Looming Medicare Pay Cut Weighs Heavily on Physicians

Physician practices across the country are beginning to limit the care they provide for Medicare patients as Medicare physician payments fail to keep pace with the cost of providing health care to seniors. That's according to a study of more than 1,000 physician practices conducted by the Medical Group Management Association, or MGMA.

In a March 6 press release, MGMA said that nearly 24 percent of medical practices that responded to the survey said they had begun limiting or not accepting new Medicare patients as a result of the "financial uncertainty" created by temporary adjustments to Medicare physician payments and a pending 10.6 percent cut scheduled to take effect July 1.

About 46 percent of respondents said that they would have to stop accepting new Medicare patients or limit the number of Medicare patients their practices treat because of the expected payment reduction this summer.

MGMA members participating in the survey reported that they would "suffer further operational damage" as a result of expected double-digit reductions to Medicare physician payments. In addition,

MGMA President and CEO William Jessee, M.D., reacted to the survey results by lambasting Congress for its failure to act. In an interview with AAFP News Now, he said, "The inability of Congress to solve the Medicare physician payment problem has reached a level of absurdity. How can physicians be expected to care for a growing number of Medicare patients and invest in e-prescribing and electronic health records when there is absolutely no predictability to their revenues?"

Jessee said that physicians who responded to the MGMA survey were doing what any rational small business would do: "They're restricting the number of Medicare patients they treat, deferring or avoiding investments in new technology, and reducing staff.

"This situation is a very sad commentary on Medicare," said Jessee, adding that the program "is rapidly failing to deliver on its promise of access to health care for America's seniors."

Physicians have options when it comes to Medicare. They can participate fully, become nonparticipating Medicare physicians, or opt out entirely. In these difficult times, family physicians are having to make tough choices in an effort to preserve their practices.

James Molloy, M.D., of Sheridan, Ore., told AAFP News Now that his practice opted out of Medicare in 2008 and instead is offering Medicare patients a 40 percent cash discount on practice fees under individual contracts.

"We made a decision based on what we had to do to make this practice survive," said Molloy.

He said Medicare patients constitute about 12 percent of his patient panel, and that 30 percent to 40 percent of those had signed the private contracts. More than half of his Medicare patients have left the practice, but finding physicians who take new Medicare patients could be a challenge for those patients.

Prior to opting out of Medicare, Molloy said he routinely turned away Medicare patients so desperate to find a physician that they offered to pay for charges out-of-pocket. Medicare, however, prohibits its participating physicians from collecting full charges directly from Medicare patients for otherwise covered services.

Molloy was steadfast and resolute in his Medicare decision. "I refuse to participate in a system that I consider to be a very broken system." He added that he was prepared to "opt out for the long haul" until the Medicare payment system is permanently fixed.

FP Steven Blair, M.D., of Yuba City, Calif., said his small group practice became a nonparticipating Medicare provider as of Jan. 1, 2008. The high cost of living and providing care in northern California already were making managing a practice difficult even before the proposed cuts, he noted. But Blair and his partners got angry enough to take action when the government strung physicians along late in December with the six-month 0.5 percent increase.

Much of the progress made in increasing Medicare physician payment during the past decade would be wiped out by a 10.6 percent reduction, said Blair. "The whole episode left a very sour taste in my mouth. A lot of physicians felt like they were left out to dry."

As a nonparticipating Medicare physician, Blair still sees his Medicare patients, but he can bill them about 9 percent more than what Medicare pays participating providers. The extra cost, which is borne by the patient, would offset most of the anticipated Medicare payment cut in July, said Blair. As much as 10 percent of Blair's Medicare patients have left the practice, however.

"The most frustrating part for family physicians is this uncertainty of not knowing whether we'll have to deal with a 10 percent pay cut," said AAFP President Jim King, M.D., of Selmer, Tenn. "We already have a slim profit margin -- if any at all -- for taking care of our Medicare patients."

King said the Academy has received calls from family physicians seeking advice about their Medicare options.

"It's very frustrating because we like taking care of our senior citizens, and we want to continue to take care of our seniors -- but from a financial standpoint, some family physicians just may not be able to do so any longer if this payment mess with Medicare continues," said King. "The Academy is willing to work with the administration, Congress and CMS to find solutions," he added.

For John Saranko, M.D., of Plant City, Fla., the bottom line is whether or not his practice can afford to continue treating Medicare patients.

Late in December, with the government mired in indecision, Saranko and his partners voted not to accept any new Medicare patients in 2008. They also agreed that if the Medicare pay cut became a reality in July, the practice would opt out of Medicare in 2009.

Medicare patients make up about 57 percent of Saranko's patient panel, he said, and many of those patients are the kinds of old friends that come after 28 years in practice. He agonizes over dropping those patients, but if payments are slashed, Saranko said, he'll have no choice. "It's a business, and if I can't pay the bills, I can't survive," he explained.

Saranko said he's certain his practice would thrive without Medicare; he's consistently turned away younger patients in order to keep treating his Medicare population. "If I stop seeing Medicare patients, within three months, I'd be back up to where I am right now and maybe making more money," he said. That's because he likely could increase his daily patient load with a schedule full of younger patients presenting with simple, easily treated complaints. Older patients suffering from multiple chronic diseases just take more time, said Saranko.