Medical practices should expect 2003 to be no different than 2002, or, for that matter, the previous 50 years: Once again, practice expenses will rise faster than both the Consumer Price Index and medical revenue.
Analyses of annual survey information gathered by the Medical Group Management Association show that medical groups are surviving in today's environment by trimming waste, staffing appropriately and taking other steps to increase physician productivity.
The bad news is that just surviving is becoming more and more difficult. For nearly two years, the MGMA and a variety of other groups have urged Congress and the administration to correct the flawed Medicare physician payment system that has contributed to this problem. But no fix has occurred. MGMA data show that during those two years, practice costs increased 12% while reimbursement levels decreased. In 2002 alone Medicare physician payments have declined by 5.4%. When uncontrollable expenses continue to rise and revenues fall, something has to give.
During the past decade, medical group practices have continued to serve a growing population of older Americans, even as annual Medicare reimbursement increases lagged behind actual practice cost increases by about 3% each year. Most practices have continued to offer accessible medical services without closing their doors to Medicare patients by increasing efficiency, seeking cash-only service niches or leaning on parent organizations with deep pockets to subsidize operational losses.
But a recent survey by the American Medical Association found that 24% of physicians either have placed limits on the number of Medicare patients they treat or plan to do so in the next six months. Of greater concern is that 42% of physicians said they would cease to participate in Medicare if additional cuts were made.
Unless legislative change occurs, physician reimbursement under Medicare will continue to decline during the next three years-starting with another 4.4% cut on Jan. 1, 2003. These reductions in payments, combined with industrywide increases in medical liability premiums and other financial pressures, are making it harder for many practices to just survive. The Senate failed to act on this issue before it adjourned for the upcoming elections. It's starting to look like seniors are going to find it more and more difficult to find a physician who will accept Medicare.
As if the reimbursement problem was not enough, there is the possibility that more physicians, nurses and other clinicians now in their peak years of productivity will retire early, just as millions of baby boomers become Medicare-eligible. If so, patients of all ages should be concerned about their future access to care.
A recent study by the Center for Studying Health System Change shows that privately insured patients are having a harder time getting access to physicians. Findings from the center's Community Tracking Study Household and Physician Surveys indicate that more patients are delaying or not obtaining needed care, more patients are not getting timely appointments with physicians and fewer physicians are accepting new patients.
The study also found that as the proportion of physicians accepting new Medicare patients fell from 74.6% to 71.1% from 1997 to 2001, so did the proportion of physicians who did not accept any new patients-Medicare or privately insured. A recent physician survey conducted on behalf of the Medicare Payment Advisory Commission found similar patterns.
This coming crisis can be averted. But it will require state and federal legislation and regulatory relief, such as meaningful tort reform at the federal level; a Medicare payment formula that fairly reimburses physicians and fully reflects the uncontrollable costs of providing services; and incentives for medical residency programs to produce a balanced physician workforce that meets the nation's medical needs.
Until these changes occur, medical practices can take a number of steps to improve their resiliency in today's turbulent environment. Actions that the MGMA has identified as common characteristics of successful medical groups include:
* Buying medical supplies through cooperatives to get the best prices.
* Improving practice efficiency through better facility planning and equipment purchases.
* Finding new revenue sources such as ancillary services, new business lines, extended hours and operational improvements.
* Demanding fair contracts with payers.
* Hiring the right mix and number of motivated and trained staff (MGMA data show that more profitable practices actually have more support staff than the average group).
* Investing in automation to enable performance benchmarking, electronic capture and storage of data, and improved productivity.
* Improving patient and insurer billing and collection procedures and increasing the quality and safety of patient care.
* Finding efficiencies in scheduling, registration and elsewhere to improve patient flow.
Taking steps such as these will mean the difference between survival and failure for many practices in the future. But management tactics alone can't create a sustainable future for the access that patients need.
The innovations enacted by today's progressive medical group practices must be matched by reforms, innovations and planning by our public and private policymakers. Until then, the financial squeeze will continue.
William Jessee, M.D., is president and CEO of the Medical Group Management Association, Englewood, Colo.