Medicare to Cut Physician Payments by 5%

Just in time for the elections, the big news from the conference I attended this weekend was that a 5% paycut for physician services from Medicare will take place effective 1 Jan 2007. From CMS:

The Medicare law includes a statutory formula that will require CMS to implement a minus 5.0 percent update in payment rates for physician-related services. This is slightly less than the 5.1 percent reduction in the proposed rule. This formula compares the actual rate of growth in spending to a target rate, which is based on such factors as the growth in number of Medicare fee-for-service beneficiaries and statutory or regulatory changes in benefits. If the actual rate of spending growth exceeds the target rate, the update is decreased; if it is less, the update is increased. Every year beginning with 2002, in response to rising spending, the statutory update formula would have operated to impose payment cuts. The negative update went into effect in 2002, but for 2003 to 2006, Congress intervened and temporarily suspended the requirements of the formula in favor of specific, statutory updates.

No such action occured by Congress this year (as expected), so as of 1 Jan 2007 doctors will need to start making some business decisions. CMS's press release was sugar-coated, stating:

“The rule we are announcing today will pay physicians more for the time they spend talking with their patients about their health care,” said Leslie V. Norwalk, CMS Acting Administrator. “We believe that this emphasis on personalized care will lead to better outcomes for patients, and more efficient use of health care resources.”

The Final Rule will take some time to evaluate its effect on individual physician subspecialties, but I feel cardiovascular and orthopedic services will likely be hit the hardest.

-Wes