Medicare to Slightly Reduce Big Physician Pay Cut in 2012

November 02, 2011

November 2, 2011 — In the category of not exactly good news, the Centers for Medicare and Medicaid Services (CMS) yesterday announced that it would cut Medicare reimbursement for physicians by 27.4% on January 1, 2012, instead of 29.5% as previously planned.

To physicians, this resembles telling a condemned man that his firing squad will consist of 5 riflemen instead of 6.

The slightly lower reduction in reimbursement appears in the final regulations that CMS released yesterday regarding the 2012 Medicare Physician Fee Schedule. Medicare sets these fees using the so-called sustainable growth rate (SGR) formula, which organized medicine wants to abolish. The SGR formula establishes an annual target for Medicare spending on physician services based in part on annual growth of the gross domestic product. If actual spending exceeds the target, the difference is taken out of next year's outlays for physician services.

In March 2011, CMS estimated that physicians would be subject to a 29.5% reduction in reimbursement. The change to 27.4% reflects the fact that Medicare costs this year have grown more slowly than expected, according to the agency's announcement.

The SGR has triggered annual pay cuts for physicians since 2002, but starting in 2003, each one has been postponed by an act of Congress. The postponed cuts then accumulate, leading to the deep one scheduled for January 1. Organized medicine has warned that such a steep drop in revenue would cause droves of physicians to stop seeing new Medicare patients or drop out of the program altogether.

The slightly lower reduction announced yesterday is not changing anybody's tune. Robert Doherty, senior vice president of governmental affairs and public policy for the American College of Physicians, told Medscape Medical News that "27.4% isn't going to make doctors any happier than nearly 30%."

Glen Stream, MD, president of the American Academy of Family Physicians, said in a written statement that the 27.4% reduction "poses a serious threat to the financial viability of physician practices." He cited a survey showing that even a 25% cut would put nearly 13% of family physicians at risk of shutting their doors.

The American College of Physicians, American Academy of Family Physicians, and other medical societies have pressed the new Congressional Joint Select Committee on Deficit Reduction, known as the "super committee," for short, to include a repeal of the SGR formula in its recommendations to Congress.

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