How will the sequester affect primary care?

For primary care physicians  (PCPs) the most immediate impact of the cuts-known as the sequester-will be a 2% reduction in reimbursements for Part B Medicare claims. Those cuts include reimbursements to practices that have successfully attested to meaningful use of electronic health record (EHR) systems.

“Many of the practices I see are already running on razor-thin margins, so these (cuts) are a real concern for them,” says Mark Master, CPA, a partner in the healthcare services group of EisnerAmper, an accounting and consulting firm in Jenkintown, Pennsylvania, and a member of the Medical Group Management Association (MGMA). “To take 2% away from their Medicare payments comes right out of doctors’ pockets.”

That is the case with Patricia Roy, DO,

a family practitioner in Muskegon, Michigan, and a member of Medical Economics’ editorial board.

“At this point, I don’t see changing staffing or hiring, but it will definitely reduce my take-home pay,” she says.

The same is true for Sal Volpe, MD, a solo internal medicine practitioner in New York, New York, and Medical Economics editorial board member. “I couldn’t say to the people who work for me, ‘You’re all going to make less money for the next year so I can make [the cuts] back,’ ” Volpe explains. Moreover, he notes, about half of his practice’s gross revenue pays for overhead costs, thus doubling the impact of the cuts. “I’m just going to take the hit and shop a little more intelligently for my family,” he says.

Volpe thinks that some practices will deal with the cuts by limiting or eliminating year-end staff bonuses. “Those are easier to manage because you don’t promise a fixed amount,” he notes.

“This kind of uncertainty may force doctors with large Medicare populations to say, ‘Maybe I can’t take on more Medicare; maybe I shouldn’t hire that extra person because next year it’ll be another 2% and now it really starts to affect my ability to meet payroll,’ ” says Volpe.

(Because Medicare reimburses for 80% of most claims, the net reduction to doctors’ fee payments will be 2% x 80%, or 1.6%.)

Mood of frustration, pessimism

As unwelcome as the Medicare cuts are, most primary care practices probably can absorb them if they are a one-time event. (See “Suggestions for absorbing the Medicare sequester cuts” on page 15.)  Unless Congress and the White House can agree on other ways to reduce the nation’s budget deficits, however, the cuts are scheduled to continue through 2021 at an annual pace of 2%, with effects that will be felt throughout the healthcare industry and beyond. (See "Annual impacts of federal Medicare funding cutbacks” and “Top 10 employment segments affected by Medicare funding cuts in 2013” on page 20.)

That prospect, combined with the ever-present possibility of far larger Medicare cuts called for under the sustainable growth rate (SGR) funding formula, creates a mood of frustration and pessimism among many doctors.

“When I meet with our members, they roll their eyes and say they’re tired of what seems like another ‘ask’ and another hit from Medicare every few months,” says Jeffrey Cain, MD, FAAFP, president of the American Academy of Family Physicians. “They see these things as part of what they call ‘the hassle of Medicare.’ Family medicine is not as profitable as other specialties, so when they hear ‘2% here, SGR there, invest in this, start using EHRs,’ they get frustrated with the multiple demands.”  

Anders Gilberg, senior vice president for government affairs with the MGMA, says, “It’s the threat of always looking on the horizon and seeing a cliff there. That’s what’s causing our members to make the biggest adjustments in their practices, like holding off investing in new technology or opening satellite offices. It’s a complete erosion in the trust they have in Congress and the government to provide any stability for physicians.”

The fact that the cuts extend to reimbursements for attesting to meaningful use is another cause of frustration. Meg McElroy,MBA, RHIA, consumer engagement subject matter specialist with the American Health Information Management Association, notes that under the meaningful use regulations, eligible providers who waited until 2013 to start the attestation process already were receiving less in reimbursement than those who started earlier ($39,000 versus $44,000). “Now, on top of that, you’re going to be receiving 2% less. That doesn’t sit well, especially with eligible providers in small- to medium-sized practices who don’t have a cushion to fall back on,” she says. “It’s disheartening.”

Roy adds: “Many smaller practices like mine invested heavily to adopt EHR technology and did so with the promise of a certain payback for achieving meaningful use. To reduce that now is really a dishonorable move.”

Adding to the uncertainty is the possibility that commercial insurers will follow Medicare’s lead and reduce their payments when they renew their contracts with physicians. “Since Medicare tends to be the benchmark for so many of these contracts, it would probably follow that there will be a corresponding impact on the private payers,” says Bill Lewis, CPA, a partner in the medical industry practice of the accounting and consulting firm CohnReznick LLP.

