Medicare physician reimbursement will change next year. As I noted yesterday, it looks like cognitive services (office visits, etc) will be paid at higher rates, while procedures (surgeries etc) will see a cut in reimbursement.
Consider the fallout from the change. If things go as I think they will, the specialty societies and their allies will fight long and very very hard to minimize any reductions in reimbursement. But over time, their compensation will decline relative to generalist pay. And over time, the re-leveling will become reality – the generally-accepted-way-the-world-is. That process will take years not months, and be marked by ups and downs, resistance from providers and nastiness in negotiations.
What are the implications for health plans? Several.
The near term – the end of this year into 2011
Specialists will seek to replace lost revenue by increasing prices paid by and the number of services delivered to health plan members. Yes, cost shifting. This makes it even more important for health plans to invest in medical management, data mining, physician profiling and reporting. This new pressure to shift costs will manifest itself in a variety of ways – some obvious and some not.
Contracting will take longer, be tougher, and be even more acrimonious than it is today. Health plans will have to plan carefully, provide contracting staff with real, accurate data they can use to convey market share, provider effectiveness, and provider rankings. These last will be highly contentious; physicians will vociferously defend their practices and complain about metrics and methodologies. And in many cases they may have a case. But if they want to be paid more, providers will have to make a convincing case that they are worth it. The net – both parties will need more and better information.
The longer term
Health plans with smaller market share will be at an even-greater disadvantage. Providers will be increasingly picky about the plans they contract with, forcing small plans into a Hobbesian choice – agree to higher rates to fatten the provider directory, and suffer the consequences of the inevitably higher medical loss ratios. Or refuse to contract at higher rates and end up with far too few specialists.
Except for those health plans that are part of integrated delivery systems. These plans will (over time) flourish, especially if they ‘buy’ their physician services from one or a very few groups.
Over time, expect health plans to also reduce compensation to specialists (relative to generalists). The smart plans, those who can look beyond next quarter’s medical loss ratio numbers, will not try to keep generalist reimbursement low while also ratcheting down specialist pay. (Alas, there are far too few ‘smart’ plans.)
There’s a wild card out there as well. Those plans investing in medical homes will likely find their need for specialist services is reduced rather dramatically. While there’s been much talk about homes, there’s not been a matching amount of activity. The reimbursement change could trigger that, as it will drive more providers into primary care. If the need for specialists is reduced, as it should be with the home model, those same specialists will find they have little leverage.
What does this mean for you?
If you are a provider, be prepared to make the case that you are better than the competition. Payers, get serious about profiling and reporting. Primary care docs, change is a-coming.
Feb
24
Hey Joseph,
Enjoyed reading your post. Are you saying that the patient centered medical home is a good thing for the future? Are you saying the reimbursement change will increase the overall payment primary care physicians receive. Thanks again.
Nathan
Hey there,
You wrote yesterday: It looks like reimbursement for cognitive services … office visits and similar services for others – will be increased while payments for surgeries, imaging, and other ‘procedures’ will be reduced.
This sounds like sound, and much needed policy. Do you have a source for this statement, or is it speculative?
Speaking as the daughter of elderly parents who are frequently in doctors’ offices, I think this will be a good thing. Their PCPs are pressed for reimbursements and thus for time and spend little time with them, prefering to send them on to specialists. These docs are very eager to perform repeat procedures on them for probably two reasons…the first is that they can get reimbursed for them and the second is that they probably don’t know how to tell the patients that they might not know what’s wrong with them. I would like to see more involvement in patient management from the PCPs.
The concept that specialist and generalist (i.e., internal med., family med., peds.) pay will/should equal out over time is absurd. Most specialists have many more years of more difficult training (during which they make very, very little) than generalists, they have much higher malpratice premiums and operating expenses and often much worse/irregular hours. If anyone thinks that a cardio-thoracic surgeon (minimum of 7 very tough years post med school training) will work for an internist’s (three years, much easier) wages than they are sadly mistaken.
I am a 37 year-old fellow in cardiothoracic surgery hoping to start a job next year for 225K. I graduated medical school at age 27, general surgery residency at age 34, and finishing three years of cardiothoracic surgery training. I have 150K in student debt. I respect my primary care colleagues who are in practice three years after finishing medical school while I had to work 100 hours a week ( I know, I know about the “80 hour work weeks” that were supposed to prevent that) for the last 10 years while earning between 35-50K.
Every operation I do runs the risk of death for a patient. I pay 50K/yr in malpractice while an internist pays 7-10K.
Can you really call this a “fair” system if Internists make 75% of what a cardiac surgeon makes knowing this information.