April 2000 Bulletin

AAOS, 16 others sue HHS on SGR calculation

The AAOS and 16 other medical associations, including the American Medical Association, are suing the Department of Health and Human Services (HHS) to recoup billions of dollars in lost Medicare payments to physicians. The groups are alleging that Health Care Financing Administration officials miscalculated the 1998 and 1999 Sustainable Growth Rate (SGR). The SGR is an important factor in determining the total amount of money that Medicare will pay physicians each year.

When HCFA calculates the SGR for the coming year, it has to make projections regarding several factors. Once the year has passed, it could turn out that the projections were wrong, which could have made the SGR for that year too high or too low.

In the 1997 regulation establishing the SGR, HCFA said that if its projections turned out to be wrong, an adjustment would be made in future SGRs to make-up the difference. Then, in late 1998, HHS changed its policy and decided it would not make any adjustments if its projections were wrong. It did this without any prior notice or opportunity for public comment.

AAOS and the other medical associations claim that because the SGR was not calculated correctly for 1999, physicians may have been shortchanged by more than $3 billion in Medicare payments. The groups also are suing because HCFA changed its policy without giving the public any notice or chance to comment.


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