Sunday, December 30, 2012

No Medicare "Doc Fix" Could Result in Over 50% Salary Cut to Primary Care Physicians

With the Fiscal Cliff looming, I have re-posted this entry from November 2011, the last time Congress was against a deadline, and what got us into the mess we are in today.  Hopefully, Congress will come together and in addition to putting together a package that will spare most Americans tax increases, will eliminate the 27% cuts in payments to physicians that are set to go into effect on Jan 1, 2013.

From November, 2011:

Fortunately, the 27% reduction in Medicare payments to physicians that is set to take place in a matter of weeks unless congress acts is getting some press.  Fox News published this piece yesterday, as did the Washington Post. Writer Merrill Goozner breaks things down nicely in his article, "Is There a Doctor Fix in the House...and Senate?"

However, one thing that seems to be getting confused in all the media reports is the difference between physician payments and physician salary. A doctor's income is what he takes in (payments) minus expenses or overhead. Physician overhead (staff, office space, electricity, malpractice, equipment,etc.) is very expensive. One of the reasons, but not the only reason, a doctor's overhead is so high is because we need to hire extra staff just to deal with the insurance bureaucracy.  (See "Your 10 minute office visit needs 8 people and 45 minutes of work" via KevinMD.) While payments from Medicare to physicians have not really increased over time, overhead has gone up dramatically.

Physicians, patients, and policy makers need to understand that a 27% cut in physician payment will have a far greater impact on physician salary because of this overhead. 

An article from the AMA News discussing the issue of the "doc fix" has an interesting table with current payments and proposed payments.  Let's say a family physician sees 25 Medicare patients a day, 5 days a week for 50 weeks out of the year. At the current rate of  $68.97 per visit, this generates $431,062 in revenue. At 60% overhead of $258,637, this family physician's income would be $172,425 per year. Now any doctor reading this will tell you that 1) no physician would see exclusively Medicare patients because they just don't pay enough (at current rates) to sustain a practice and 2) you can't see 25 Medicare patients in a day because patients 65 and up have multiple medical problems and you simple couldn't see them all in 15-20 minute visits. However, the income is very close to$168,550 which is the average salary for a family physician. Thus, the numbers are good for the purpose of discussing the impact of Medicare cuts on not just payments but salary.

Now, if the 27% Medicare costs go into effect, Medicare will only pay $51.07 for that same visit.  Using the same numbers, the revenue generated is only $319,187 (26% decrease in Medicare payments), but the $258,687 in overhead stays the same.  This leaves the primary care physicians with a $60,550 annual income. That's a 65% cut in physician salary.  Even if my numbers are off, its clearly more than a 27% cut to salary, and much greater than 50%.  The bottom line is that if these cuts take place, primary care physicians will certainly stop seeing new Medicare patients, and many will stop taking Medicare patients altogether.Many already have!!!

Now, most pundits seem to think that since seniors vote, and Medicare is a big issue for them, and that the election is less than a year away; Congress will find a way (like they have for the past few years) to find the money to cover the cuts for at least another year.  However, I wouldn't be so sure.  I would advise anyone who is on Medicare, has a loved on on Medicare, or who plans on having Medicare in the future to call their representatives and ask them to ensure that these payment cuts not go into affect.


Anonymous said...

Yesterday, CMS announced a huge expansion of "free" benefits for 15 million obese Medicare recipients. (BMI's over 30).

They can now visit their primary care doctor 14 times in six months for "free" obesity counseling. If they have lost at least 3kg in the first six months, they are then eligible for an additional six monthly visits for a total potential 20 annual visits for obesity counseling.

If you do the math, this new benefit has the potential to double the number of total Medicare patient visits a year. 50 million Medicare recipients times 5 visits a year is 250 million potential visits. 30% of Medicare patients are obese so 15 million obese patients at 14 extra 'free" visits is 210 million extra visits a year for the first six months of counseling. If only half the patients loses 3kg in the first 6 months, there are potentially another 45 million office visits. Now not everyone is going to take advantage of this "free" service but why wouldn't millions of Seniors do it?

It's not clear if the benefit continues after one year for successful dieters if they are still over a 30bmi.

This huge unfunded benefit was done by CMS without any cost/benefit analysis, any thought on how this will be paid for or if physicians have the capacity to deliver this service.

