Even If Medicine Avoids the 'Cliff,' Problems Still Loom
This is not turning out to be a good Christmas for physicians because of what remains to be resolved for next year.
The Medicare reimbursement will automatically drop by 27% unless Congress extends it another year - something that has been done in the eleventh hour of every year since 2004. I expect Congress to once again throw a bandaid at the "sustainable growth rate" formula. To pay it off now would cost $25 billion. There is no time to work out a permanent fix because of the threat of significant cuts in programs and higher taxes that would occur January 1st, due to the so-called "fiscal cliff."
Besides a decision on the Bush tax cuts (which by now everyone pretty much understands), Republicans and Democrats must come to grips with the sequestration that will mean deep cuts in defense as well as Medicare and Medicaid and other non-defense programs.
What hasn't received much notice is that health plan deductibles are rising - everywhere. It isn't unusual in the West, South and Midwest to have a $2,500 deductible (for an individual) that must be met before the insurance kicks in. Typically, family health plan deductibles are $5,000. They can be lower, but that means a larger deduction from paychecks. Now, the Northeast is starting to experience them. There may be co-pays, but even those are going up. That means a larger part of the doctor's bill is being borne by the patient until the deductible is met. So the physician doesn't know if he will receive the total payment from the insurance company or the patient or a combination of the two. The physicians I've seen in the last year or two collect fees at the time of service, rather than send out a bill. Look for that to become the rule.
Faced with these payment pressures, no wonder many doctors are: (1) threatening to drop Medicare patients from their practice, or at least not take any new ones; (2) considering moving to a direct care, or concierge, practice (more about that in a moment); (3) making you pay for the visit and treatment BEFORE they will see you; (4) selling their practices to hospitals; or, (5) retiring.
For years, physicians have been complaining about delays in reimbursement, whether they get them from Medicare or private payers. As a result, some are moving to a practice model with a much smaller patient enrollment. Usually, when a doctor makes a decision to go to direct care, written notices are sent to all patients, telling them about the change and giving them the first come-first served option to convert to concierge coverage. If the doctor has 3,000 or more patients in the practice, the first 300 or 400 may get in. The number of patients in a concierge practice determines how busy the doctor will be, so fewer patients mean less money, but a shorter work day. If patients choose to stay on with the doctor, they must pay an annual fee for enhanced care. The fee may be set high enough so that there is no extra charge for visits during the year. Those patients who can afford it are usually guaranteed to see the doctor the same day. And the doctor agrees to take calls from patients after hours and on weekends. Often, the doctor works with patients to develop a plan for their better health. Consults with specialists, lab tests, medicine, hospital stays and emergency room visits, though, are the responsibility of patients.
There are also more expensive concierge models that offer primary care as well as specialty care when needed. The Mayo Clinic in Arizona, for example offers the "Medallion Program." According to the Mayo Web site
, "The Medallion Program emphasizes personalized care in a private office setting, with phone and email access to your personal doctor for nonemergency questions, 24 hours a day, 365 days a year." Individuals pay a "program membership fee" of $5,000 per year. If you want it for you and your spouse (or "a couple" as the Mayo site says), that will be $8,000 per year. No doctor at Mayo will have more than 300 concierge patients. If you don't make the cut, they will put you on a waiting list. Mayo accepts Medicare reimbursement, but not for payment in full. Medicare patients must pay 15% more than the Medicare reimbursement, and the Medallion plan does not accept Medicare Advantage programs.
Back to the solo practitioner who decides to go direct care - let's break it down. If an individual patient pays, say, a $2000 annual fee for concierge physician care, and the physician limits the practice to 300 patients, the physician receives $600,000 in annual gross income. Companies that physicians can consult to set up a direct care practice usually handle the collection of the fees, but take a cut of the annual gross income. With fewer patients and no accounts receivable, the doctor can get by with a smaller office and staff, so the overhead is much lower; the doctor's premiums for malpractice insurance may also be lower. Concierge doctors don't have to deal with patient insurance, public or private, unless they wish.
I bring all of this up because we (the royal "we") are backing physicians into a corner. Concierge practice represents one direction where the doctor remains in charge, can spend more time with each patient, and doesn't have to wait for reimbursement. If the Medicare situation continues to deteriorate, another alternative for physicians tired of the paperwork and the runaround may be to sell their practices to hospitals and become part of Accountable Care Organizations(ACOs). A good thing about ACOs is that hospitals are now looking at starting telemedicine programs to utilize the physicians they've added to their staff. I say it's a good thing because in giving doctors angst about payment, we may find ourselves with an even larger shortage of physicians than what is already predicted. And telemedicine can expand access to healthcare and represents the only real healthcare reform in the short-term. The fly in the proverbial oinment is that now hospitals who are setting up ACOs are starting to talk about deserving higher payments to compensate for compliance with government regulations, being fully-staffed at all times and offering treatment regardless of time of day or ability to pay.