2008 Medicare Payment Cuts and Beyond:
What Lies Ahead for the Interventional Physiatrist

As I near the end of residency, I’ve decided to do one more year of training in interventional pain medicine – one more year to develop my skills before entering the job market. Curious about the future of the specialty I’m entering into, I began looking for answers to some of my questions. While on the interview trail, I asked one faculty member how many PM&R residents are pursuing a career in pain medicine. He suggested the number was greater than 50%, though he bluntly speculated the field’s popularity could be solely attributed to the money. He wasn’t a physiatrist – but if he’s correct that residents are only in it for the money, we could see a dramatic drop in the number of practicing interventional pain specialists in the coming years.

With the presidential election less than a year away, the current health care crisis has become a popular topic for economic and political pundits alike. Our federal deficit is growing at an exponential rate, and our health care system may be largely to blame. Statistics continue to show that the United States ranks among the top countries in the world for health care expenditures while performing closer to the bottom on various outcome measures. We physicians are simply too busy being physicians to solve the economic crisis we now face. We can, however, make ourselves aware of the problems that lie ahead.

Medicare Payments and Physician Cuts

Throughout the years, many changes have taken place within the political and economic environment of health care. In 1965, Medicare was established to provide low-cost health care to our rapidly increasing aged population. At its inception, physicians were allowed to bill whatever they deemed appropriate. This “golden era” was short lived. Within 10 years Medicare changed its payment policy so as not to exceed the Medicare Economic Index (MEI), a formula designed by the government to estimate the increase in total cost incurred by the average physician to operate a medical practice. That policy was unsuccessful, however, and from 1984 to 1991, legislation determined yearly fee changes. In 1998, after several system modifications, the sustainable growth rate system (SGR) was born. The SGR has three components:

• expenditure targets (based on a formula which applies a growth rate to spending),

• the growth rate, and

• annual adjustments to payment rates for physicians (which is intended to bring spending in line with expenditure targets).

The physician fee schedule also contains three components:

• the relative value for the service (based on physician work as well as practice and malpractice expenses),

• the geographical adjustment (an index of work and liability costs), and

• the national dollar conversion factor.

As you can see, it can be complex – a potential downfall of our flawed system.

Another downfall of the system relates to the dramatic increase in the volume and intensity of medical services being provided to the increasing aged population. This in turn has resulted in a large disparity between actual spending and target spending, as determined by the SGR. One reason for this disparity is that the adjustment factor applies only to physician fees and not to payment rates for incident-to-services (services performed by ancillary personnel under the supervision of the physician), which comprise about 15% of spending within SGR targets. Other services unaccounted for within SGR include national coverage policies, preventative services, and advances in technology and drug therapy. Furthermore, SGR neither rewards physicians who practice cost-effective medicine, nor punishes those who order unnecessary services.

As a result of SGR, the 2007 Medicare Trustees report predicts total physician payment cuts of about 40% by 2016. During this same time period, the MEI estimates physician practice expenses will increase by 35%. And after taking into account actual practice inflation and cost of nursing and other health professional shortages, the actual increase may be closer to 90%.

Reimbursement Rates

But physician cuts aren’t the only battle interventionalists are facing these days. CMS has also decided to cut reimbursement rates for all services provided within Ambulatory Surgical Centers (ASC). For many, this will work synergistically in reducing interventional reimbursement rates.

The first ASC was opened in 1992, and since that time over 4,700 Medicare-certified ASCs have emerged. Consequently, payments to ASCs have grown from $1 billion in 1996 to $2.9 billion in 2006. However, these payments pale in comparison to those for inpatient hospital services, outpatient hospital services, nursing homes, and Medicare Advantage plans. For example, hospital outpatient department (HOPD) payments alone increased from $17 billion in 2001 to $35 billion in 2008.

Regardless of their relatively smaller expenditures, ASCs have been the target of CMS cuts for some time. In 1998, CMS attempted to eliminate 60% of all interventional pain procedures and decrease payments for the remaining 40%. This rule was fortunately delayed until the advent of a new payment system, based on the HOPD payment system model. Government officials determined that the cost of care within ASCs was relatively less than that provided in the HOPD setting. In 2007, after much resistance, CMS guidelines decreased ASC reimbursements to 65% of HOPD rates, graciously including a four-year transition period.

Take Action

It is apparent that we are facing assaults on all fronts. And as our predecessors battle to stay afloat, hospitals, nursing homes, outpatient services, and especially third-party payers are enjoying yearly profit increases. Unfortunately, these dramatic shifts in reimbursement will eventually affect patient care, as more physicians find themselves financially unable to treat the growing Medicare population. According to a recent survey by the AMA, "If Medicare payment rates are cut by nearly 40 percent by 2015, 77 percent of physician respondents said they plan to limit the number of new Medicare patients they treat." If significant changes are not made to the current SGR formula, a crisis will undoubtedly occur, resulting in a dramatic drop in healthcare accessibility. As the next generation of practicing physicians, we must take responsibility to stay abreast of the current political and economic policies that are increasingly governing our profession. We must make ourselves heard and must proactively push for reform – for our future and for that of our patients. Call your local Congress members through the AMA toll-free hotline: 1-800-833-6354.

Jonathan French, MD
PGY4 –University of Virginia

Information in this article has been gathered from the following sites:
www.ama-assn.org
www.painphysicianjournal.com

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