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Physicians Must Make Tough Choices in Face of Medicare Cuts

February 13, 2002

ACP-ASIM Recommends Payment Updates Reflect Rising Costs in Health Care Delivery

(Washington, DC): Medicare physicians are being forced to make tough cuts in response to continued reductions in the Medicare Physician Fee Schedule according to the American College of Physicians - American Society of Internal Medicine (ACP-ASIM) in a statement delivered today to the House of Representatives Committee On Energy And Commerce Subcommittee On Health.

The Medicare Physician Fee Schedule that took effect January 1, 2002, contained a 5.4 percent reduction in physician reimbursements, the fourth such cut over the last ten years. The fee cut mainly results from a faulty formula that bases physician reimbursement on the Sustainable Growth Rate (SGR). The SGR is derived in part from the Gross Domestic Product, rather than the changes in the cost of delivering health care services.

"A reduction in the practice revenues of this magnitude is a tremendous blow to physicians, particularly internists whose practices typically receive nearly 30 percent of their revenue from Medicare." said Dr Hall. "In a practice like mine that specializes in geriatrics, that number can soar to 80 percent or more."

"The 5.4 percent reduction comes at a time when malpractice premiums are increasing dramatically, the regulatory burden is rising, and the costs of staffing and other overhead expenses are increasing," stated Dr Hall. "This culmination of events may force physicians to make difficult choices in order to continue to operate. "

The ACP-ASIM urged Congress to act immediately to halt the 5.4 percent payment cut.  In addition, the College expressed support for the Medicare Payment Advisory Commission's (MedPAC) goal of "achieving consistent payment polices" for physicians and their practices.   To reach that goal, the Commission has recommended replacing the current update formula with a new framework that would base reimbursement for physician services on the estimated change in input prices for the coming year, less an adjustment for productivity growth. The framework would consist of an annual recommendation to Congress from MedPAC on the update for the following calendar year, based on increases in the costs of delivering services minus an adjustment factor for productivity gains.  Congress would then be required to act on the Commission's recommendation.

ACP-ASIM supports MedPAC's proposed framework, but recommends that Congress also enact legislation to provide for a "default" update for years when Congress does not act to establish an update. The default would be equal to the Medicare economic index, which measures changes in costs of providing physician services, with technical modifications, minus a standard one-half percent productivity adjustment. This process would allow for predictable and adequate updates should Congress decline to pass legislation to set the update factor as recommended under the MedPAC framework. 

"These necessary changes will not only put the physician payment system in line with other segments of the health care industry, but more importantly, these changes will allow for an accurate accounting of all factors that impact the cost of providing physician services, stated Dr Hall.  "These changes will also contribute to a more stable and predictable physician payment schedule for years to come and help assure continued access to physician services for America's elderly and disabled patients."

ACP-ASIM is the nation's largest medical specialty organization and the second largest physician group.  Membership encompasses more than 115,000 internal medicine physicians and medical students.  Internists are the major providers of medical care to adults in America.

Jack Pope, (202) 261-4556, jpope@acponline.org
Jennifer Whalen, (202) 261-4575, jennw@acponline.org

Page updated: 11-04-03

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