Physicians and other healthcare providers are being forced to do more with less. To remain financially viable, doctor’s offices must perform more procedures with fewer resources, in an increasingly complex health care environment. The 2022 Medicare Physician Fee Schedule proposed payment rule, which was released in July of 2021, represents yet another example of how payments to physicians and other providers have failed to keep pace with inflation and, in some cases, have decreased in real terms.
As doctors and other health providers well know, Medicare and Medicaid reimbursement rates are substantially lower than private insurance. Yet providers must agree to accept these rates if they wish to participate in Medicare or Medicaid. And very few providers are able to forgo participation in these government plans.
With a continued focus on “efficiency” and “managing spending,” Congress and the Medicare Payment Advisory Commission (MedPAC) claim to use reimbursement rates to rein in the cost of health care. Yet the result of this continued focus on lower reimbursement has been fewer specialists, longer patient wait times, a medical practice geared towards time instead of quality, and physicians doing office-based surgery to get better leverage on facility rates besides professional rates.
Medicare uses a complex formula to determine reimbursement rates. For a given service, MedPAC assigns a relative value unit (RVU) that is multiplied by the conversion factor for a given year. While many factors go into setting the conversion rate, over time it has only decreased and never increases.
The 2022 Medicare Physician Fee Schedule proposed payment rule includes a proposed conversion factor of $33.58, which represents a decrease of $1.31 from 2021. The proposed fee schedule would reduce physician pay by approximately 3.75%.
The conversion factor has remained relatively flat for more than twenty years, despite general inflation of more than 50% during the same time period. In fact, if the conversion factor had been indexed to inflation its current value would be $57.60.
In addition, the clinical practice of medicine has become increasingly complex due to the introduction of new treatments and technologies, the incorporation of electronic health data, new regulations, and the increasing demand for services. Physicians also face additional administrative burdens which require additional time and resources.
Taken together, these factors have reduced physician income and combine to incentivize healthcare providers to increase volume, often at the expense of quality and value of care, and time spent treating patients.
Further exacerbating the issue, a 2021 study by the Urban Institute found that Medicaid reimbursements are often even lower than those for Medicare. The study found that, for 27 common procedures, the Medicaid reimbursement rate was 72% of the Medicare reimbursement. This discrepancy could have profound implications, especially as enrollment in Medicaid increased during the COVID-19 pandemic.
In addition to reimbursement for patients who qualify for Medicare or Medicaid, reimbursement rates are also used to calculate the cost of care for uninsured COVID-19 patients and to set the cost of reimbursement for out-of-network COVID-19 vaccine administration.
The Biden administration has made moves to bolster Medicaid, calling on policymakers to review policies that undermine protections for patients with pre-existing conditions, reduce coverage, establish barriers to coverage, or reduce affordability of coverage. But to be effective, policymakers will need to take a closer look at physician fee schedules.
According to the American Medical Association, increasing reimbursement rates will reduce the likelihood of patients not receiving care and would reduce disparities in access to quality medical care.
Historically, hospital systems have used economies of scale to combat the mismatch between physician compensation and productivity. But eventually, these systems will run out of ways to reallocate funds to cover physician subsidies. Physicians, therefore, must remain aware of how market forces are driving compensation and must take steps to protect their financial futures. Physician specialty groups have opposed the rate cuts, which disproportionately impact specialty providers and those who were affected by the COVID-19 pandemic.
For example, according to a December 2020 statement from the American College of Radiology, “While the COVID-19 pandemic rages and wreaks havoc on the health care system, providers continue to contend with overflowing hospitals and the financial impact of the spring-summer government-recommended shutdown of most non-urgent medical care. Against this backdrop, double-digit Medicare cuts will be devastating for patients, communities and providers.”
Similarly, the American Academy of Ophthalmology has pledged to work with the AMA and the Surgical Care Coalition to ask Congress to take action to ensure fair physician reimbursement.
Led by attorney Neil H. Ekblom, Ekblom & Partners, LLP has extensive experience advising and representing physicians and other healthcare providers in matters involving the Medicaid and Medicare physician fee schedule. These include:
We routinely advise and represent medical providers in contract and transactional matters, healthcare litigation, and in defense of general contractual and tort claims. Contact us to see if your situation matches our expertise.