Even if an SGR patch goes through, this new, massive benefit is going to break Medicare. There has been almost no news reporting on this.

shadowfax said...

your point is valid, though your numbers are ... rather exaggerated, since as you point out, no physician sees all medicare patients. A more reasonable estimate would consider an internist with 50% of his practice from Medicare. Let's also (to save me math) assume that doc is in a state where the Blues and commercial carriers pay about medicare rates, so the net revenue and overhead numbers can be unchanged.

In this, more realistic case, the doc's revenue is cut by about 13.5% to $372K and the net income drops to $114K. This is about a 33% pay cut for office-based physicians -- not as bad as the numbers you cited but certainly bad enough to cause them to depart the system in droves.

Dr. Matthew Mintz said...

Thanks for your comments.
You are correct that by using 100% Medicare patients, my numbers are somewhat exaggerated. There is no question that payer mix (% patients Medicare, %Medicaid, % commercial, etc.) greatly affects revenues. However, a few points.
1. Don't forget about Medicaid, which usually pays less than Medicare. Your 50/50 scenario is also probably not the norm.
2. Commerical insurers usually follow Medicare. Don't be surprised if their rates drop as well.
3. Your 50/50 scenario highlights the fact that you can't have 100% Medicare, and in fact, if Medicare cuts their patients, physicians will need to reduce or eliminate their percent Medicare patients to stay afloat.

leslie robbins said...

Our practice has about 67-70% medicare (and medicare replacement)patients,9% medicaid, 1% indigent care. We employee 9 people and the newly added workload of meaningful use reporting and EHR means cuts of any kind in our office will result in lay offs and ultimately compromised care. Very unfortunate considering you can't just have any Joe Shmoe providing these medical services to the community. This huge physician payment cut is not just killing the current medical environment but when our smart young kids start deciding on their future professions, do you think they'll see the work-in vs. compensation of this kind of healthcare environment and choose such a challenging/demanding route? They'll be engineers, small business owners, designers, maybe even politicians, but probably not doctors. Good payments = Good doctors. Cheap/poor payments = (often times) cheap/poor doctors......

Knitted_in_the_Womb said...

Reality check here...even a salary of $60,000 is in the top 35% of incomes. But as Shadowfax points out...your calculations are exaggerated (insurance companies will only get away with dropping reimbursements so far), and physician income is likely to stay well over $100K, which is in the top 15% of incomes. heart does not bleed for you!

Before you start in on how my life is in a doctor's life is also in the hands of the mechanic who fixes my brakes, or the electrician who wires my house, or the public works employee who times traffic lights. Doctors do have a valuable skill set and deserve to be well compensated...but the divide between rich (which doctors are--with incomes that are currently in the top 5%) and middle class has become too large, and needs to be curbed.

But I have no doubt that doctors will find ways to work around this to prevent large income drops. For example, my primary physician and my kids pediatrician both utilize Physician's assistants for visits, and even when we do see the actual doctor, we rarely see the doctor for more than 10 minutes...5 minutes is more average.

Dr. Matthew Mintz said...

@knitted in the womb,
There is no question that $60K is a lot of money. However, you need to consider how many years it takes you making nothing or minimum wage to get there (11 years after high school for primary care) and the incredible debt that is incurred (our students graduate with $200K in debt). Please see the post "Doctors make far less money than most people think" from KevinMD
Also, see many posts on the net, such as this one, showing that plumbers actually make more than doctors.
Even though $60K is a lot of money, no smart student will make these sacrifices to go into primary care when they could do better off as a dentist, lawyer, accountant, plumber, and most importantly a subspecialists. You are correct that the divide needs to be curbed, but it is the divide between specialists and primary care physicians. You are also correct that physicians will find a work around, such as your example how you "rarely see the doctor for more than 10 minutes...5 minutes is more average." Is this what you want? It's what you and everyone else will get unless things change drastically.

Nathan said...

One of the issues I've always wanted to get involved in is medical insurance because of situations like this, but unfortunately, it doesn't look like there's anything I can one I know can, either, frankly. I think that, at $60,000 a year for primary care physicians, this will make the career even less attractive to medical students. Yet, don't we need more primary care doctors than specialists? This would simply make that situation even worse. But, as the other comments say, it's difficult to predict what the salaries will actually be, but regardless, this will still send a message to medical students and others. If they don't know what's coming, then they'll probably worry about it rather than not.

Anonymous said...

@ Knitted_in_the_Womb . I didn't take advanced placement courses h.s. and work my butt off to want to make 60,000 you Stalin worshipping communist. There is a huge gap in the workload and difficulty and people outside of "pre-med" zone don't understand because they are so used to there pre-school like curriculums. Give me a break.