The Fix that Failed

The Fix that Failed

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The new “fiscal cliff” legislation hailed by some as a “one-year doc fix” of the scheduled 26.5% sustainable growth rate (SGR) cut that was scheduled to take effect on 1 January 2013, has passed the Senate and House as part of the American Taxpayer Relief Act ( HR 8 ) goes to President Obama for his likely signature.

But was this “one-year doc fix” really a fix?

Not at all.

In fact, once again Congress has failed to resolve the ever-present sustainable growth rate cuts that repetitively surface year after year by kicking the proverbial can down the road another year.

The cost of the one year patch will be $25.1 billion dollars over 10 years and will be paid for almost entirely by health care cuts in other areas.

  • Hospitals (increasingly doctor-employers now, remember?) will see audits of their billings increase as efforts to recoup some $10.5 billion of “overcoding” charges are seen as the largest source of revenue for the one-year “fix.”
  • Hospitals will also see an extension of lower Medicaid payments to hospitals that treat a high number of uninsured or low-income beneficiaries, known as “disproportionate share hospitals” to find savings of about $4.2 billion.
  • Another $4.9 billion offset will be applied to the lowered bundled payments given for patients with end-stage renal disease – some of the sickest people receiving services from Medicare.

  • Also another $1.8 billion will be “saved” to offset the “fix” by reducing payments for multiple procedures that are performed on the same day with patients.  Look for more ICD-9 (or ICD-10) code changes for the new year.
  • Also, look for an even greater crackdown on imaging studies as another $800 million has to be found to pay for the “fix.”
  • And there’s more: the complete list of payments for the “fix,” drawn almost exclusively from health care alone, can be found here.
  • Finally, doctors can expect revenue to stay flat result of this “fix” from Medicare, meaning that the payments received will not address costs imposed by annual inflation.  (You well-paid primary care doctors, are you listening?)

So you see, the “doc fix” is in for another year alright …

… one that is assured to get even harder to really fix next year.

Westby G. Fisher, MD, (aka Dr. Wes) is a board certified internist, cardiologist and cardiac electrophysiologist practicing at NorthShore University HealthSystem in Evanston, IL. He is also a Clinical Associate Professor of Medicine at the University of Chicago’s Pritzker School of Medicine. He blogs at Dr.Wes, where this post originally appeared.

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69 Comments on "The Fix that Failed"


Guest
Sebastian Alexander
Jan 3, 2013

I would add that the “fix” is an adjustment of zero percent, which is better than a reduction of almost one third, but hardly a “fix” because there is surely positive price inflation to physicians’ practice costs. Original SGR “fixes” increased the adjustment with practice costs but this stopped a while back.

While the pure SGR reduction would be catastrophic, a “fix” of zero percent is more like a frog in a pot of water slowly coming to a boil. However, until the medical community accepts a Republican-style reform of making the taxpayers’ contributions a defined contribution, physicians have no hope of getting back the ability to balance bill.

The rational response by physicians to this is to see more healthy Medicare patients for very short appointments, check the right boxes, and make up their revenue on volume. Not a good incentive, I trust we’ll all agree.

Guest
Peter1
Jan 3, 2013

“(You well-paid primary care doctors, are you listening?)”

Maybe, but I bet those really high paid specialists (like yourself) are.

So Doc Wes, what is your fix seeing that we pay the highest prices in the universe?

Guest
Cynthia
Jan 3, 2013

Pitting the American Medical Association (AMA) against the American Hospital Association (AHA) is one way to reduce healthcare costs, IMO. So, if robbing Peter (i.e. the hospital) to pay Paul (i.e. the doctor) will significantly lower the overhead or administrative costs in hospitals, I’m all in favor of it!

Guest
Peter1
Jan 3, 2013

I’d rather rob Peter and Paul to lower costs.

Guest
Barry Carol
Jan 3, 2013

I would still like some insight regarding why U.S. hospitals’ prices per service, test or procedure and their costs, especially related to the number of employees per licensed bed, are so much higher than for similar hospitals in other developed countries.

The weird thing is that hospital inpatient bed days per 1,000 people in the U.S., the average length of stay, and the number of discharges per 1,000 people are all below the OECD median according to the Kaiser Family Foundation. Most hospital bed days are accounted for medical as opposed to surgical patients so the medical arms race in operating rooms is presumably not a dominant factor driving costs. I don’t think higher physician compensation compared to doctors in other countries is a significant cost factor either. Are we performing way more tests per patient and, if so, why? Are we administering more drugs and more expensive drugs and, if so, why? Most importantly, why are there, apparently, so many more employees per licensed bed in U.S. hospitals? I’ve never heard a good answer. It can’t all have to do with fear of litigation and patient expectations. Could it?

