Reimbursement Woes: Physicians Can Now Move On

In an unusual display of bipartisanship, Congress made it clear that they have no intentions of cutting physician reimbursement—even in a time when the country is facing severe economic challenges. By unanimous consent, the Senate passed the Medicare and Medicaid Extenders Act of 2010, extending Medicare rates through the end of 2011 and preventing the threatened 25% cut that was to go into effect on January 1. The following day, the House of Representatives passed the payment fix by an overwhelming (nearly unanimous) vote of 409 to 2, and President Obama’s signature is expected imminently.

Physicians should feel reassured that the uncertainty and concern that the SGR formula creates each year—and no doubt will until the calculation is redefined—should be tempered. This year’s resolution, albeit not an increase, can be taken as an indication that the annually feared drastic reductions are not likely. Physicians can now plan accordingly and make business decisions and capital investments that enable practice growth.

One thought on “Reimbursement Woes: Physicians Can Now Move On

  1. I believe that it is unlikely that the reimbursement trend is headed anywhere but down given the Dec 2010 tax cuts; repeated Medicare delays or not. The Deficit Reduction Act authorized the Medicare Physician Advisory Committee (MedPAC) to develop a recommendation regarding the Sustainable Growth Rate (SGR) calculation for Congressional consideration. It is the SGR formula that is driving the Medicare Part B physician reduction. Without a permanent legislative solution, physicians will continue to be threatened with average yearly cuts, temporary delays notwithstanding. CMS found that many private health plans have been able to negotiate very low rates with practices based on relatively stagnant Medicare payments. Antitrust relief for physicians is not included in the legislation. Nonetheless, there appears to be growing recognition that antitrust relief is needed to enable physicians and other health care professionals to effectively negotiate with health plans without fear of violating antitrust laws.

    With healthcare costs in our country rapidly approaching $2.5 trillion annually the U.S. spends more on healthcare than any other nation. Reimbursements from Medicare and private payers have not kept pace with annual increases in operating costs, delayed reductions or not. Health care is not ‘recession-proof’ as often claimed, but rather only ‘recession moderated and delayed’. A macroeconomic forecasting model developed at the Temple University Center for Health Finance indicates that from 1960 to 1990 the health care industry, although growing faster than the economy as a whole, did show reductions in growth following each recession. Some of the effect is felt immediately as consumers cut back on discretionary primary care, over-the-counter medications, but most of the spending reductions unfold over the subsequent four years, and the lag between recession (or recovery) can be as long as seven years.

    The ailing economy is leading many Americans to skip doctor visits, skimp on their medicine, and put off mammograms, Pap smears and other tests. And physicians worry the result will be sicker patients who need even more costly treatment in the long run. Statistics from a USA Today healthcare poll show that 36% of family members have put off much needed medical care. The aging physician workforce is an additional problem: one third of physicians are over 55 years of age, and the population over the age of 65 years is expected to double by 2030. As part of the Federal governments’ strict mandate to reduce waste and eliminate fraud and abuse in Medicare and Medicaid, the DHHS and CMS have revised their calculations of improper payments using “a more rigorous method” in calculating the error rate, and contracted audits to commercial firms, so expect paid bounty-hunters to come knocking looking for Medicare refunds to extract, even on simple CPT coding disputes.

    Insurance companies are notorious for denying care to improve profitability, at the expense of physicians. The Federal Department of HHS issued an order beginning January 1, 2011 that insurers must spend at least 80-85 cents of every dollar on medical care and quality. Insurers that fall short will have to issue refunds to enrollees. Insurers have threatened to pull out of markets, with the result that some states are requesting exemptions to the Federal rule fearing loss of insurers. Employer-provided healthcare insurance is at risk of losing its tax-deductibility, which could cause consumers to go-without or choose lesser-benefit plans.

    This is not a time for physicians to rest attentiveness to the issues.

    Keith C Borglum CHBC CBB
    Medical Practice Appraiser and Broker
    Certified Healthcare Business Consultant
    Certified Business Broker specializing in medical practice valuation and sale
    Practice Management Faculty – many medical associations

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