Physicians Consider Dropping Medicare Patients

Low reimbursement rates squeeze the earnings at doctors’ offices
By Thomas Gaudio


Mounting pressure on doctors stemming from Medicare has New Jersey physicians thinking about dropping patients with the federal insurance.

More than 1.2 million people in the state have Medicare, which provides health insurance for individuals 65 and older, and for the disabled and patients with permanent kidney failure.

Most private-practice doctors in the state accept Medicare insurance, which makes up about 30 percent to 40 percent of the average physician’s income, according to the Medical Society of New Jersey (MSNJ), a trade group based in Lawrenceville.

The group says Medicare reimbursements are falling behind the rising cost of running a doctor’s office in New Jersey, which includes malpractice insurance, employees’ health care benefits and rent.

Eleventh-hour action was needed last month to stave off a scheduled 10.1 percent reduction in Medicare reimbursements nationwide. The reprieve came when President Bush signed the “Medicare, Medicaid and SCHIP Extension Act of 2007,� which forestalled the reduction and raised Medicare payments by 0.5 percent.

Barring a change to the payment formula, or another legislative intervention, the double-digit slash is set to take effect July 1.

Congress has come to the rescue of Medicare reimbursement several times before, delivering small increases instead of the decreases that the current federal formula has called for.

But increases that don’t keep pace with inflation, plus the constant threat of cuts and growing business costs, have many New Jersey doctors thinking about “opting out of the Medicare program,� says Richard Scott, president of MSNJ.

There are about 19,000 licensed and practicing doctors at private practices, hospitals and other facilities in New Jersey, according to the trade group.

Scott says spine surgeons and some other specialists have already stopped taking Medicare users, mostly because they can’t afford to see “low-margin patients.�

General practitioners and internists may soon follow suit if a new reimbursement formula isn’t implemented, he says.

State Sen. Robert Singer (R-Ocean County), who sits on the Health, Human Services and Senior Citizens Committee, says low Medicare reimbursement rates are hurting “the family practice doctor, the internist, the bread-and-butter doctors, who by the way don’t make a gazillion dollars a year. We keep forgetting doctors are small-business people.�

Congress changed the way it calculated physician fees in 1997, according to the Centers for Medicare & Medicaid Services (CMS), which administers those plans. In 2002, the new formula led to a cut of 4.8 percent, the first time there was a “negative update� in the fee schedule, says Ellen Griffith, a spokeswoman for CMS.

Griffith says that “every year since 2002, the statutory formula has yielded a negative update, but Congress has intervened each year to prevent the cut from going into effect. CMS has worked with Congress and physician groups to try to develop an alternative methodology [new reimbursement formula] that will not erode physician payment rates, but will still constrain the rate of growth in health-care spending.�

William Isle, a health-care and elder-care attorney in the Princeton office of the firm Archer & Greiner PC, says scheduled cuts in reimbursement rates are the result of a “combination of more demand for services from more people over the age of 65 and the increasing costs of technology.�

But Pamela Moore, senior editor of Physicians Practice, a Baltimore trade publication that bills itself as a how-to guide for running a doctor’s office, says physicians should combat declining payment rates with business savvy. “Doctors need to think of their practice as a business, and they need to come up with creative ways to deal with changing reimbursements,� says Moore.
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