Physicians to Face Cash Flow Problems While Congress Debates Expanded Medicare Fix Next Week

June 10, 2010

June 10, 2010 — Carriers for the Centers for Medicare and Medicaid Services (CMS) on June 15 will begin processing 2 weeks' worth of suspended Medicare claims at rates reduced by 21.3% unless Congressional Democrats change their timetable to avert the massive cut.

If legislative efforts to end the reimbursement crisis continue to stall, medical practices will have to decide whether to delay filing new claims until the pay cut is blocked or to submit those claims at the reduced rate and get them paid in full later.

All of these possibilities mean a potential cash-flow problem for physicians, who once again are waiting for Congress to enact a so-called "doc fix" to avert the cut, which was triggered by the sustainable growth rate formula that Medicare uses to set physician reimbursement. The reduction was scheduled to take effect January 1, but Congress put it off until March 1, then April 1, and then June 1. The cut also temporarily went into effect in March and April, when Congress did not postpone it until after the deadline.

On May 28, the House approved a Democratic-sponsored bill delaying the cut until January 1, 2012, and giving physicians a 2.2% raise for the last 7 months of 2010 and a 1% raise in 2011. However, Senate Democrats opted not to take up the House legislation until June 7, partly because they lacked enough time, in their opinion, to pass it before their Memorial Day recess. Democrats in both chambers of Congress have encountered Republican opposition to doc-fix legislation because of how it would increase the federal budget deficit, but Senate Democrats must contend with filibusters — a form of legislative stonewalling not allowed in the House.

As a result of Congressional inaction, Medicare reduced its rates on Tuesday, June 1, but largely in a technical sense. Days earlier, CMS had instructed its carriers to hold June claims for the first 10 business days of the month — or through June 14 — in the hope that Congress in early June would retroactively avert the pay cut. If that happened, the carriers could process the suspended claims at the higher rate. CMS has stated that holding claims for 10 days does not hurt practice finances very much because it reimburses clean claims no sooner than 14 days after receipt if they are electronic, and 29 days if they are paper.

Expanded Doc Fix Would Last Until 2014, Cost $63 Billion

This week the Senate did turn its attention to the doc fix, which is part of an "extender" bill that would stretch out unemployment benefits and various tax breaks while closing other tax breaks. However, Senate Democrats have indicated that they will not vote on the legislation until early next week — a timetable that takes them beyond the CMS hold on June claims.

Further complicating the picture is that the Senate has been busy debating amendments to the House's extender legislation (the House passed separate doc-fix and extender bills in May, only to combine them afterward). One proposed, but not yet introduced, amendment would postpone the Medicare rate reduction to January 1, 2014 (or for 3.5 years), instead of January 1, 2012.

That was originally the formula for the House doc fix as well, but its price tag of $63 billion over 10 years drew flak from budget hawks and forced House Democrats to settle for a 19-month fix that would cost only $23 billion. Under the earlier House solution to the Medicare reimbursement crisis, physicians would have received raises of 1.3% for the remainder of 2010 and 1% in 2011, with the possibility of raises in 2012 and 2013, especially for primary care physicians.

Regan Lachapelle, a spokesperson for Senate Majority Leader Harry Reid (D-NV), told Medscape Medical News on Wednesday that the vote on the doc-fix bill itself probably would not occur until next week. Because Senate Democrats do not plan to conduct any votes on Monday, the earliest that they can vote on the doc-fix bill is Tuesday.

Physicians Face Cash Flow Crimp No Matter What They Do

If a 3.5-year doc fix passes the Senate next week, it would need House approval before President Barack Obama could sign it into law. Those additional steps could expose physicians even further to the effects of the 21.3% pay cut, especially because there is no guarantee the House will approve the measure immediately or at all.

One effect would be carriers beginning to process suspended claims at the slashed rate on Tuesday. When Congress did not postpone the pay cut scheduled for April 1 until after a 10-day claims hold that month, CMS told physicians that any claims paid at the reduced rate would be reprocessed automatically at the unreduced rate, provided the physician charge was at or above it. Still, depending on how long Congress stretches out the current drama, physicians could start receiving skinnier Medicare checks.

Then there is the problem of claims after June 14 coming under the pay-cut knife. True, physicians have the option of not submitting them until a new rate takes effect. However, many cash-strapped small and medium-sized practices cannot afford to go unpaid for long, said Kevin Burke, director of governmental relations at the American Academy of Family Physicians.

"They still have to pay their rent and meet payroll," Burke told Medscape Medical News.

The alternative is submitting a claim at the reduced rate and waiting for CMS to reprocess it at the higher amount once Congress enacts a fix. Cash flow also wanes in this scenario because initial check amounts will be one fifth smaller than before.

Physicians on average depend on Medicare for roughly 30% of their revenue, according to the Center for Studying Health System Change.

Burke also pointed out that the pay cut complicates the task of collecting copays from Medicare patients. The copay is 20% of the allowable Medicare fee, so if this fee decreases, the copay must decrease as well. If Congress does not enact a doc fix by Tuesday, a physician treating a patient would collect a copay based on the new reduced rate for services rendered. If and when the rate reduction is undone, the patient then would owe more on the copay because the fee will have increased retroactively. For an office visit with an established patient, this extra amount might be a few dollars.

Rebilling the copay creates more work for the medical practice and threatens to annoy patients, Burke said.

However, CMS has instructed physicians in the past that they can forgo collecting such small amounts if they are less than the cost of billing for them, according to Cynthia Hughes, a coding specialist at the AAFP. "The cost of mailing out a statement is in the $5 range when you include labor and postage," Hughes told Medscape Medical News.

Hughes added that when CMS has held claims for 10 business days during the pay-cut crisis, physicians could collect copays based on the unreduced Medicare fee schedule during that time.

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