The Centers for Medicaid and Medicare Services recently announced a scheduled cut in physician fees for 2012 using a sustainable growth rate (SGR) formula, which determines annual adjustments to payments for services. The SGR formula was implemented in 1998 to curb the growth in expenditures on physicians’ services.

In a new paper, “The Sources of the SGR ‘Hole’,” published in the New England Journal of Medicine, Amitabh Chandra, professor of public policy, along with Ali Alhassani and Michael E. Chernew, both of Harvard Medical School, warn against this method. They argue fee cuts applied evenly across all states, specialties and services hardly provide a fair solution.

“Some health care providers will receive cuts in pay despite the fact that they contributed little to the increases in the volume of services delivered that resulted in the SGR-dictated cuts,” write the authors.

“Different states or physicians contribute to cost-growth, but even the ones that did not contribute to cost growth get their fees cut. The SGR does this, as does what Congress is currently proposing with Medicare fee-cuts,” said Chandra.