The annual updates for the conversion factor are made according to the sustainable growth rate (SGR), a formula that determines a target physician spending amount. The SGR ties annual physician payment updates to the estimated change in fees for physician services, the estimated change in beneficiaries enrolled in Medicare’s fee-for-service program, the estimated growth in real gross domestic product (GDP) per capita and the estimated change in expenditures due to law and regulation.
Explore This IssueSeptember 2010
If actual spending is less than the target, the update is positive. If actual spending is greater than the target, the update is negative and the Medicare physician payment is cut.
The physician community argues that the SGR is flawed because it is based on the GDP, rather than the change in the cost of practicing medicine, and because it does not allow for such factors as advances in medicine or the shift in care from hospitals to physician offices.
Sources: The American Medical Association and the Medicare Payment Advisory Commission