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Medicare Physician Payments
Under the Sustainable Growth Rate (SGR) system for determining Medicare payments to physicians, physician fees are updated each year by an inflation factor (the "Medicare Economic Index") plus or minus a "Performance adjustment." Section 1848(f)(2) of the Social Security Act specifies the formula for establishing yearly SGR targets for physicians' services under Medicare. The use of SGR targets is intended to control the growth in aggregate Medicare expenditures for physicians' services.
The SGR targets are not direct limits on expenditures. Payments for services are not withheld if the SGR target is exceeded by actual expenditures. Rather, the fee schedule update is adjusted to reflect the comparison of actual expenditures to target expenditures. If expenditures exceed the target, the update is reduced. If expenditures are less than the target, the update is increased.
Under the statute, the update for a year is determined by comparing cumulative actual expenditures to cumulative target expenditures from April 1, 1996 through the end of the year preceding the year at issue. For instance, the 2002 update reflected a comparison of cumulative actual to cumulative target expenditures from April 1, 1996 through December 31, 2001.
Regulatory Information
Additional Resources
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