Bah, Humbug: 4 Coals in Your Stocking in 2014

Leigh Page


January 02, 2014

In This Article


Some new developments in healthcare reform are being praised by many, but there's no doubt that for many doctors, some of these mandates are creating challenges and daily hassles. Whether something is positive or negative often depends on which side of the fence you're on. Still, physicians are dealing with pressures and a large increase in paperwork.

Following are 4 of the challenges doctors are already or will be wrestling with in the near future.

Payments Are a Problem

1. Reimbursements Aren't Keeping Pace With Costs

Internist Robert J. Sobel, MD, has had a tough time keeping reimbursements in pace with the rising costs of his 2-physician group practice in Chicago. When payers' reimbursements fall below his costs, he has to drop them. He did this with Medicare more than 2 years ago. Dr. Sobel said he is one of only 10-15 internists in the state who have totally dropped Medicare. About 10%-15% of his former Medicare patients still see him, paying entirely out of pocket.

Dr. Sobel is still working with Blue Cross Blue Shield of Illinois, the dominant local payer, but its payments are also below cost. The only way he can afford to keep the plan is through the payments he gets for ancillary services, such as laboratory tests, but he doesn't know how long this will last. As a small practice, "I have no leverage with the big payers," he said.

Across the country, physicians like Dr. Sobel have been in a losing battle to keep reimbursements ahead of costs. In its latest report,[1] the Medicare Payment Advisory Commission (MedPAC) said that from 2000 to 2012, Medicare fee-for-service rates increased 9%, but the cost of operating a practice increased 27%.

Commercial rates are following the same trend as Medicare, and all of the payers are making it harder for physicians to find ways to make up for these losses, said Mark V. Pauly, PhD, Professor of Healthcare Management at the Wharton School in Philadelphia. "In the past, physicians could always do something to make more money, but now insurers are more likely to limit what they do," he said.

The new mood in Washington to tamp down federal spending could further tighten reimbursements. Organized medicine has been pushing Congress to abolish the sustainable growth rate (SGR), but under Congressional "pay as you go" requirements, the funds the government gives up by rescinding the SGR have to be made up with cuts somewhere else in the federal healthcare budget.

A bill to eliminate the SGR[2] introduced in the House this year would put physicians under a tight reimbursement regimen. It would keep annual pay increases to 0.5% for Medicare payments from 2014 to 2018 and then introduce new payments based on meeting quality measures and nudge physicians into bundled payments and other alternative payments. However, the Congressional Budget Office[3] estimated that even under these modest fee increases, the bill would raise federal direct spending by $176 billion from 2014 to 2023.

"I don't see any factors that are going to allow physician fees to rise at earlier rates," said Douglas Hough, PhD, at associate professor at Johns Hopkins Carey Business School in Baltimore. "Practices are just going to have to get more efficient. They have to figure how much it costs to provide a service. Most healthcare providers have no idea."

Many physicians responding to these pressures by giving up private practice and becoming an employee of a hospital, but Dr. Pauly questioned that solution. "Hospitals don't have a money machine in the basement," he said. "They are not going to be able to pay physicians more than they can be making on their own."


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