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Medicare pay cut delayed (again)

January 1, 2012

Article

Legislators will try to sort out a fair compensation system for physicians after they staved off a scheduled 27.4% pay cut for those who treat Medicare patients.

Key Points

The Senate's 2-month extension, passed by the House and signed by President Obama Dec. 23, holds reimbursements at 2011 rates while bills from the House and Senate are negotiated in a conference committee.

Washington, DC-Legislators will try to sort out a fair compensation system for physicians after they staved off a scheduled 27.4% pay cut for those who treat Medicare patients.

The so-called "doc fix" gives no rate increase and its short term keeps physicians on the edges of their seats while they try to manage their practice budget.

That's what happened in 2010, as five times Congress voted to avert a pay cut for physicians. Three times, the Centers for Medicare and Medicaid Services (CMS) held payments to give Congress time to work out an alternative to cuts that took effect. For 24 days that June, physicians had no cash flow. The upheaval wreaked havoc on practices, which have employees, mortgages, and equipment purchases to consider. A December 2010 bill postponed cuts until Jan. 1, 2012.

House Republicans pledged last month they would not leave Washington, DC, for the holidays until they found a longer-term plan, but the Senate refused to go along and demanded the 2-month fix.

"I think it (the 2-month fix) is necessary for doctors, but it's pretty pitiful," Dr. Bakewell said. "Doctors definitely need a permanent fix. They can't keep living in limbo. It's no way to run a business. We can only hope that the conference committee does its work and comes up with a permanent fix."

Once the House returns to Washington, DC, on Jan. 17 and the Senate on Jan. 23, the matter will be taken up by the conference committee. Among the committee members from the House are two physicians-including ophthalmologist

Nan Hayworth, MD (R-NY). They have until Feb. 29 to hammer out a new plan, but getting rid of the sustainable growth rate (SGR) formula will add $300 billion to the federal deficit.

Cathy G. Cohen, vice president of governmental affairs for the American Academy of Ophthalmology (AAO), expressed concern that a substantive change in physician payment now hinges on legislators during an election year.

"We're obviously glad the cut did not go into effect, however, we don't see a path forward," Cohen said. "The election year becomes a more polarizing environment to work on legislation, so it's traditionally not a time when big plans come together."

House leaders are insisting on a 2-year fix to give physicians more stability, Cohen said, but such a plan would mean this year's 27.4% scheduled cut grows to 37% in 2014.

"While we need stability in general, the AAO and medical groups can't endorse a plan that includes a 37% cut," she said. "Our position is we need a permanent fix for this problem."

A 1-year fix means a 34% cut in 2013.

"None of these are good options," she noted.

The cuts, mandated by the SGR formula, would occur on top of the 2% across-the-board cuts required in 2013 after the Joint Select Committee on Deficit Reduction (the "super committee") failed to agree in November to a massive overhaul of the federal budget.

The AAO has asked legislators to hold off on cuts for 5 years while CMS tests new ideas that could save the system money, such as accountable care organizations (ACOs), bundling, valuebased modifiers, and value-based purchasing. While some proposals (such as ACOs) might not work for specialties like ophthalmology, "there are a number of ideas that aren't tested out there," Cohen said. "We're not ready to agree today to what the path going forward should be."

Diversify income

In the meantime, physicians should consider diversifying their income streams to minimize the impact of the income swings caused by Medicare payment cuts, Dr. Bakewell said.

CMS has extended its window during which physicians may change their status as a Medicare provider from Dec. 31 to Feb. 14, but Dr. Bakewell said it is impractical for ophthalmologists, whose practices largely depend on geriatric patients, to stop accepting Medicare. For example, Medicare patients make up about 65% of his Phoenix-based practice.

Instead, ophthalmologists could consider adding an optical shop or becoming a consultant, Dr. Bakewell noted.

"There are other things that we can do than see patients to generate income," he said.