Mayo: Hold the Medicare

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