An appendage to the fiscal cliff deal that Congress passed last week kicked a 26.5 percent cut in Medicare physician payments down the road for another year.
But the temporary “Doc Fix,” as it is popularly called, comes at the expense of hospitals’ bottom lines, and some Vermont providers and government officials are concerned that the federal decision will drive up the cost of care in the Green Mountain State.
“The ‘Doc Fix’ is crucial … that had to happen without question,” said Stephen Leffler, chief medical officer at Fletcher Allen Health Care. “But they robbed Peter to pay Paul because they’re going to pay a huge chunk of that by reducing payments to hospitals.”
The payment remedy carries a price tag just north of $25 billion. Of that amount, $10.5 billion is slated to come from Medicare cuts between 2014 and 2018. Another $4.2 billion is set to come from a reduction in Medicaid payments through the disproportionate share program for hospitals that serve a high level of low-income patients. In fiscal year 2011, Vermont hospitals received about $22.5 million in Medicaid disproportionate share payments.
Leffler did not provide a financial analysis for how Fletcher Allen would be hit by these cuts, but he said the impact would be substantial.
“Medicaid only covers less than 30 cents on the dollar of our costs,” he said. “So any further erosion from that makes us lose more money. In the world we live in right now, we have to charge the private insurers more for that cost shift.”
Shifting costs from doctors to hospitals, agree medical professionals and lawmakers, doesn’t solve the overarching problem of how to reduce the cost of care or reimburse providers for care. The measure also delays a 2 percent sequestration of Medicare funds until March 1 of this year, unless Congress takes action.
“This ‘Doc Fix’ did not address the underlying problems of how providers at hospitals are reimbursed,” said Leffler. “It just changed the problem from how we pay the doctors to how we pay the hospitals. Ultimately, hospitals and employee doctors have a common bottom line. … At some level, it will affect every employee we employ here and the patients we care for.”
Bea Grause, CEO of the Vermont Association of Hospitals and Health Systems, voiced a similar concern about how such cost shifts might affect quality of care.
“While Congress has acted to temporarily fix the physician payment formula, it has done so by reducing other payments to hospitals and potentially weakening their ability to care for seniors and their communities,” she said.
Anya Rader Wallack, chair of the Green Mountain Care Board, said the “Doc Fix” puts the state in a health care bind. Her board is charged with the difficult task of reducing health care costs in Vermont, and she said these federal measures would not do that.
“It creates a dilemma for us as state regulators to decide: Do we shift that cost to private ratepayers or the state Medicaid program, or do we simply require providers cut those costs out of their institutions?” she said. “That’s a dilemma because in some cases these will be big costs. We need to worry about the solvency of our hospitals and the quality of care that people receive.”
Allan Ramsay, who also sits on the board and practiced general medicine for 30 years, sees these hospital cuts as a potential opportunity. If the health care system in Vermont remains status quo, then he agrees that hospitals, commercial insurers and patients will have to foot the bill. But, he said, these reductions could encourage hospitals to become more efficient.
“If we don’t change how we deliver health care we’re not going to be able to provide health care to all Vermonters,” he said. “Hospitals are at risk and physicians have been at risk because the system now is not sustainable.
“But if they look at this risk as an opportunity to really focus on their efficiencies and how they deliver health care and reduce costs, then everyone will survive this and be better,” he added. “Change is difficult.”
