Primary care doctors are set to lose more than half of their salary

by MATTHEW MINTZ, MD

Fortunately, the 27% reduction in Medicare payments to physicians that is set to take place in a matter of weeks unless congress acts is getting some press. Fox News published a piece recently, as did theWashington Post. Writer Merrill Goozner breaks things down nicely in his article, “Is There a Doctor Fix in the House … and Senate?”

However, one thing that seems to be getting confused in all the media reports is the difference between physician payments and physician salary. A doctor’s income is what he takes in (payments) minus expenses or overhead. Physician overhead (staff, office space, electricity, malpractice, equipment,etc.) is very expensive. One of the reasons, but not the only reason, a doctor’s overhead is so high is because we need to hire extra staff just to deal with the insurance bureaucracy. (See “Your 10 minute office visit needs 8 people and 45 minutes of work) While payments from Medicare to physicians have not really increased over time, overhead has gone up dramatically.

Physicians, patients, and policy makers need to understand that a 27% cut in physician payment will have a far greater impact on physician salary because of this overhead.

An article from the American Medical News discussing the issue of the “doc fix” has an interesting table with current payments and proposed payments. Let’s say a family physician sees 25 Medicare patients a day, 5 days a week for 50 weeks out of the year. At the current rate of $68.97 per visit, this generates $431,062 in revenue. At 60% overhead of $258,637, this family physician’s income would be $172,425 per year. Now any doctor reading this will tell you that 1) no physician would see exclusively Medicare patients because they just don’t pay enough (at current rates) to sustain a practice; and, 2) you can’t see 25 Medicare patients in a day because patients 65 and up have multiple medical problems and you simple couldn’t see them all in 15-20 minute visits. However, the income is very close to$168,550 which is the average salary for a family physician. Thus, the numbers are good for the purpose of discussing the impact of Medicare cuts on not just payments but salary.

Now, if the 27% Medicare costs go into effect, Medicare will only pay $51.07 for that same visit. Using the same numbers, the revenue generated is only $319,187 (26% decrease in Medicare payments), but the $258,687 in overhead stays the same. This leaves the primary care physicians with a $60,550 annual income. That’s a 65% cut in physician salary. Even if my numbers are off, its clearly more than a 27% cut to salary, and much greater than 50%. The bottom line is that if these cuts take place, primary care physicians will certainly stop seeing new Medicare patients, and many will stop taking Medicare patients altogether. Many already have.

Now, most pundits seem to think that since seniors vote, and Medicare is a big issue for them, and that the election is less than a year away; Congress will find a way (like they have for the past few years) to find the money to cover the cuts for at least another year. However, I wouldn’t be so sure. I would advise anyone who is on Medicare, has a loved on on Medicare, or who plans on having Medicare in the future to call their representatives and ask them to ensure that these payment cuts not go into affect.

Matthew Mintz is an internal medicine physician and blogs at Dr. Mintz’ Blog.

COMMENTS

David Gelber MD

A 27% cut in Medicare reimbursement translates into a 27% cut in all reimbursements, at least in our general surgery practice. Every insurer we contract with ties their reimbursement to Medicare rates. Most are slightly above, exactly at, or slightly below Medicare rates. Of course, the private insurers also make up their own "rules". If I do multiple procedures on one patient, Medicare pays me 100% of the most expensive, 50% of the next most expensive procedure and 25% of any other procedures done at that time. Private insurers often pay 100% of the least expensive procedure and consider the rest incidental.

Such a large cut in reimbursement will likely result in some doctors quitting, most looking for ways to make up the difference and some just shrugging their shoulders and taking it as best they can. In our practice, I can see my older partners simply retiring, as the cost of practicing reaches the point where reimbursement doesn't cover overhead.
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- 3 hours ago
Diane

Well I was going to say that Medicare payments set the standard for other insurance companies, but Dr. Desai points out that they often pay more. In our business, we rely on those Medicare, Medicaid, a few private insurance and a handful of cash customers. Our professional journals tell us that Medicare and Medicaid payments affect every step of health care as the government trendsetters. Then again, why should private insurance pay higher - more money in Mr. CEO's pocket. (oh, I mean for all the good causes they sponsor).

Many years ago, a huge OB/GYN practice stopped accepting the largest private insurance carrier in our area b/c of it's crummy payments. You can imagine the uproar that followed and the action that a bunch of hormonal, angry pregnant women can take. And this was long before smart phones were on the block. Many businesses stopped taking their insurance as the revolt grew. It took a long time before BIG insurance was able to regain it's reputation. So it's not unheard of to rebel. I suppose you just have to have enough power in the numbers...
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- 2 days ago
James Lewis

Interesting challenges ahead - Lets take a look at which clinicians are most likely to stop seeing M'care patients if and when these cuts actually take place. If we look at the new physicians entering the primary care (PC) market and the elder PCs about to depart from the market then we have 2 pools of clinicians who will most likely continue to take these patients, i.e. with new physicians the number of M'care patients who they would stop seeing wouldn't be enough to make a dent in their salary and the departing physicians would ultimately go bankrupt if they stopped seeing these patients. This leaves a huge pool of clinicians in the middle who could decide to stop seeing M'care patients and throw the system into an even greater access conundrum. The Feds couldn't possibly be looking to push out these MDs/DOs since they are the lowest on the food chain. When cuts take place, I believe they will be ultimately taking from the rich and passing on to the poor, i.e. reducing procedural payments and increasing visit payments.
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- 2 days ago
Kevin Nasky

Maybe it's my paranoid streak, but I've got a suspicion that the overarching goal is to rid the market of primary care physicians, and have mid-levels step in to fill the void (at much lower reimbursement rates, mind you).

