NJ Doctors Face Significant Cuts to Medicare Reimbursements

Andrew Kitchenman | November 15, 2012 | Health Care
Unless Congress acts by end of year, healthcare providers in the Garden State could see Medicare payments shrink by more than 25 percent

Dr. Robert Eidus is in an uncomfortable position, but it’s one he and other doctors have found themselves in for each of the past 10 years.

Without further action by the U.S. Congress, physicians in New Jersey and throughout the rest of the country will see their Medicare payments cut by 26.5 percent come January 1.

The immediate question is whether Congress will act in time to forestall the reduction. But that uncertainty, which has become an annual rite for physicians, is being played out against the looming threat of the “fiscal cliff” — automatic federal tax increases and spending cuts that will also occur in January if Congress does not intercede.

Eidus, who’s headed up the Cranford Family Practice for the past decade, is concerned about how the cuts — if they come — will affect New Jersey doctors, “particularly . . . primary care physicians.”

The threatened cuts in Medicare payments are triggered by the “sustainable growth rate” (SGR), a 1997 law designed to balance the federal budget.

The feds use a complex formula to calculate the sustainable growth rate each year. Essentially, the SGR is based on an estimated increase in medical costs; estimated increase in the number of Medicare recipients; estimated cost to Medicare of changes in law or regulations; and the 10-year average of the gross domestic product.

When actual medical costs exceed the SGR, Medicare payments are adjusted downward the following year.

In the law’s first five years, the SGR outpaced doctors’ expenses, but the formula triggered a 4.8 percent cut in Medicare payments in 2002.

The resulting outcry by doctors led to the passage of the “doc fix,” a term for legislation that prevents the cuts.

That yearly wait for legislative action has ratcheted up uncertainty for doctors, particularly family physicians like Eidus who provide much of the medical care to seniors. Eidus is particularly concerned that the attendant anxiety will discourage young doctors from pursuing family medicine or other specialties that depend on Medicare.

“People are not going to want to go into practice in New Jersey and even before that, they’re not going to want to enter a primary care field,” said Eidus.

The shortage of primary care physicians in New Jersey has become something of a crisis. Costs for medical school are high; students often graduate burdened with $200,000 in debt. The cost of living in the Garden State is also high, while primary care physicians are not paid nearly as well as specialists.

As a result, newly minted MDs tend to set up practice in another state or decide to go into a more rewarding specialty. Either way, it results in fewer primary care physicians.

Eidus added that he and other doctors would consider no longer accepting Medicare if the payment cut occurs.

“The average primary care physician has a 70 percent overhead — if you cut Medicare fees by 30 percent, you’re essentially working for free. That’s not sustainable.”

Eidus said that he and other family doctors were disappointed that the 2010 federal healthcare law didn’t address the issue. “Each year, we’ve written our local congressmen about this. We were hopeful that this would be resolved within the Affordable Care Act,” Eidus said. “There was not sufficient cooperation between Democrats and Republicans to get that done.”

An Outdated Approach

Dr. Robert Brenner, chief medical officer of the Summit Medical Group, said the SGR formula is unlikely to control costs because it is outdated and isn’t based on a doctor’s individual performance. He said a more productive approach would incorporate performance.

“I think what we need to do is reward those physicians that produce value,” Brenner said. He cited the Centers for Medicare & Medicaid Services’ Comprehensive Primary Care Initiative as a potential model. This program rewards doctors for better coordinating patient care.

Brenner said Summit Medical Group, the state’s largest physician-owned multidisciplinary practice, has the resources to hire care managers needed to increase the value of care. However, smaller firms lack those resources, he noted.

Until the federal government finds a new approach to lowering costs, the annual SGR rite will occur.

“I think it drives people nuts. It’s like this wave of fear come November, December,” with the debate over temporary fixes sometimes taking months, Brenner said. “What should be done is to get rid of it and put in place something that’s based more on performance of individuals.”

Medical Concerns

Dr. Mary Campagnolo, current president of the Medical Society of New Jersey, said “it’s extremely concerning when potentially a quarter of your income is always uncertain at a certain point in the year.”

The statewide organization representing doctors recently sent a letter to New Jersey’s congressional delegation urging it to support funding for Medicare.

Campagnolo, who has a family practice in Lumberton with a focus on geriatrics, noted that New Jersey might feel more pressure than most states if Medicare payments are reduced.

“As physicians get older, their patients tend to get older, and an issue we have to think about is that in New Jersey we have a little bit older physician workforce,” Camagnolo said. “I’ve been practicing for 25 years. My patients who were 60 when I started are 85 now. If potentially more doctors drop out of the workforce, who will take care of these patients?”

The issue affects other healthcare fields that depend on Medicare payments, including psychologists.

Josephine Minardo, executive director of the New Jersey Psychological Association, said her staff “ritually lobby our congressmen” over the Medicare SGR fix.

“We are concerned about cuts because if our psychologist members actually make a living on the reimbursements, it makes it difficult to see patients who are Medicare recipients” if the reimbursements are cut, Minardo said.

The New Jersey Hospital Association also is advocating a long-term solution, but is concerned about how it will affect hospitals, according to association spokeswoman Kerry McKean Kelly.

“It’s something that we’re engaged on. It poses a serious problem for healthcare access and we’re advocating for some kind of fix to this physician pay cut,” McKean Kelly said.

She added that the fix “must not come on the backs of hospitals or other providers to offset those added costs.” She said that hospitals have absorbed billions in cuts under the ACA and “couldn’t sustain further cuts without jeopardizing access to services, or even quality of services.”

Attorney Frank R. Ciesla said a primary reason why federal officials haven’t permanently changed the SGR law is that assuming the cuts will occur allows federal healthcare budget projections to be lower.

“It makes the cost of healthcare look less than it would be if the growth rate wasn’t in effect,” Ciesla said. “Sooner or later, they’re going to have to confront how they’re going to resolve this.”

Joel Cantor, director of the Rutgers University Center for State Health Policy, said any serious attempt to balance the federal budget in the long term is likely to affect both Medicare and other federal healthcare programs.

“You can’t do it without touching Medicare,” Cantor said. “It is by far the biggest part of the problem” of rising federal healthcare costs.

But the long-term calculation may not factor into the resolution of annual Medicare cuts.

“Can you imagine what would happen to healthcare to the elderly if we lowered doctor’s fees [by 26.5 percent]?” Cantor asked.