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Unintended Consequences Mount

Posted Feb 03 2013 4:15pm
Stanley Feld M.D.,FACP,MACE

On January 1, 2013, as part of the law to delay the “Fiscal Cliff” congress and the President delayed the Doctor fix for another year.

The Medicare Sustainable Growth Rate (SGR) is a method currently used by the Centers for Medicare and Medicaid Services (CMS) in the United States to control spending by Medicare on physician services.

In the last several years the SGR calculated reductions in physician reimbursements have been delayed. The yearly percentage reduction has been cumulative over the last five or six years.

The percentage reduction for 2013 was supposed to be 29%. The cumulative reduction due in 2014 will be over 30% unless the SGR is permanently fixed.

The formula for the yearly SGR reduction is complicated and defective. Physicians’ reimbursement for service has been reduced over the years so that a 29% reduction in Medicare’s physician reimbursement would surpass physicians’ overhead costs for providing their service. 

Physicians could not stay in business if it cost more to service patients than they would be reimbursed. Physicians accepting Medicare cannot charge more than the law permits.

Therefore, with the threat of massive reductions, more and more physicians are opting out of Medicare. These physicians will serve Medicare patients but the patients have to pay for the services out of pocket.

In the past patients would send their paid bill to Medicare and receive reimbursement for Medicare allowable fees.

The administration’s goal is to force all physicians to participate Medicare. A new administration regulation eliminates direct Medicare reimbursement to patients for services provided by physicians that do not participate in Medicare.

The losers are seniors on Medicare.

I predicted there would be a mass exodus of physicians from the Medicare program. if the “Doc Fix” were not enacted for 2013. Physicians opting out of the Medicare program would put an added burden on seniors.

Physicians are happy that the reimbursement cuts have been delayed for another year because they want to be able to service their patients without putting an additional burden on them.

The government postponing the cut for another year continues to frustrate physicians because they have to face the same uncertainty next year.

Neither congress, physicians nor the administration support the present SGR formula. However the government is unwilling to spend $200 million dollars to fix the SGR formula.

This year hospital systems are being forced by the government to receive less Medicare reimbursement in order to pay for half of the cost of the temporary “Doc Fix.” Hospital systems are not very happy.

Texas hospitals have already faced painful cuts,” said Dan Stultz, president and chief executive officer of the Texas Hospital Association.

“Although addressing the Medicare physician payment formula is imperative, cutting reimbursement to one health care provider to pay another is shortsighted.

These cuts come at a time when hospitals are making significant investments in technology and facilities to provide for an aging population.”

Hospital systems claim they continue to struggle with past decreases in Medicare and Medicaid reimbursements.  Government reimbursement represents about 60 per cent of hospital system’s revenue. Hospital systems assert that decreasing one healthcare providers (physicians) reimbursement to pay for delaying the “Doc Fix” is coming at a time when hospital systems are struggling for survival.

These cuts come at a time when hospitals are making significant investments in technology and facilities to provide for an aging population.”

Patients who have recently been in the hospital recently uniformly complain about hospital bills and hospital co-pays.

When patients study the “Explanation of Benefits (EOB)” carefully they complain about being billed for procedures they did not receive.

Most hospital bills are impossible to interpret.

Patients also complain about the high salary of hospital CEOs. These salaries are usually published in local newspapers.

 The high salaries paid to the multitude of hospital administrators are not available to consumers.

The way hospital systems report their expenses are not available to the government or consumer protection groups either.

The government should not take the hospital systems word that the hospitals are losing money because of expenses and low reimbursement.

I suspect there is a great deal of waste, overpayment and duplication that the government could question.

If all of these expenses are justified the government should reimburse hospital systems for expenses and provide them with a reasonable net return. The government should not indiscriminately cut reimbursement.

There are a lot of dysfunctional activities in the healthcare system. The dysfunction is a result of massive regulations that are unenforceable.

It is important to find the root causes of the dysfunction. The administration should help hospital systems fix the dysfunction rather than penalize them indiscriminately.

Hospital systems have already been adjusting to these stresses. They are consolidating and forming regional monopolies in the name of efficiency.

The result of eliminating hospital competition will only increase the costs of hospitalization for patients.

Hospital systems are also buying physicians practices at an alarming rate. Physicians want to practice medicine and not deal with all the complicated regulations.

 Once these physicians realize that their independence and intellectual freedoms are compromised there will be further unintended consequences.

 If the administration does not help fix the dysfunction hospital systems will figure out a way to decrease the impact of the cuts.

The unintended consequence will mount. The cost of the healthcare system will escalate while the healthcare system will become more dysfunctional.

The burden of cost increases due to this dysfunction will fall on Medicare and Medicaid recipients.

  The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.




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