Guest
rbaer
Jan 4, 2013

From my residency years at several hospitals in Germany, I can tell you: RNs and in particular docs are better paid in the US – hospital docs in Germany are really underpaid and the country notices that their docs are migrating (mostly England, Switzerland), some of the voids filled by eastern European docs with limited German skills). In the US, drugs and devices are insanely overpriced (in germany only moderately so). The intensity of care and of staffing is much higher in the US. If a German nurse has, say, 8 patients, only 1 or 2 truly need attention, while a US RN may have only 2-4 patients, but more more active ones … and much more paperwork. And since hospital stays in the US are so short, more weekend coverage from techs and therapists are needed (at least in larger hospitals), while really not much is going on in German hospitals on weekends unless it is a true emergency. In general, german hospitals are more lean, much less bureaucracy, discharge planning, coding, slimmer safety margin, less supportive staff, at times inappropriate (I worked in a psychiatric hospital that was operating extremely leanely at night – 8 wards with 30 patients in a high rise, if someone became violent and needed fixation/drugs, the 2nd person from each ward helped out when activated by phone from the ward in need, no security, no labs at night – if needed, patients were transferred).

” It can’t all have to do with fear of litigation and patient expectations.” Culture/slowly developing customs and standards play a role as well. German patients demand less, on average, less pefection, and understand that residents, students, student nurses have to learn and are not perfect. A german hospital day rate for EVERYTHING was (of course, that depends on hospital type), if I recall correctly much less than just room/board/nursing in the US (now DRGs are used in Germany so the daily rates are irrelevant).

Guest
Doug Arnold
Jan 3, 2013

May I offer a bit of good news in all this gloom. Per the ACA, in 2013 and 2014 Medicaid fees for primary care must be no less than 100% of Medicare fees. In my state (CT) Primary Care physicians will see increases of from 70% to 136% in their fees for treating adults on Mediciaid and increases from 6% to 53% for treating kids under age 19 on Medicaid. The fee for the most commonly billed office visit (99213) for an adult wil go from $37.48 to $77.93, an increase of 108%. Medicaid will now pay more han many of the largest commercial insurers for many primary care services in certain plans. This will go a long way to increase access to primary care services for this population.

Guest
DeterminedMD
Jan 5, 2013

Gee, who is paying that increase? Ah, yeah, you and I and the rest of the suckers who stay in the US and allow the ongoing taxation without representation to continue.

New irony to the adage “the more things change, the more they stay the same”, or, more recently by Pete Townsend, “meet the new boss, same as the old boss”. King Barack really has you all awed and awful, eh?

Guest
Jan 4, 2013

A faster way to cut down on hospital upcodings would be to wipe out the higher-paying codes.

In other words, if a heart failure case has 3 DRG codes, wipe out the top one which pays the highest.

Then you have to worry about increased utilization, as hospitals try to make it up in volume.

You could deal with that by withholding 10% of every single reimbursement until the end of the fiscal year, to be sure you do not go over budget.

These are old hat techniques in Germany, Japan, etc. American Medicare will probably take years to come around to them, because Congress is so dependent on contributions from health care providers.

As for the doc fix and related issues, it is somewhat absurd for Medicare to be paying any claim under $500. People under 65 bear up with $300 medical bills with or without health insurance every day of the year, but a $300 bill to a non-poor senior citizen is considered a national emergency.

The solution to Part B upcoding is to give each senior a prepaid debit card for $1,250 or whatever for office visits. The doctor can charge what they please, and be paid in 30 seconds when the card is swiped in their office.

If a senior is spending more than $1,250 in office visits, one can assume there is price gouging going on somewhere.

Bob Hertz, The Health Care Crusade

Guest
Barry Carol
Jan 4, 2013

Bob –

When the ICD-10 hospital coding system is finally implemented and supplants the current ICD-9 system, the number of codes will expand by at least fivefold. While this will have some benefits for academic researchers, it could also easily lead to even more upcoding.

My understanding is that healthcare payment policy in other countries is driven primarily by trying to pay for necessary care and not pay for unnecessary care. By contrast, Medicare’s underlying approach is to cover provider costs. If costs are driven up by inefficiency and/or providing lots of unnecessary care, it still seems to get built into the cost structure that gets reimbursed. New drugs that win FDA approval are generally paid for even if they are no more effective but much more expensive than competitive therapies. They just have to be more effective than a placebo to win approval.

Since we are not likely to change this culture anytime soon, I would prefer to attack costs through such strategies as litigation reform, especially safe harbor protection for providers who follow evidence based guidelines where they exist and monthly surcharges for Medicare beneficiaries who have not executed a living will.

The program should be restructured in a way that provides a range of unified deductibles from a minimum of $1,000 to a maximum of at least $10,000 regardless of whether the expense is for a Part A or a Part B service. There should also be 20% co-insurance above the deducible with an out-of-pocket maximum amount of between $5,000 at the low end to $25,000 at the high end. The Part D drug benefit should be revamped along the same lines. Raise the deductible at the low end, provide a reasonable OOP amount at the high end and eliminate the donut hole. People who want to can buy supplemental policies to cover most or all of what Medicare doesn’t pay for.

