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Pilot Project Excludes Medicare Payments for Primary Care

Capping off a year of hard-fought debate over reforming healthcare, and specifically health insurance, the Mayo Clinic made holiday-season headlines with the initiation of a 2-year pilot project involving a 5-physician family practice clinic in Glendale, Arizona, that has opted out of accepting Medicare payments for primary care starting January 1. Initially announced in October, the decision to temporarily stop accepting Medicare reimbursement for primary care office visits followed an earlier announcement that some Medicaid patients would not be accepted at a Minnesota facility. Mayo attributes these policy changes to low reimbursement rates and is asking legislators to remedy the situation as part of the comprehensive healthcare reform proposals being debated by Congress.

A statement from the Mayo Clinic clarified terms of the
time-limited trial, which will be reviewed at its conclusion. “Some recent
media reports have inaccurately stated that the Mayo Clinic in Arizona is no
longer seeing any Medicare patients. This is not true.” The decision will
result in changes for about 3000 patients receiving care at the Mayo Clinic
Family Medicine–Arrowhead facility. These patients will not be able to transfer
their primary care to another Mayo facility.

Current Medicare patients may continue receiving primary
care at the Glendale clinic but will be required to pay out of their own pocket
for office visits or to seek care from another physician. Normal fee rates for
office visits are expected to range from $175 to $400 per visit, depending on
the type of service provided. There will also be an annual administrative fee
of $250.

Mayo Clinic is currently one of the largest Medicare
providers in the country. The project affects only primary care office visits
for the 5 Mayo family practice physicians at the Arizona site. For the duration
of the trial, the Glendale location will still accept Medicare for specialty
care, laboratory services, imaging studies, and ancillary services. Primary
care reimbursement will not change at the Mayo Clinic in Arizona overall.

The Mayo Clinic loses a substantial amount of money every
year due to the reimbursement schedule under Medicare. Last year, Mayo provided
approximately $275 million in uncompensated care, due in large part to
underfunding from Medicare.

 “The
discrepancy between what Medicare pays and our cost of providing services is
particularly acute for our clinics that provide primary care,” said a statement
provided to First Report–Managed Care 
(FR-MC). “Due to these ongoing financial challenges, the 5 physicians at
Arizona’s Mayo Clinic Family Medicine–Arrowhead in Glendale will no longer
accept Medicare payments for primary care office visits. This is one of several
options we are exploring to address the Medicare shortfall situation. Mayo
Clinic remains committed to serving Medicare beneficiaries, but we struggle to
afford it.”

In October 2009, Mayo also announced that Medicaid patients
from Nebraska and Montana would no longer be accepted in its Rochester, Minnesota, facility. Only Medicaid patients from Minnesota and
its 4 bordering states would be accepted there.

Physician Shortage

The challenge Medicare patients face in obtaining primary
healthcare services did not begin with the Mayo Clinic, as noted in a March
2009 report to Congress on Medicare payment policy. Prepared by the Medicare
Payment Advisory Commission (MedPAC), the report deemed Medicare payments adequate
but expressed concerns about access to primary care. The commission expressed
its concern about the undervaluation of primary care services and has
recommended a payment increase for primary care services provided by
practitioners who focus on primary care.

The MedPAC report includes an analysis of illustrating that
the ratio of Medicare to private payer physician fees has remained stable at
about 80%. Survey results included in the report stated that of the 6% of
Medicare beneficiaries who looked for a new primary care physician in 2008, 28%
reported problems finding one—10% characterized the problem as “small” and 18%
reported it as “big.” Medicare beneficiaries seeking a new specialist were less
likely to report small (7%) or big (4%) problems than those seeking a new
primary care physician.

MedPAC also said that the share of US medical school
graduates entering family practice and primary care residency training programs
has declined in the past decade. Although international medical school graduates
have thus far filled the void, this influx may not be enough to meet growing
demand.

