This is What You Voted For

As you all know, the game of tag is played ever year. Courtesy of the failed economics of sustainable growth rate, RVU and RUC, every year, physicians are forced to ponder the sustainability of their business model. And once again, Congress messes it up. This year, the house passed resolution H.R. 6331 which would have prevented a "10.6% cut" in revenue and replaced it with a "1.1% raise". However, the Senate fell two votes short on its bill and then they go home to their families for an extended vacation, on a fully funded government health insurance program, leaving the Medicare folks out to the wolves.

Now anyone reading my blog knows these numbers are pure bogus. First of all, when you factor the cost of operating a medical office rising about 5% a year (at least), that 10.6% cut is in fact a 15.6% cut and that generous offer of a 1.1% raise is in fact a 4% cut. And if you factor in a very generous 50% overhead expense to run an office, a physician whose office is entirely made up of Medicare patients would in fact experience a 25% cut or more in take home pay starting July 1st. Because cutting revenue by 10.6% will not cut your overhead by 10.6%. 10%=20%. In fact look at it like this. Using round numbers, imagine if a physician's office grosses $200,000 in a year on $400,000 in revenue. If you cut 10%, revenue drops to $360,000, costs rise to $210,000 (5% rise in expenses every year), and the physician is left with $150,000 in take home pay, a 25% cut. That is the reality of the current economics starting July 1st.

If you are a senior citizen, imagine your social security check being cut 4% every year for the last decade. That is the state of medicine. The AARP is in a big letter writing campaign trying to organize the grey haired generation against rises in their Medicare premiums. This is the same as an organized effort against physician payment because part B premiums fund physician payments. They don't tell their constituents that however.

What the AARP should be telling seniors is that their premiums, which go to fund the Part B benefits, are rising because of the failure of their government to fully fund primary care services. As a result, all the down line effects of this failure which include over referral, over imaging, over proceduralization, over specialization have created an explosion in volume of expensive paid for services (through Part B) provided with no significant improvement in quality. The AARP should be encouraging seniors to fight for increased primary care access. And the only way that will happen is by increasing payment for primary care.

Instead, the AARP wants to hold premiums at a stand still. In essence, they wish to maintain the unsustainable economics of sustainable growth rate. They will soon get their wish if Congress fails to reverse the cuts slated towards physician payment. But I actually hope that happens and I will blog about that soon. And the AARP can sit there, along with Pete Stark and see if physicians really are bluffing when they say they will leave the Medicare system in mass exodus without an overhaul in payment. So AARP, get your wish and see what happens. I can assure you, it will not be pretty. Eventually you will be begging physicians to come back and doctor you.

SHM sent out a letter a few days ago explaining the benefits to me as a hospitalist for passing HR 6331. In that letter they stated the following:

The bill that passed the House on Tuesday would forestall the 10.6 percent Medicare cut on July 1 by extending the current 0.5 percent update through the end of 2008 and implementing a 1.1 percent update for calendar year 2009. The bill also increases from 1.5 percent to 2 percent the bonus payment for participation in the Physician Quality Reporting Initiative (PQRI). In addition, the measure makes important changes to the physician fee schedule that would significantly increase payments for inpatient evaluation and management services performed by hospitalists.

I read HR 6331 trying to hunt down the clauses that stated hospitalists would get more money. The best I could come up with was:

b) APPLICATION OF BUDGET-NEUTRALITY ADJUST OR TO CONVERSION FACTOR.—Section 1848(c)(2)(B) of the Social Security Act (42 U.S.C. 1395w–4(c)(2)(B)) is amended by adding at the end the following new clause: ‘‘(vi) ALTERNATIVE APPLICATION OF BUDGET-NEUTRALITY ADJUSTMENT.—Not- withstanding subsection (d)(9)(A), effective for fee schedules established beginning with 2009, with respect to the 5-year re- view of work relative value units used in fee schedules for 2007 and 2008, in lieu of continuing to apply budget-neutrality adjustments required under clause (ii) for 2007 and 2008 to work relative value units, the Secretary shall apply such budget-neutrality adjustments to the conversion factor otherwise determined for years beginning with 2009.’’.


This paragraph was highly confusing. I asked for SHM to respond to help me understand. Because 98% of what I do as a hospitalist involves E&M codes, codes which are available to all physicians that see patients, a change in the rules would mean increased E&M funding for all clinical physicians, primary care, hospitalists and specialists alike.

SHM responded to me by email (I was very impressed that they did):

In response to your recent posting, H.R. 6331 would change Medicare budget rules to increase the Medicare relative value units (RVUs) for inpatient evaluation and management services, among others, resulting in improved payments for these services. You are correct that these changes would apply to all physicians who perform these services, not just hospitalists. We referenced hospitalists and hospitalists only, because those are the people we represent. But, many other physician specialties would benefit as well from this provision. Please see the 2006 sign on letter asking that the budget neutrality adjustment be made on the work values as background.

I read that sign on letter. What I understood this to mean was instead of a budget neutral approach (SGR) to payment being undertaken through the conversion factor (you see each RVU (this explains RVU) is established a hard dollar value, approximately $38 this year), the budget neutral approach would instead be undertaken by making E&M encounters worth more RVU at the expense of non E&M encounters (imaging, surgery, procedure).

My distaste for this bill, is confounded even more when I read the last sentence of the above paragraph from HR 6331: the Secretary shall apply such budget-neutrality adjustments to the conversion factor otherwise determined for years beginning with 2009.’’.

In other words, the the improvements (which were just a drop in the bucket) made last year in E&M payment would stop and budget neutral adjustments in the failed SGR system would go back to conversion factor adjustments in 2009. It just so happens that HR 6331 is just an 18 month bill. And then things go back to the old failed ways of prior. So in 2009, the mandated across the board cuts will be 20 or 25% instead of the current 10.6%

How can anyone sign on to that? The bill does nothing but delay the inevitable collapse of Medicare. Every year of delay now makes a change in the future harder and harder to find. I can't agree to a bill that doesn't fix anything. I disagree with any effort to put a band aid on a horribly flawed system. The longer we fail to fix the problem, the harder and harder it will become to face when that time eventually comes.

If we can't pay for everything, we must pay for what we value. If we value primary care as a highly efficient, cost effective component of our health care system, we must give it top priority in time, energy, and resources. If we value specialty services for providing the best possible expensive technologically advanced service for everyone, all the time, then we must find a way to pay for it. That means higher taxes, higher premiums. We have already shown that more service doesn't not equate to more quality. Only more expensive.

You can't have both in the current system of sustainable growth rate economics. It is impossible. Either expand the pot of money, or start denying the scope of services available. If you cut payment for services as a cost control (the 10% cut), you will get more volume by the survivors doing the expensive highly profitable procedures, AND you will get declining access from the already high volume, low profit centers (primary care). In other words, you will get less primary care (the cheap stuff) and you will get more expensive proceduralization by specialists. Or put another way, you will get exactly what the system is set up to give you.

Look out America, get ready for even lower access to cheap effective care and a highly expensive and wasteful proceduralization of your friends and family. As George Carlin says, I don't vote so you can't blame me for all the bad decisions coming out of Washington. Well America, this is what you voted for. I hope you're ready to live with the consequences.