“Constrained” by Medicare

July 22, 2010 in Health Care Reform, Industry News by excel

President Obama recently appointed Dr. Donald Berwick to head the Centers for Medicare and Medicaid Services (CMS). This appointment was done over a Congressional recess, thus avoiding hearings.  This has drawn criticism from some quarters ostensibly because of the still open wounds from the recent health care reform legislation and the fact that CMS has the largest budget in the federal government – even larger than the military.

Dr. Berwick has impressive academic and professional credentials.  Depending on your views of the role of government in health care, you may or may not like Dr. Berwick’s philosophy, which you can read about in this recent editorial in the Wall Street Journal.

For an entrepreneurially-minded provider like Excel Physical Therapy and Fitness, one quote from Dr. Berwick caught my attention: “For-profit, entrepreneurial providers of medical imaging, renal dialysis, and outpatient surgery, for example, may find their business opportunities constrained.”

“Constrained” is a pretty subjective term.  My first thought was it was a euphemism for “cut, slashed, whacked” or other even more off-color terms.  One might be inclined to shrug it off as just more noise coming from Washington DC.  Let’s face it, we’re all pretty tired of and perhaps numb to the goings-on inside the beltway.  But please read on.

Also recently, CMS issued its proposed rule on the Medicare Physician Fee Schedule for the 2011 calendar year. This rule outlines a bleak and potentially devastating forecast for payment to physical therapists, physicians, and other health care professionals. Without Congressional action, the fee schedule will cut payments 23.5% on December 1, 2010, and reduce payments an additional 6.1% on January 1, 2011.

In addition to this cut, CMS proposes a detrimental additional physical therapy payment policy. The multiple procedural payment reduction (MPPR) would make full payment for the therapy service or unit with the highest practice expense value and reduce payment to 50% of the practice expense component for the second and subsequent procedures or units of the service furnished during the same day for the same patient.

Let me translate.  All-in, the worst case scenario for physical therapy providers as best we can figure means that come January 1, 2011, Medicare payments could be cut approximately 35-50% from current per visit payments.

In a competitive health care marketplace like the Philadelphia region, providers understand that you’ve got to deliver quality care and get results to stay in practice.  If you do that and run a good business model too, then maybe financial success results.  But there is no guarantee.

With these drastic payment cuts perhaps on the short-term horizon, tough decisions are going to have to be made about salaries, benefits, personnel and even whether it is worthwhile to see these Medicare patients.  These are potentially sad consequences of being “constrained”.  Let’s hope we can muster enough legislative muscle to defeat these proposed fee cuts.

By: Jeff Ostrowski, PT, CEO