This is going to happen. Just watch.
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Jonthon Izbicki

You are not paranoid...it's reality. I am a PCP and just sick as can be. No one really cares, who takes care of them, as long as they get what they want! One reason this has happened is that our current payor system plus the RUC as devalued PC services... It's so simple, even a cave man can do it!
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Dave Chase

The only plausible "doc fix" I've seen is the ones that doctors take themselves. I've written about the Direct Primary Care model (i.e., concierge medicine for the masses). See http://www.kevinmd.com/blog/po... for examples. Not only is this model supported in the PPACA, it even has a GOP/MD rep from Louisiana who was a vocal opponent of PPACA proposing to pay for Medicare using the DPC model (HR 3315). An explosion of DPC models are happening right now. There's a blend of independent DPC practices (e.g., AtlasMD, OrganicMedicineNow) and orgs (e.g., MedLion) that are teaching other docs how to move to these models and providing enabling business models and technology. I don't see how the handwriting on the wall could get any clearer that the way we pay for primary care is severely flawed. The good news is there's a model that pays docs well, saves patients money and reduces downstream costs. When the co-pays for a public health center are more costly that the entire fee structure of a DPC practice (and the doc is making a healthy living), you know there's change afoot.

My latest piece (follow link above) was "Overcoming barriers to building a direct primary care practice". Docs...
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- 2 days ago
PamC

"Medicare: now accepted nowhere."
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- 3 days ago
davemills555

Medicare? Accepted nowhere by prima donna primary care doctors! Neighborhood Health Centers are accepting Medicare patients regularly and the mass migration is growing every day. When prima donna primary doctors say "NO!" to Medicare, our seniors have no choice but to go to a local clinic. More and more, seniors are finding that they get better care and more face-time without the ignorant and disparaging remarks about Medicare not paying enough. Screw the greedy prima donnas! We need more Community Health Centers and less prima donnas! Obamacare encourages Community Health Centers and encourages Accountable Care Organizations. Both a breath of fresh air when compared to the fee-for-service prima donna doctors. The prima donna primary docs need to dry up and blow away!
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Steven Reznick

So far Primary Care doctors have not said " NO" to Medicare patients. In areas like South Florida where Medicare pays more than private insurers, the effect of a big reduction instantly will probably result in specialty doctors opting out of Medicare long before PCP consider it. It has already happened in the " ROAD" specialties where cosmetics and aesthetics practices and dermatology practices charge cash up front.Most of the procedural oriented medical and surgical specialties have started charging an annual fee to their patients in addition to the visit and procedure charges. Interestingly many of the same individuals who complain about a $25-35 copay per PCP visit have regular appointments for botox and filler injections and nip and tuck procedures where they pay cash up front regularly.
For those enamored with future ACO's and Community Health Centers I can only point out that in my area of the country these are being assembled by hospital systems who in the past have tried these 2-3 times previously and failed miserably. Even with massive government subsidies it remains to be seen whether they can actually efficiently and compassionately care for patients in the new setting and not go bankrupt again?
Non...
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Gil Holmes

Yes, us prima donna doctors just love having our pay cut by 2/3. Who wouldn't love that.
Why everyone I know is willing to spend $10 in order to get $7 back. Not $7 profit, $7 total.
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southerndoc1

Community Health Centers LOVE Medicare patients because they get paid 3x as much for seeing them as docs in other practices. You want to see greed: look at the payments made to CHCs.
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Vikas Desai

Dr. Mintz, as underpaid as we are from medicare, most of my private insurance patients actually pay even less than medicare does, its pretty depressing. What a joke 60,000 a year as a PMD for the same work, thats one third of what a nurse anethetist gets paid, I could go train to do IT for six months at devry and make more than that. I doubt it will happen though, the senate has done a good job putting a band aid on it.
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kjindal

yes same here Vikas. In NYC medicare is sadly one of the highest payers. None of the private insurers have raised rates ever for my practice duration (about 8 years). A few of the commercial insurers pay extra for weekend or emergency visits, and eliminate the "84%" problem with dual-eligibles (this is where medicare pays 80% of allowable and medicaid decides that 20% OF 20% is sufficient to cover the difference, of course with no balance billing allowed).

But otherwise, we are really at the mercy of medicare and commercial insurers, and their unilateral policies. I am almost looking forward to all the self-appointed obama-lovin' health gurus and pundits (who've never seen a patient or had to make a living treating patients) eliminating fee-for-service altogether, and then they can give me a mediocre salary but with full government benefits, then i can work like a VA doc - in at 10am, lunch from 12-1:30pm, meetings from 2:30-4pm, then home, and no call or weekends (that's what residents are for!) I think in that scenario it'd be hard for them to justify paying an MD any less than an NP. Screw the next generation of physicians at this point, now it's...
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ninguem

I assume you're East Coast?

I hear that a lot from there.
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