In each of the past three years, physician reimbursement in Massachusetts has failed to keep up with inflation in about 95% of the most common procedures--a situation that medical leaders believe could set the state up for a California-like crisis.
The grim findings are found in a Deloitte and Touche study commissioned by the Massachusetts Medical Society. The study looked at 18 of the most commonly billed CPT codes and compared average reimbursement from insurers and the government between 1997 and 2000.
They found that while expenses rose at an average of 3.7% a year for three years, reimbursements in 17 of the 18 CPT codes not only didn't keep pace but dropped an average of 6.5% per year.
"It confirmed a lot of our curbside suspicions and then some," says MMS spokesperson Frank Fortin. "It was not a surprise to see reimbursement rates had fallen. It was shocking to see they had fallen so much. It was shocking to see that Boston was in worse shape than similar cities with a high number of medical centers and high managed care penetration."
MMS officials don't have estimates for aggregate losses for physicians, although they plan to further study physician expenses.
The 18 CPT codes represent more than 80% of the billed procedures in the regions studied. The study compared Boston with Philadelphia, Chicago, San Diego and Los Angeles. It also looked into reimbursement and operating costs in the Cape Cod area and western Massachusetts. Researchers chose those areas because they are statistically different and have different medical communities than Boston.
The report shows a significant gap between reimbursement and the average increase in total operating cost per physician. Reimbursement for coronary bypass has decreased an average of 17.7% per year for three years, the biggest decrease of the 18 codes studied. The total operating cost per physician increased an average of 3.7% per year for three years regardless of the physicians' specialty.
Reimbursements for mammograms dropped 5.2% each year while reimbursement for office consults dropped 3.8% each year. Office/outpatient visit reimbursement increased 4.4% each year.
The statistics show that reimbursement, in actual dollars, is worse for Massachusetts physicians than their counterparts in California, a state often cited as having the worst financial conditions for physicians. California has seen a rash of practice management closings, and physicians there have blamed health plans for bankrupting their practices.
The situation in Massachusetts is rapidly deteriorating, says MMS President Virginia Latham, M.D. "Our data shows they (California) are 50th and we're 49th in financial health for physicians."
The problem stems from the eagerness with which California and Massachusetts embraced managed care, Latham says. In the late 1980s and early 1990s, both states saw paring down of healthcare costs and reimbursement, she says. When the federal government cut reimbursement in the late 1990s, California and Massachusetts suffered the most because there was so little wiggle room, Latham says.
She closed her practice late last year after the hospital with which she was affiliated terminated its contracts with physicians. She worked for a multiphysician group practice that was part of a hospital in Concord. The hospital decided to cut ties with the physician practices.
Latham says the situation in Massachusetts worries her. The number of physicians leaving the practice of medicine increases every year, she says. When her term as MMS president ends, she may go into the administrative side of healthcare, she says.
Declining reimbursement coupled with increasing operating costs, a high cost of living and the demand for high wages in the Massachusetts job market have led many physicians to cut their staffs or close up shop, MMS officials say.
Walter Harrison, M.D., reduced his office staff from 11/2 full-time nurse practitioners to one half-time nurse practitioner. He also laid off an office manager and hired lower-cost billing staff.
"I think physicians everywhere are trying to get more efficient in their office practices, and they're working longer hours," says Harrison, a pediatrician in solo practice in Lynn, Mass. He says he doesn't think he'll have to lay off more staff in the near future.
The Massachusetts statistics don't surprise California Medical Association CEO Jack Lewin, M.D. California no longer can attract top physicians because of poor financial conditions and poor reimbursement from health plans, he says.
"We're not only having an epidemic of insolvencies, but the best and the brightest are going eastward," Lewin says. "There are ways to fix this. The important thing is to understand it does cost money . . . We have to value doctors the same way you value other professions."
Unlike California medical leaders, MMS officials aren't so quick to pin the blame squarely on the health plans.
"Everyone's hurting," Latham says. "We've seen (the four major HMOs), which consistently have come out at the top in national ranking in satisfaction and quality measures . . . in very precarious financial health. We're all trying to make a go of it in a state that has a very high cost of living."
Earlier this year, MMS officials organized a forum with health plans, physicians and others in the healthcare industry. What was striking, Latham says, is that the presentations all cited the same concerns.
"We brought together the different arms of the healthcare system to try to see what we could do to increase the funding," Latham says. "One way is to say 'I want a bigger piece of the pie,' the finger pointing. The other is to say the pie simply isn't big enough."
The Massachusetts approach of talking about the problem, rather than finger pointing, is the one that needs to be taken, says Bobby Pena, spokesperson for the California Association of Health Plans.
"If anything, (the Massachusetts study) really reinforces our argument about the stresses we see in California," Pena says. "The problem is there are other parties who just want to use inaccurate data and anecdotes to promote their own political gain as opposed to finding a solution."
The problem, Pena says, is the same in Massachusetts and California: People aren't willing to pay more for healthcare, an industry in which costs rise significantly every year.
"Is there enough money coming into the system? Yes," Pena says. "Is there enough to meet every desire, every want? No."