AAMC Letter to Congress on Fixing The Sustainable Growth Rate
As Congress prepares to consider Balanced Budget Act (BBA)
amendments and Medicare reforms, the Association of American
Medical Colleges (AAMC), which represents over 80,000 clinical
faculty physicians practicing at teaching hospitals throughout
the country, urges that any proposed legislation include improvements
to the Medicare Fee Schedule's Sustainable Growth Rate (SGR)
system. Enacted under the BBA, the SGR establishes a target
growth rate for Medicare spending on physician services, then
annually adjusts payments up or down, depending on whether
actual spending is below or above the target.
Since inception of the SGR, the AAMC along with the physician
specialty societies, the American Medical Association and
the Medicare Payment Advisory Commission (MedPAC), have alerted
the Health Care Financing Administration (HCFA) to projection
errors in the SGR formula that have resulted in significantly
lower payments to physicians than justified. (A discussion
paper is attached outlining the technical problems and
recommended steps to improve the SGR system.) To date, the
agency has not acted to correct these errors.
Physicians have been subject to significant Medicare payment
cuts since implementation of the Medicare Fee Schedule system,
and in particular, since transition has begun to a resource-based
practice expense methodology required under the BBA. Cumulatively
from 1991-97, physician payment updates have slipped 10% below
growth in medical practice costs. In addition, the new resource-based
practice expense system will cause double-digit reductions
in total Medicare payments to physicians in key surgical and
medical specialties and emergency medicine at the end of the
transition period.
Medical education, research and clinical advances, are extremely
vulnerable to pressures on teaching physician income as well
as teaching hospital revenues. In fact, medical schools finance
up to 46% of their operating budgets for academic activities
from income generated by their clinical faculty and relationships
with teaching hospitals. The AAMC is especially concerned
that the disparity between Medicare's rates and physicians'
practice costs will become much wider, making it difficult
for teaching physicians and medical schools to continue their
role as safety-net providers, as well as to cover the costs
of advances in technology and state-of-the-art medical care.
The uncompensated care burden of teaching physicians continues
to grow. The AAMC tracks uncompensated care in terms of both
charity care and bad debt charges for its member practice
plans. Median charity care charges per clinical faculty member
were $13,305 in 1998. The typical faculty practice plan has
342 full time faculty members resulting in a charity care
burden of at least $4.5 million per institution annually.
We believe these charity care figures are substantially understated
due to the fact that many faculty practice plans have not
developed the appropriate accounting procedures to track the
amount of charity care provided by the clinical faculty. The
total uncompensated care burden is even larger, however, when
bad debt charges per faculty member are added to charity care.
The total uncompensated care per faculty member (charity care
plus bad debt charges) in 1998 jumps to $34,219 or $11.7 million
per practice plan. This is a staggering financial burden.
BBA provisions and other Medicare payment reductions are
threatening the essential activities of the nation's medical
schools and teaching hospitals. Congress must act to assure
that teaching physicians are able to continue their roles
as "safety-net" providers of care to the elderly
and the uninsured, as researchers of new cures and medical
technologies, and as teachers of tomorrow's doctors. Changes
in the SGR are necessary to stabilize payment updates and
to avoid potential disruptions in patient access to care and
the continuation of medical innovation.
Americans value the highly specialized expertise of teaching
physicians practicing at the nation's medical schools and
teaching hospitals. We urge the Congress to help assure that
this expertise continues to be available to all patients in
need of their care.
Sincerely,
Jordan J. Cohen, M.D.
President
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