Home » FOCUS » Medicare reimbursement often falling behind costs of care

Medicare reimbursement often falling behind costs of care

Aging Baby Boomers may very well be on a collision course when it comes to being able to get adequate healthcare treatment from Medicare after turning 65. The problem is that the costs for family practice physicians to treat a Medicare patient are often more than reimbursement.

Dr. Eugene Wood, who recently retired from the Hinds Internal Medicine Group at the Central Mississippi Medical Center, Jackson, is worried about his patients finding another doctor.

“I retired last week, and in the past couple of months I have been attempting to place patients with good doctors who will take Medicare,” Wood said. “Many times patients me call back and say the doctor said they have their allotment of Medicare patients and aren’t taking any more.”

‘Going in the hole’

Wood practiced family medicine as a solo practitioner for 44 years. But because he had a large percentage of Medicare patients, he was losing money.

“When I saw a Medicare patient with pneumonia and they needed a shot that cost $30, and Medicare would reimburse only $21, I gave him the shot,” Wood said. “I went ahead and practiced good medicine. But I just kept going in the hole. Lab fees were also way below the cost of doing it, but workers’ comp, taxes and other expenses went up. I don’t know how a solo doctor can have a whole lot of Medicare patients. Some are taking only a percentage of Medicare patients and that is all they can take.”

Two years ago because of the skyrocketing costs, he went in with the Hinds Internal Medicine Group.

“They paid me a salary,” Wood said. “I didn’t have to worry about decreasing Medicare reimbursement and increasing costs.”

Next generation…

Wood worries about the impact this is having on the practice of family medicine, particularly in recruitment of young physicians. Physicians come out of family practice residencies and might owe $150,000 to $200,000 for student loans. Yet they can only expect to make approximately $150,000 per year.

“It takes a long time for them to pay that off compared to a surgeon, a neurologist or a cardiologist,” Wood said. “That is why you are seeing a decrease in the number of family doctors coming out. If you don’t run your business properly, you will go under. That is why doctors are going in with groups. They hesitate to go into solo practice because it difficult to make it.”

Medicare, the nation’s largest health insurance program, covers nearly 40 million Americans who are age 65 or older, disabled or have kidney failure. Wood sees the problem getting worse as more Baby Boomers retire and join Medicare. And he thinks it is wrong for Medicare patients to be treated as second-class citizens.

Each year physicians have to fight to keep even the same payments from Medicare.

“At best, these payments are increasing 1% to 2% per year,” said Dr. Jason B. Dees, D.O. FAAFP, a family physician in New Albany with the New Albany Medical Group. “When inflation is 4% to 5%, our reimbursement is actually less year to year. On a dollar-for-dollar basis, family physicians are paid over 20% less to treat patients today than they were in 1991. This is at a time that our malpractice premiums have increased, our supplies are much more expensive, staff costs are higher at a rate of 3% to 5% per year, utilities are up, building costs are up and compliance with government mandates continue to eat away at the bottom line.”

Thin margins

Most family medicine practices are operating on razor thin margins. These conditions force family physicians to make difficult decisions. Expenses have to be trimmed, services not offered and staff has to be cut.

“Ultimately a practice can only cut so far,” said Dees, who is a member of the board of directors for the Mississippi Academy of Family Physicians. “Many times this overage in costs is born by the individual physician with a declining income. The personal difficulties for physicians can be devastating. We are a group that loves to win. If a practice gets in trouble financially, physicians try to just work harder and see more patients. But, unfortunately, this leads to burn out.”

Older patients often take more time to treat as the average older patient has five chronic medical problems.

“Unfortunately, with this broken payment system we can’t financially spend the time that we need or would like to spend with patients to address their concerns,” Dees said. “Rather it is much easier to set them up to see this or that specialist. This in turn costs the system much more money when, in fact, we have the ability to care for the majority of these issues but can’t cover the cost of operations in our current environment if we don’t see “x” number of patients daily.”

Years ago there was actually a wide enough margin to provide uncompensated care. However, now with payments that don’t even cover costs or just barely covers costs, the private practice family doctor has to make every second in the office count.

Fundamental changes

This isn’t a situation that can be solved only by increasing payments. Instead, family physicians are advocating fundamentally changing the way care is delivered in this country. The model being advocated is the Patient Centered Medical Home (PCMH).

“This model is used throughout the world and leads to much better quality at less cost,” Dees said. “With PCMH, every patient would have a relationship with a physician and his/her team. This team would be responsible for the care of this patient. We should utilize integrated electronic health records so that a patient’s medical information is readily available. It’s a travesty that I can be half way around the world and find out the balance of my bank account, but can be across town and not have access to my medical record.”

The payment system would be restructure as part of this. Physicians should be paid for seeing the patient, but should also be paid for addressing issues over the phone, via e-mail or with text messaging.

“This will not be an easy change, but General Motors spends more in a year for healthcare than it does on steel for cars,” Dees said. “We are at a point that the system has to be overhauled.”

Contact MBJ contributing writer Becky Gillette at 4becky@cox.net.


… we’d like to ask for your support. More people are reading the Mississippi Business Journal than ever before, but advertising revenues for all conventional media are falling fast. Unlike many, we do not use a pay wall, because we want to continue providing Mississippi’s most comprehensive business news each and every day. But that takes time, money and hard work. We do it because it is important to us … and equally important to you, if you value the flow of trustworthy news and information which have always kept America strong and free for more than 200 years.

If those who read our content will help fund it, we can continue to bring you the very best in news and information. Please consider joining us as a valued member, or if you prefer, make a one-time contribution.

Click for more info

About Becky Gillette

Leave a Reply

Your email address will not be published. Required fields are marked *