Physician Payment Reform: An Opportunity to Bolster Primary Care

James Rickert

First posted 9/07/11 on The Health Affairs Blog

Copyright ©2011 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc. 

With the Budget Control Act of 2011 now signed into law, health care lobbyists are preparing to fight any changes to federal programs that affect their constituents.  One particular concern for physicians is the scheduled 30 percent cut to Medicare reimbursement mandated by the Sustainable Growth Rate (SGR) formula.

Any attempt to waive these cuts will need to be offset by lower spending elsewhere in the federal budget.  While no one can predict what action will occur, it appears that Congress is in no mood for increased health care spending, and some cuts are inevitable. Thoughtful and strategic changes in physician reimbursement  could meaningfully improve health care in our country while  reducing our health care spending.

I practice orthopedic surgery in a small town in south-central Indiana.  In addition to orthopedic coverage, we’re well provided with urology, otolaryngology, cardiology, opthalmology, pulmonologists, and just about every other medical specialty.  What we lack is adequate primary care.  Our hospital does not have an admitting pediatrician.  We’re woefully understaffed with general internists and family medicine physicians.

When I was diagnosed with cancer myself, I relied on my friendship with a general internist to get a doctor to help coordinate my care; otherwise, no generalists were accepting new patients — they all were already swamped.  We actively recruit these doctors, but the competition for their services is fierce, and they often go to any number of other needy communities.  The impact of their absence on local health care is enormous, and no number of specialty physicians can replace them.  We simply don’t have the skills or training to coordinate care, offer preventive medicine or perform the other functions of primary care docs.

Strengthening Primary Care Can Improve Outcomes And Reduce Costs

The lack of such care is obvious and frustrating, and its negative effects have been well documented over the past decade. For instance, researchers in 2007 concluded that communities with higher percentages of primary care doctors (PCPs) perform much better on any number of health quality measures including infant mortality rate, life expectancy, and death from such diseases as cancer or stroke.  Limiting results to all-cause mortality, these authors found that an increase of only 1 primary care doctor per 10,000 population resulted in a 5.3 percent annual reduction in mortality.  On a national level, this would translate into a 127,000 reduction in mortality.

Much of these improvements can be attributed to the preventive care that PCPs offer their patients.  Communities with higher numbers of primary care doctors enjoy increased diagnosis of early stage breast cancer and melanoma  (rather than late stage) and a lower incidence of advanced stage cervical cancer. Most mammograms are ordered by primary care physicians, and people with an adequate primary care source are more likely to receive blood pressure screening and Pap smears.

Surprisingly, these many health quality improvements associated with an increased supply of PCPscome with a quantifiable savings to our health care system.  None of these metrics are affected by the specialty physician supply; we simply have not been trained to act as generalists, and we naturally focus on our own specialties.

Unfortunately, to the detriment of America’s health care system, the number of medical students entering primary care specialties is limited by the lower income potential of these fields compared to the incomes earned in procedural specialties.  There is a near perfect correlation between specialty earning potential and the fill rate of specialties with American medical school graduates.  It requires little imagination to understand that newly minted medical students will be drawn to the most lucrative specialties, especially if those specialties pay up to 3 times the income of a career in primary care.

Our current reimbursement system tells students that society esteems specialists more than generalists.  We laud the value of PCPs, but we pay specialists.  Therefore, to improve the number of primary care doctors in this country, we must begin to equalize compensation across medical disciplines.

The looming SGR cuts make a tempting tool to improve America’s physician reimbursement schema.  By targeting the SGR cuts only to procedures, we can save primary care physicians from financial harm and reduce the irrational disparities in reimbursement that help drive medical students away from careers in primary care.  According to a recent survey, only 17 percent of primary care doctors described their practices as “healthy and profitable”.  Significant SGR cuts would significantly worsen their situation, and all efforts should be made to prevent lowering their reimbursement even if this means that payment cuts must fall on others.  Specialists earn average incomes of $400,000-500,000 or more and can more easily absorb a 10 percent income loss (assuming an SGR cut of 30 percent, a practice Medicare population of 50 percent, and an average procedure rate per patient volume) than primary care docs making an average income of $185,000 could withstand a 15 percent reimbursement cut (assuming a practice Medicare population of 50 percent).

Targeting Cuts To Procedures Would Also Improve Incentives For Specialists

Furthermore, targeted SGR cuts to procedures would have other salutary effects.  It would reward specialty physicians who practice conservatively — delaying procedures until other treatment modalities have failed — by maintaining their incomes from E & M codes (office charges) while penalizing specialists who employ procedures more aggressively.  Such targeted cuts would also reduce the financial incentive to perform unnecessary procedures.

While the cost of unnecessary or questionable procedures is difficult to quantify, one look at resources such as the Dartmouth Atlas reveals that it does occur.  In my specialty of orthopedics, the Atlas shows an average rate of total knee replacement of about 8 per 1000 Medicare patients.  However, there are outlier communities, such as Provo, UT, where the rate is nearly double the national average.  I can think of no medical reason for such a disparity.

If reimbursement were equalized for both procedural and office based care, there would be much less incentive for doctors to proceed with unnecessary treatments.  Reducing questionable procedures saves both the patient and our health care system.  It saves patients from unnecessary risk and morbidity, and it saves the system both the physician charges and the much more expensive facility charges –hospital, surgery or imaging center — where the procedures are performed.

We Have A Chance To Accomplish What Physicians Have Proven Incapable Of Doing Thus Far

Physicians, through the American Medical Association’s Relative Value Scale Update Committee (RUC), have proven themselves utterly incapable of rationalizing our payment system; the SGR cuts provide an opportunity do so through a different process. Indeed, even the idea that Congress might use the SGR cuts to change our reimbursement system would likely be enough to force the RUC to fix this fundamental structural problem with our health care system.

When asked about the SGR in the light of the Budget Control Act, AMA President Peter Carmel said, “[We] anticipate the Medicare physician payment issue will be among the issues the [super] committee will address, as everyone agrees that a 30 percent cut in payments to those who care for Medicare patients would hurt seniors’ access to the health care they need and deserve.”  He is only half right.  Primary care doctors do need to be protected from these cuts, but lowering the value of procedures would improve our nation’s health.  Such a strategy would improve the attractiveness of primary care as a career choice; reward the less risky and costly conservative management of disease by specialists, and reduce the incentive to perform unnecessary procedures.

Not many situations exist where we can improve the quality of health care in our country by cutting spending on Medicare.  This is one of those opportunities, and it should not be squandered.

James Rickert is a private practice orthopedic surgeon. He also serves as an Assistant Clinical Professor of Orthopedic Surgery at Indiana University School of Medicine. He founded and is president of The Society for Patient Centered Orthopedics, a group of orthopedists that advocates for, among other things, patient interests in our health care reform debate.