Medicare Compliance & Reimbursement

Physicians aren't getting much opportunity to celebrate this year's Medicare reimbursement increase. At a March 17 Centers for Medicare & Medicaid Services "open door" forum, Administrator Tom Scully warned of future pay cuts.

The biggest factor, according to Scully: Physicians responded to last year's negative 5.4 percent update by "jacking up the volume of services" to the tune of a "stunning" eight percent volume growth. At a March 20 congressional hearing, the CMS chief said the volume increase sent Medicare physician spending up seven percent, higher than it would have been had physicians received the pay increase that would have occurred absent mistaken estimates in the 1990s by CMS.

The pay formula sets a spending growth target that feeds back into the formula by reducing future reimbursements, setting up a "viscous cycle" if physicians respond by increasing services further, Scully explained.

Hospitals didn't get much reason to celebrate either. While they were happy that Medicare cuts were dropped from the House budget, that document still contains Medicaid cuts that could come from disproportionate share hospital payments. And House Ways and Means Committee chair Bill Thomas (R-CA) went before the Federation of American Hospitals to confirm his support for the frugal provider reimbursement adjustments recently recommended by the Medicare Payment Advisory Commission.

MedPAC would increase hospital inpatient rates by the so-called hospital market basket rate minus 0.4 percent percentage points and outpatient rates by 0.9 percentage points below market basket, adjustments that hospitals view as cuts.