Reimbursement cuts at CMS are fueling the exodus of independent physicians

Reimbursement cuts at CMS are fueling the exodus of independent physicians

For independent physicians, 2024 began with a 3.4 percent cut in Medicare reimbursement wages, as legislation in both the House and Senate sought to ease but not eliminate the cut. Over the past 20 years, Medicare physician pay has fallen 26 percent, adjusted for inflation, while hospital reimbursements have risen 70 percent, prompting more than 100,000 physicians to leave independent practice for hospital or corporate work as of 2019. this way.

According to Dr. David A. Eagle of New York Cancer & Blood Specialists, this is a threat to patient access and quality of care. In an interview with The American Journal of Managed Care® (AJMC®), he discusses how the costs associated with practicing medicine have increased by 50% since 2001, making it increasingly difficult for independent physicians to stay in business.


AJMC: Can you provide an overview of the current situation regarding the proposed 3.4% Medicare reimbursement wage reduction for independent physicians effective January 1st?

Eagle: Yes, unfortunately it went from proposed to actually implemented. We’re still hoping for a fix, but it looks like that won’t happen until March of this year if lawmakers can agree on a fix. So, unfortunately, those cuts have already happened. You know, 3.4% in itself doesn’t necessarily sound like a lot, but it’s in the context of the repeated cuts and lack of inflation adjustments that have happened over the last 20 years.

AJMC: In contrast, hospital reimbursements have seen a 70% increase. How has this disparity affected physicians’ choices between independent practices and larger health care systems?

Eagle: Yes, we are unfortunately witnessing a decline in independent practice that began 40 years ago and continues today. You know that 40 years ago roughly three-quarters of physician practices were independent, and now maybe a quarter of practices are truly independent. And that’s largely a result of changes in reimbursement—if you have one system that’s supported with higher reimbursement, it’s not surprising that care providers will migrate to that more expensive system. You know, we think this needs to be fixed.

Changes in inflation have been a problem for 20 years now, and hospitals and other facilities get automatic inflation adjustments in their reimbursements, but private doctors don’t. And it’s the fact that it’s gone on for so long that it’s created a huge disparity in the financial support that goes to private doctors’ offices versus hospitals.

AJMC: Could you elaborate on Medicare physician pay trends over the past 2 decades, especially the 26% inflation-adjusted decrease? What factors contributed to this decline?

Eagle: I think it’s the fact that if we look at it, physician reimbursement has only gone up 10% since 2001. While hospital payments have risen 70% since then, and that’s a combination of inflation adjustments and actual changes in [fee] the very schedule that the two things together have just created a divergence. And I think a lot of people have seen the graphs of the divergence between doctors and hospitals since then. And you know, when you make these small changes over a longer period of time, it adds up and actually affects the settings of care that patients have access to.

AJMC: The statement mentions that over 100,000 doctors have left independent practice since 2019. What are the main reasons behind this exodus and how has it affected the quality of patient care?

Eagle: Well, we think that independent medicine provides tremendous value and quality for patients and allows people to be treated in their local communities in a more convenient environment and a more cost-effective environment. And I think typically patients’ out-of-pocket costs are lower as well. So we believe in this independent model and we believe that it really serves patients well, it really comes down to reimbursement and we have to compete with other models of care. If our reimbursement goes down while there are other competing models of care, that reimbursement goes up, it just makes it harder to sustain independent physician practices.

AJMC: The cost of practicing medicine has reportedly increased by 50% since 2001. What are the main cost drivers and how does this affect the ability of independent physicians to sustain their practices?

Eagle: Just the cost of everything from rent to staffing, staff salaries, all of that has gone up over the last 20 years, while physician payments have stayed relatively flat. So, at some point maintaining an independent practice, the numbers don’t stack up when expenses go up, but reimbursement doesn’t.

AJMC: How are the House and Senate addressing this issue through legislation, and what are the key considerations in these proposals?

Eagle: We very much support the Strengthening Medical Care for Patients and Providers Act, HR 2474, which was introduced last year. This provides permanent inflation-based updates to the Medicare physician fee schedule and eliminates the payment cut that went into effect in early 2024. So we think this is the right type of legislation to support to address with these problems.

AJMC: How does this shift from independent care to hospital settings affect access to health care and patient equity?

Eagle: Well, I can give an example, our practice in New York and Long Island, we underwrite all the insurance plans, we put clinics in places that, frankly, in communities that other cancer providers don’t necessarily want to go to. So the first step is to be available to the patient in their community where they can come see you and actually pick up their insurance plan. And if you can’t do that, you can’t offer patients hope. Hospital care is sometimes simply not available to patients. And then often the out-of-pocket costs for hospital care, which include things like facility fees, can be higher. So this can be a barrier for patients.

At New York Cancer and Blood, one of the things we’re really trying to do is build a structured intake form for health-related social needs so that we can better connect patients in need with resources. We have our own foundation in practice that raised over a million dollars last year, and we use those resources to really try to meet the needs of patients who have financial needs – their non-medical needs. It’s for transportation, housing, utilities, food, things like that. Those are the types of things as a private practice that we try to focus on and provide care for the benefit of the patient or the community. But to your original question, you know, to really take care of a patient, you have to be in a place that they can get to, and you have to accept their insurance plan, and without that, they just don’t have access to you.

AJMC: Are there any legislative actions where there may be potential solutions or strategies that can be explored to support independent physicians and mitigate the challenges they face?

Eagle: I think pay parity legislation could help. I think any time you have 2 separate models of care that pay differently for providing the same type of service, I think that type of disparity in payment is really the type of thing that puts more pressure on independent medicine . Support for payment parity between private practices and hospitals would be a very good and important step in the right direction.

AJMC: The statement suggests that care costs more in hospitals and large systems. Can you explain why this is and how it contributes to the overall healthcare landscape?

Eagle: Well, I think patients’ out of pocket costs are often higher, hospitals are paid in a different method by Medicare than private doctor’s offices. So there are things like facility fees, hospitals can often negotiate higher commercial rates with private insurers. And I often think that means patients pay higher co-pays when they seek care at the hospital. I think the care itself is actually more expensive, too, because hospitals tend to be structurally more expensive than private doctor’s offices.

AJMC: How can the health care system strike a balance between controlling costs and providing quality care, especially in the context of independent practices?

Eagle: I think the best way to strike a balance between cost and quality is to support the lowest cost care providers who deliver quality. And I think independent practices do that. I think our quality is as good, if not better, than care in a hospital setting. And we can do it at a lower cost. So I think supporting that model is really the best way to strike that balance.

AJMC: Do you have anything else to add?

Eagle: We have a new organization, the American Association for Independent Medical Practice, and that really seems to be the voice of independent medicine, and that independent medicine needs its own voice. We created this organization to do that and help share the message: it’s getting harder and harder for medical practices to stay independent, and there’s tremendous value to private practice patients. Patients should have this option.

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