Playground Politics

The Hospitalist. 2010 September;2010(09):

September 1, 2010 | The Hospitalist

Both parties blinked, resorting to almost unanimous short-term fixes that have allowed legislators to save face while putting off politically risky votes until after the November elections.

Lynne M. Allen, MN, ARNP, who works as a part-time hospitalist in hematology-oncology at 188-bed Kadlec Regional Medical Center in Richland, Wash., says she and other colleagues were initially hopeful that the Obama administration would make Congress work together to find a lasting solution. “There’s a sense of frustration because instead of that happening from our legislators, they’re playing a lot of games with the funding,” says Allen, a member of Team Hospitalist. “They’re not willing to step up to the plate, as they say, and make a decision that will allow us to go forward smoothly.”

The result, Allen says, has been a “roller-coaster ride” of uncertainty over reimbursements. Because Washington’s Tri-Cities region has a relatively high percentage of patients with private insurance, her hospital is somewhat cushioned from a precipitous drop in Medicare fees. But if CMS is ever forced to cut back on its rates, she fully expects private insurers to follow the same downward track.

SGR 101

To prevent the annual rise in Medicare beneficiary expenses from soaring past yearly growth in the nation’s GDP, the Social Security Act of 1997 introduced a new cost-containing formula called the sustainable growth rate, or SGR.

Using the GDP as one of its main benchmarks, the formula established a target for overall Medicare Part B payments. Whenever payments exceeded the target, the formula would recalculate a new SGR for the following year that cut reimbursement rates to doctors in order to recoup the lost money.

Healthcare delivery costs, however, have consistently outpaced the GDP. Every year since 2002, the SGR formula has called for rate cuts, and Congress has consistently waved them off through a series of temporary measures to prevent Medicare beneficiaries from losing access to care. Why is this a concern? Some providers already have opted out of Medicare because of its lower reimbursement rates for physician services. Legislators and healthcare experts worry that even lower payments would spur more doctors to turn away Medicare patients.

With the repeated patches, Medicare payments have remained relatively stagnant the past eight years. But because the cost-control formula hasn’t changed, the gap between targeted spending and actual payouts for physician services continues to widen, triggering ever-bigger rate cuts: 21.3% for 2010, and nearly 30% for 2011.—BN

Practical Concerns

Barbara Hartley, MD, a part-time hospitalist at 22-bed Benson Hospital in Benson, Ariz., says the town’s healthcare facility is somewhat protected from potential Medicare rate cuts through its official status as a Critical Access Hospital. Instead of being reimbursed through diagnosis-related group (DRG) codes, the rural hospital is repaid by Medicare for its total cost per day per patient.

The arrangement is a stable one at the moment, but not enough to dispel Dr. Hartley’s uneasy question: If the economy worsens, will Medicare be able to retain its commitment to rural hospitals? If not, the pain might be felt acutely in communities like Benson, where Dr. Hartley estimates that as much as 75% of the hospital’s in-patient business is through either Medicare or a Medicare Advantage plan.

Kirk Mathews, CEO of St. Louis-based Inpatient Management Inc. and a member of SHM’s Public Policy and Practice Management committees, says Medicare rate cuts also could significantly reduce the leverage of hospitalists during contract negotiations.

“Even if we’re employed by the hospital, but our professional fees that the hospital can recoup for our services are dramatically affected, it will affect how those future contracts go,” Mathews says. “We might be insulated temporarily by the strength of our current contract. But if the formula—however that works out—dramatically impacts the hospitalist reimbursement on the professional fee side, the hospital will feel that, and then hospitalists will eventually feel that as well.” In other words, it could strengthen the bargaining hand of the hospital at the expense of the hospitalist. “Therein lies the long-term threat,” he points out.