The US Department of Health and Human Services and the
American Medical Association have estimated that the United States currently
faces a shortage of about 16,000 primary care physicians to provide care for
patients in underserved areas. The Association of American Medical Colleges
(AAMC) estimates that the United States will face a shortage of 124,000 to
159,000 physicians by 2025. This will occur as potential healthcare reforms
that provide more Americans with health insurance increase overall demand for
healthcare services, increasing the projected shortfall by 25%.

AAMC reviewed census data and calculated that the number of
elderly Americans (age 65+) will increase from just below 40 million in 2010 to
about 70 million in 2030. Meanwhile the number of first-year medical school
enrollees per 100,000 population has declined from 7.3 in 1980 to 5.6 in 2005
and is expected to fall to 5 first-year medical school enrollees per 100,000
population in 2020. In addition, AAMC found that the US physician workforce is
aging, with 250,000 active physicians over the age of 55 in 2005 compared with
113,000 over age 55 in 1985.

Payment Rates & Reform

Despite ongoing concerns over primary care payment rates and
physician availability, legislators pushing healthcare reform continue to use
physician payments as a political football. MedPAC had anticipated a reduction
in the Medicare physician fee schedule (MPFS) of 21.2% for 2010, effective
January 1. The update of the MPFS conversion factor is determined by the
sustainable growth rate (SGR) formula set forth in the Balanced Budget Act of
1997. The MPFS sets payment rates for >7000 types of services in physician
offices, hospitals, and other settings.

The Centers for Medicare & Medicaid Services (CMS)
issued the final changes to policies and payment rates for services to be
furnished during calendar year 2010 on October 30, 2009—1 day before the
mandated deadline. As it has done for several years, Congress responded by
postponing the decrease in physician payments before the end of the year.
Congress passed the legislation as part of a defense appropriations bill, and
the amendment postpones the MPFS reduction for 2 months while final negotiations
on a comprehensive healthcare bill continue. Legislative intervention has
prevented the SGR reductions in physician payments since 2003.

CMS’ 2010 fee schedule also provides for payment changes
through practice expense adjustments, eliminates some consultation codes, and
updates the value of high-tech medical technology used in practice. These
policies are expected to improve payment rates for primary care physicians and
have been endorsed by the American Academy of Family Physicians (AAFP).

Reacting to the postponement of a Medicare physician pay
cut, AAFP has stated that family physicians are deeply disturbed by the size of
the planned 21.2% MPFS reduction. “This drastic reduction demonstrates the
urgent need for Congress to implement legislation that permanently addresses
the flawed SGR formula on which Medicare physician payment is based,” said Lori
Heim, MD, president of AAFP.

The Mayo Clinic has also expressed its support for reform of
the healthcare payment system. A Mayo statement said the practice of opting out
of Medicare has been prompted by decades of underfunding and a reimbursement
system that pays for volume rather than value. In this system, providers who do
fewer unnecessary tests and services are paid the least, and Mayo says they are
the doctors and hospitals that will go out of business first if the payment
system is not changed.

“That is why Mayo Clinic strongly supports health insurance
reform and healthcare delivery reform,” the Mayo statement explained.
“Health-care delivery reform in the patients’ best interests means changing the
payment system to reward value—defined as better outcomes, better safety,
better service, and lower cost.”

Although Congress appeared to be nearing final passage of a
healthcare reform bill at press time, inclusion of a permanent fix for the MPFS
remains far from certain. Regardless of whether reformers decide to amend SGR
rules, the Mayo Clinic is committed to following through on its Medicare
opt-out program. A spokesperson for Mayo told FR-MC that the Medicare opt-out
project will help the group find ways to continue to deliver the level of care
that patients demand. “We are hoping to understand more about the
sustainability of our primary care practice in Arizona given the current
reimbursement under Medicare. We are also hoping to learn whether or not this
is a care delivery model that is appealing to patients in this market.”—Charles
Boersig