Reference pricing might also be helpful. That is, if proton beam therapy for prostate cancer is currently reimbursed at over 50% more than the more standard IMRT but is no more effective, we shouldn’t pay any more for proton beam than we do for IMRT. Patients who want proton beam can pay the difference out-of-pocket and not have it count toward their deductible or OOP maximum. Of course, that difference is currently about $13,000 which not many seniors can afford but why should taxpayers cover it?

Finally, go after fraud with all of the state-of-the art analytics that we have and employ private contractors to help.

Guest
legacyflyer
Jan 4, 2013

The Government is a big dumb animal.

Our nation is like a family that is spending too much on food. We buy staples like potatoes, vegetables and bread. We also buy “luxury items” like Champagne, imported cheese and caviar.

The rational solution to the family’s problem with its food budget would be to cut back on the Champagne, imported cheese and caviar, but continue buying staples. The government solution is to cut everything 10% – including the potatoes and vegetables.

Similarly we spend too much on health care including primary care, pediatrics and other basics as well as the “luxury items” of liver transplants, futile chemotherapy and ICU hospitalization during the last weeks of life.

Rather than targeting the “luxury items”, the government just cuts everything some percent. This is called a “fix”

The ACA is perfect example of such a “fix”. The ACA is probably one of the most complex rearrangements of the deck chairs on the Titanic one could imagine.

Guest
Jan 4, 2013

“The ACA is probably one of the most complex rearrangements of the deck chairs on the Titanic one could imagine.”
__

Imagine. You and I agree on something.

Guest
legacyflyer
Jan 4, 2013

That’s scary

Guest
DeterminedMD
Jan 5, 2013

Run, do not walk to the nearest exit. And I like your end comment of the above as well.

Guest
Jan 4, 2013

President Obama for his likely signature.

Guest
Jan 4, 2013

The inability of CMS to maintain physician income increases inline with inflation or medical inflation has resulted in an ongoing squeeze-play of declining margins, and in many situations, unsustainable financial viability. Thus out of necessity, the logarithmic increase in health system/hospital physician employment will continue, whereby very few if any practices will remain independent.

To Dr. Wes’ point, and contrary a few of the comments here, any impact on hospital-side reimbursement will therefore impact physicians both directly and indirectly. No real ‘fix’ here.

Guest
Barry Carol
Jan 4, 2013

Thanks rbaer. That’s a very informative summary and analysis.

Guest
Peter1
Jan 5, 2013

On my recent hospital stay in India it was 2 nurses for every patient, or so it seemed – great service, push the call button, no waiting.

Of course nurses there are low pay, as well I was cash pay. What I did notice was the tremendous attitude toward customer service throughout the hospital, no matter what the ability or method of pay. Hospital was extremely busy, much more than any U.S. hospital I’ve been in.

Guest
Jan 5, 2013

Regarding Barry’s comments on Medicare…………..

it would be interesting to know how much Medicare spending goes to hugely expensive and late-stage Hail Mary treatments for cancer and organ failure –

versus the more prosaic but also more numerous treatments for just the normal parts of growing old — hip and knee replacements, memory loss, pneumonia, digestive ailments, eye surgery, etc.

I used to think that if we somehow cut back on heroic treatments, which involves accepting death, then we could save Medicare fiscally.

But I am starting to wonder. I have no access to Medicare claims data, but someone does and I would like to know of any studies in this area.

Guest
legacyflyer
Jan 5, 2013

The amount of spending on “late-stage, Hail Mary” treatment is HUGE.

The chance of getting a politician (Democrat or Republican) to step anywhere near this “death panel” issue is TINY.

That is why we are “re-arranging the deck chairs on the Titanic”.

Guest
Barry Carol
Jan 5, 2013

Bob –

There was an article by health policy expert and oncologist Ezekiel Emanuel in yesterday’s New York Times which expressed considerable skepticism about the potential to save significant amounts of money on less futile and inappropriate end of life care though I think there is probably somewhat more potential than he claims. He noted that the 6% of Medicare beneficiaries who die each year account for 27%-30% of Medicare costs in that year. However, that ratio has been about the same for many years.

I thought rbaer’s comments yesterday in response to my questions about hospital costs and staffing were very informative. He noted that we provide more intensive care than in German hospitals, we have a greater margin of safety built into the system, there is more staffing on weekends, doctors make more money in the U.S. than in Germany, patient expectations are higher in the U.S., there is more paperwork and bureaucracy here and patient expectations are higher and less forgiving. Moreover, drug and device prices are far higher in the U.S. than elsewhere. It all adds up. The litigation environment in the U.S. also contributes to more testing and higher costs. The cultural aspects of all this won’t be easy to change. At best, it will take a long time.

