Physician Compensation, Staffing to Take Big Hit from 10% Medicare Cut

Healthcare organizations are planning to reconsider physician compensation, hiring, and other initiatives if Congress does not stop looming Medicare payment cuts.

Almost half (47 percent) of medical groups and integrated health systems recently polled by AMGA said they would redesign physician compensation if the cuts totaling nearly 10 percent of Medicare payments to physicians are enacted on January 1st. Another 43 percent said they would put a freeze on hiring.

Generally, the healthcare workforce would take the biggest hit from the cuts, which include a 4 percent statutory pay-as-you-go (PAYGO) cut, 2 percent cut for Medicare sequestration, and a 3.75 percent cut due to evaluation and management (E/M) policy changes in the Physician Fee Schedule.

If all three payment cuts go into effect, about a quarter of respondents said they would have to furlough or layoff non-clinical staff, while nearly 20 percent would let go of clinical staff. About one in five organizations would also stop hiring specialties that are highly dependent on Medicare fee-for-service.

“During COVID and with everything that we experienced, by that I mean elective surgery stopped much like it did for everybody else, we furloughed half of our 1,000 employees. I don’t want to do that again under Medicare cuts,” said Carol Brockmiller, CEO of Quincy Medical Group, an independent, multi-specialty, physician-owned group based in Illinois.

“We would certainly make all other possible choices, but when you have to decide between moving something forward, innovation, new healthcare, and lower-cost settings versus maintaining all your staff, those are really difficult positions to be in,” Brockmiller continued on the media call sponsored by AMGA.

Like Quincy Medical Group, many medical groups and integrated health systems are ready to make the difficult decision to cut back on their workforce and compensation. The alternatives being delaying population health initiatives, postponing delivery system improvements or care model changes, and even eliminating services, the AMGA poll showed.

Some respondents also said they would consider not accepting new Medicare beneficiaries or requiring existing patients who age into Medicare to switch to Medicare Advantage.

“We would have to seriously consider the investments that we’re making in initiatives that are looking to transform the way we deliver care from a fractionated, fee-for-service, transactional model to one that’s based on value, outcomes, and accountability on cost,” said Scott Hines, MD, chief quality officer of the multi-specialty group practice Crystal Run Healthcare and chair of AMGA’s Public Policy Committee.

“It costs a lot of money to transform the way that you deliver care to a model that breeds accountability, value, and outcomes, and you need to invest in personnel, technology, and infrastructure. These cuts are going to make that much more difficult and prevent the rapid progression that we would like to achieve,” Hines stated.

AMGA, along with other healthcare stakeholders and lawmakers, have been calling on the federal government to prevent the cuts from happening next year. Just recently, Representatives Ami Bera (D-CA) and Larry Bucshon (R-IN), who are both physicians, called on their colleagues to stop the scheduled Medicare Physician Fee Schedule cut, which was temporarily paused to support providers during the COVID-19 pandemic.

“As Congress considers a framework to ensure appropriate reimbursements and improve the Medicare payment system broadly, we must act before the end of the year to avert the imminent cuts, including extending the 3.75 [percent] payment adjustment, and provide continued stability for physicians and other healthcare professionals,” Bera and Bucshon wrote in a draft letter. “Otherwise, the profound exhaustion from the pandemic combined with the stress of uncertainty in payments may lead to further retirements, office closures, or reduced staffing, ultimately limiting patient access to care.”

Still, if Congress were to make moves with the Physician Fee Schedule cuts, healthcare organizations would still be facing a 6 percent cut to Medicare payments under PAYGO and sequestration cuts. Of those cuts, the 2 percent sequestration reduction will be the hardest to prevent since it has already stopped by previous legislation, said Chet Speed, JD, LLM, chief policy officer at AMGA.

“But 2 percent is still 2 percent,” the policy expert stated.

Healthcare organizations would “live to fight another day,” as Hines puts it, but any cut to physician Medicare payment would have serious consequences for the delivery of healthcare.

Brockmiller predicts that it would take healthcare organizations “a year or two” to recover from the upcoming Medicare payment cuts. But for Sanford Health, one of the largest fully integrated rural healthcare delivery systems, it could be longer.

“I want to be optimistic and say that it’s going to take one or two years to recover from this. My realistic side tells me that it's going to be much longer because it's not only about the cuts but the expenses of delivery of care right now,” said the system’s president Luis Garcia, MD.