal President Barack Obama signed December 26, 2013,1 is anything but good news for oncologists, according to experts from 2 major medical associations.

In fact, according to Ted Okon, executive director of the Community Oncology Alliance (COA), Congress sent signals that chemotherapy administration is going to continue its march into the

hospital setting, leaving community oncologists and private practice physicians out in the cold.

News reports on the latest SGR legislation, known as a “patch,” touted a purported 0.5% increase in Medicare rates for the first quarter of 2014.2 But beyond that headline, the real news is less rosy: the SGR stopgap, designed to forestall cuts above 20% to make up for years of shortfalls, includes a provision to keep in place—possibly until 2021—the 2% cuts to Medicare’s reimbursement of physicians for patient care and buy-and-bill medication services that were imposed earlier this year due to the sequester.

The Senate approved the overall budget package December 18, 2013, with a 64-36 vote, following a lopsided House vote of 332-94 the week prior.2

The votes translate into bad news for community oncologists, according to Okon of COA, a lobbying group for oncologists in community practices. “On January 1, the Centers for Medicare & Medicaid Services will pay less for chemotherapy administration—about 7.4% less,” Okon said. “Eventually, CMS will pay 10% less to administer chemotherapy drugs with no cost-base justification.”

The latest 3-month fix, following 12 years’ worth of stopgap measures to avoid catastrophic cuts to Medicare rates, is designed to let Congress finish designing a plan to permanently eliminate

and replace SGR. Critics of SGR call it a flawed instrument that has never kept pace with the true cost of administering care. Congress has vowed to use SGR reform to move Medicare away from a fee-for-service reimbursement model to one that rewards quality care, but many details have yet to be worked out. Left unresolved is how the bill will be funded; that duty will fall to House and Senate appropriators.

Although the military, programs for the needy such as Head Start and Meals on Wheels, and the Transportation Security Administration will benefit from the budget deal, noticeably missing is specific funding for individual federal agencies and programs, including the National Institutes of Health, a critical source of research funding for oncologists, hematologists, and other cancer researchers. It’s unlikely that NIH funding will return to pre-sequestration levels, according to a statement from the American Society of Hematologists (ASH).3

“The passage of the bill is good news for the nation, with no looming government shutdown, but the demands of the sequester and constraints on NIH funding remain,” said Alan Lichtin, MD, chair of government affairs at ASH. Lichtin added that the institution where he works as a hematologist, the Cleveland Clinic, “is not immune to budget constraints [and] has experienced more voluntary retirements. With reimbursement rates going down, Cleveland Clinic has not been able to expand many of its research programs.”

The budget deal is disappointing to groups that embraced aspects of an earlier bipartisan plan for SGR reform, drafted by Congress and unveiled on October 30, but now being revised. The day before that announcement, Okon spoke at a Chicago conference, Value-Based Oncology Management, and outlined the “destructive” effects that current Medicare reimbursement policies have had on community clinics.

Since 2005, after Congress altered Medicare cancer drug reimbursement formulas—tying them to average sales price instead of average wholesale price—Okon said 288 clinics have closed, and 469 have been acquired or have a physicians’ services agreement with a hospital. “The community share of oncology patients is declining,” Okon said.4

How the SGR Shortfall Happened

The problem with SGR dates to 1997, when Congress created the formula in an effort to control spending. The formula was supposed to set realistic yearly and cumulative spending targets; if the cost of care exceeded the target in any given year, rates would be cut the following year to make up the difference.

However, inaccurate forecasts meant actual Medicare Part B spending has exceeded the target for more than a decade. American Medical Association (AMA) President Ardis Hoven, MD, told MedPage Today after the October 30 announcement that, each year, the “sword of Damocles” would hang over physicians’ heads as they waited for Congress to pass legislation to thwart the automatic cuts.5 Yet the longer Congress failed to fix SGR, the worse the problem grew.

How big is the problem? Estimates for getting rid of SGR include $377 billion for 2012 and $139 billion for 2013, and there are no good answers on how to address the problem. When asked how the repeal would be funded, AMA’s Hoven said, “I don’t think we really know.”5 Some accounts attribute the shrinking SGR shortfall to the fact that physicians have already sustained so many cuts.

Problems with Medicare’s dysfunctional reimbursement model have hit oncology especially hard, and the effects of the federal sequester have only made things worse, Okon explained in Chicago. Oncology’s buy-and-bill system of administering increasingly expensive medications, the diversity of disease states, and the fact that so many cancer patients are older and reliant on

Medicare mean an outdated reimbursement model is acutely felt in oncology. According to the American Cancer Society’s 2013 report, 77% of all new cancers are diagnosed in persons 55 years or older.6


The lack of resolution has not been good for doctors or patients, Okon told the Chicago gathering. More and more patients who need chemotherapy have been pushed into hospitals, where costs are higher. Shortages of key chemotherapy drugs, especially generics, have emerged, along with parts of the country where care is limited.


1. Lederman J. Obama signs bipartisan budget deal, defense bill. Associated Press. http://www.boston.com/2013/12/26/obama-signs-bipartisanbudget-deal-easingcuts/YDVAgpYUlFLBTilPKCb6gL/story.html. Published December 26, 2013. Accessed January 2, 2014.

2. Pittman D. Senate agrees to 3-month SGR ‘patch.’ MedPage Today. http://www.medpagetoday.com/ PublicHealthPolicy/Medicare/43507. Published December 18, 2013. Accessed January 2, 2014.

3. American Society of Hematology. Statement from the American Society of Hematology on Congressional Budget Deal [press release]. Washington, DC: ASH Newsroom; December 18, 2013. http://www.hematology.org/News/2013/11941.aspx. Accessed January 2, 2014.

4. Caffrey MK. Oncology groups active in efforts to repeal SGR. Am J Manag Care. 2013;19(SP13): SP440-SP441.

5. Pittman D. AMA president discusses SGR repeal efforts. MedPage Today. http://www.medpagetoday.com/MeetingCoverage/AMA/43041. Published November 20, 2013. Accessed November

22, 2013.

6. American Cancer Society. Cancer facts and figures, 2013. http://www.cancer.org/acs/groups/content/@epidemiologysurveilance/documents/document/acspc-036845.pdf. Accessed November22, 2013.

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