As it relates to end of life care specifically, however, I do think there is a lot more that we can do to greatly increase the percentage of elderly people who execute a living will, advance directive or POLST and make sure the information is stored on a registry so it’s available to doctors and hospitals when needed. A $10 per month surcharge on the cost of Medicare Part B premiums for those who don’t execute one of these documents would help prod them to do so, I believe.

Guest
DeterminedMD
Jan 5, 2013

We learn of new flaws and hidden expenses nearly every month of late. Hmm, if this legislation was just 900 pages and easy to digest, why all the surprises that keep surfacing? Oh, yeah, politics.

Lots of “i”s in that word, don’t find them in the words “health care”, eh?

Just like the word “team” is as foreign in DC these days too?!

Guest
Jan 6, 2013

In the last year I had two close friends who died agonizing deaths.
Financially, the huge charges to Medicare mainly came from daily ICU reimbursements. (There were no heroic surgeries.)

In strict budget terms,, we could start to fix that tomorrow morning. Just reimburse hospitals at $1500 a day instead of $5,000 a day, and bundle the fees.
Any doctor visits or blood tests would have to be paid out of the $1500.

Now this would start a whole series of counter moves by hospitals to keep people in the ICU for an extra week, or to find some procedure that can be charged at full price, etc.

But from what I have read about Canadian and German health care, this sort of cat and mouse conflict goes on all the time in those countries.
Health care cost control is an endless struggle against providers who want to preserve their high incomes, and for that matter to just meet their monthly expenses for rent, staff, and malpractice insurance.

Rather than shy away from such conflict, we should see it as inevitable and just wade in if we want to control costs.

Guest
legacyflyer
Jan 6, 2013

So your solution to dying an agonizing and expensive death is to cut reimbursement to hospitals for ICUs?

My state (Maryland) has a cost review commission that controls all hospital rates. The results are not impressive – Maryland is a fairly high cost state and cost growth has paralleled other states.

To someone with a hammer, everything looks like a nail.

Guest
Peter1
Jan 6, 2013

“So your solution to dying an agonizing and expensive death is to cut reimbursement to hospitals for ICUs?”

“agonizing” – drugs
“expensive” – health care directive

“Maryland is a fairly high cost state and cost growth has paralleled other states.”

Is this a false statement?

“No insurer wants to be known as being obsessively aggressive against price increases,” said Gerard Anderson, director of the Johns Hopkins University’s Center for Hospital Finance and Management. “If you’re an insurance company, you stand to lose a large client [the hospital] all to gain a small rate reduction.”
Anderson argues that stronger government intervention is necessary to slow price growth in the health-care market. He points to the example of Maryland, the only state where the government sets the rates that hospitals can charge insurance companies.
The program began in 1976, when Maryland’s per-admission hospital spending was 26 percent higher than in the rest of the country. Between 1977 and 2009, the state’s hospitals “experienced the lowest cumulative increase in cost per adjusted admission of any state in the nation,” researchers in the Journal of American Medical Association concluded.
“Hospital prices have been held down substantially,” Gerard said of the Maryland experience. “And private insurers pay the same rates as public insurers.”
Such efforts, however, have fallen out of favor in other states. Congress gave states the authority to set payments in the early 1970s. About 30 states went on to do so. All states except Maryland gravitated away from those models, as states have looked for more competition and less regulation in health-care markets.”

Guest
legacyflyer
Jan 6, 2013

This reminds me of a “discussion” I had with Maggie Mahar several years ago.

For those who think that the HSCRC has been effective in controlling costs go to the colored chart in the prior article: “What Does the Dartmouth Atlas Have to Say About the Politics of the ACA” by ANUBHAV KAUL, MD, et al – and look at the color of Maryland – dark green = highest cost. Or go to the Dartmouth website.

What the HSCRC has done is to keep Hopkins (and U of MD) in fairly good shape by forcing insurers to pay higher rates to these institutions. (and they probably deserve it for all the indigent care and research they perform) No surprise that Gerard Anderson likes it.

It has also pushed many procedures out of hospitals into “imaging centers or surgicenters”

What it has not done – over the course of more than 30 years – is to make Maryland a low cost state.

You and Maggie both seem to prize form over function – that is – you like regulation despite the fact that it has not been effective.

Guest
Peter1
Jan 6, 2013

Prior you seemed to question the usefulness of Dartmouth study, now you reference it?

Where would Maryland need to be to be considered a “low cost” state?

“Your remedies are the standard ones; an appeal to “providers” to be good girls and boys and “choose wisely” about tests and treatments and a faith that ACOs will solve the problem.”

“you like regulation despite the fact that it has not been effective.”

Is there anything you like?