Effects extend beyond physicians

Physicians are by no means the only ones to feel the effects of the budget sequester. Large swaths of the nation’s healthcare infrastructure, including the Food and Drug Administration, National Institutes of Health, and the Centers for Disease Control and Prevention (CDC), also are seeing their funding reduced. (See “The budget sequester’s impact on key federal health and safety programs, fiscal year 2013.")

It’s still too early to say with certainty how these funding reductions will affect PCPs. It’s noteworthy, however, that the American Public Health Association predicts that reductions in CDC funding will lead to 30,000 fewer children and 20,000 fewer adults receiving immunizations, as well as a decreased ability for the agency to investigate multi-state disease outbreaks. It’s reasonable to assume that at least some of the resulting treatment burden will fall on PCPs, especially with more people having access to health insurance under the Affordable Care Act.

Funding for programs designed to increase the supply of future physicians, such as the National Health Service Corps, Title VII of the Public Health Service Act (the only federal program providing dollars specifically to academic departments and programs to increase the number of PCPs), and graduate medical education generally, also is being cut. “The cuts are hitting practicing physicians, research that is important to medicine in general, and programs for training physicians, so it’s really impacting the healthcare industry from all angles,” says Ray Quintero,director of government relations for the American Osteopathic Association.

Quintero adds that he sees little prospect of Congress reversing the first round of sequester cuts. Longer-term, however, he holds out hope of greater stability for Medicare funding, particularly with regard to the SGR. He points to the Congressional Budget Office’s recent downward revision-from $243 billion to $138 billion-of its estimated cost for scrapping the SGR, and the introduction in the House of Representatives of the Medicare Physician Innovation Act of 2013, which would repeal the SGR. In addition, he says, the Energy and Commerce and Ways and Means committees of the U.S. House of Representatives are developing a joint proposal for repealing the SGR and moving Medicare away from the fee-for-service model.

“All these proposals are largely consistent with one another, which means everyone is at least speaking the same language, something we haven’t seen in recent years,” he says. “Also, the fact that we’re talking about [the SGR] early in the year, rather than in November or December right before cuts are due to take effect, is a hopeful sign.”

Suggestions for absorbing the Medicare sequester cuts

Apart from cutting your own pay, what steps can you take to make up for lost Medicare revenue? Here are suggestions from the experts:

Reduce non-vital services
“You can’t change the direction of the wind, but you can trim your sales,” says Judy Bee, principal with Practice Performance Group in La Jolla, California. Bee, a Medical Economics editorial consultant, advises starting by looking at reducing services that won’t affect billing or the quality of patient care, such as appointment-scheduling. “Maybe people will have a harder time getting in to see you, but you want to be sure they will get good care once they do,” she says.

Pay attention to detail
Bill Lewis, CPA, a partner in the medical industry practice of the accounting and consulting firm CohnReznik LLP, advises his clients to question every product and service their practice purchases. “Is it something you really need for your business, or is it just force of habit that makes you continue buying it?” he says. For example, physicians in group practices could belong to different medical societies and brief each other on the societies’ activities, rather than everyone in the practice belonging (and paying dues to) the same groups. “If you’re a small practice, you really have to pay attention to detail,” he says.

Get the right people in place
Practice owners need to be sure staff members have the proper training and temperament for the jobs they are doing, Lewis says. A front-office person may be hardworking and loyal, but those qualities do not always qualify someone to be an office manager, he points out. “You want to make sure your engine is working properly, but if you have the wrong person at the wrong task, you’re not being wise with your dollars,” he says.

Change your patient mix
Another possible strategy is to reduce the number of non-emergent Medicare patients your practice sees-provided you have enough patients covered by insurance that reimburses at Medicare rates or better. The way to do that, Bee says, is by limiting the number of appointments each day for non-emergent Medicare patients. Alternatively, more care of Medicare patients can be handed off to midlevels. “The doctor makes the diagnosis and says, ‘Here’s the treatment plan,’ and all the follow-up is done by the midlevel, who is a cheaper provider,” she says. “It has the additional advantage of keeping the doctor’s schedule open while still providing good care to the patient.”

Add an ancillary service
Yet another option for mitigating the impact of the Medicare cuts is to add an ancillary service for which patients are willing to pay cash, such as weight-loss products, sleep testing, or onabotulinumtoxinA injections.