NEED TO KNOW: HEALTH

Heart Palpitations

Lawmakers working on the Medicare “doc fix” should be aware that reimbursement formulas influence behavior. Just ask cardiologists.

Dr. Markus Klett, right, examines a man during an electrocardiogram in  his surgery in Stuttgart, Germany, Friday, Feb. 6, 2009. (AP Photo/Thomas Kienzle)
National Journal
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Margot Sanger Katz
Dec. 8, 2011, 9 a.m.

Blair Erb sold his car­di­ology prac­tice this year. It was a tough choice, he said, after more than 20 years as a heart spe­cial­ist in Boze­man, Mont. But a change in the way Medi­care pays him meant that he didn’t see a clear way for­ward for his busi­ness. He and his part­ner were look­ing at de­clin­ing salar­ies, and they were un­able to re­cruit a third phys­i­cian to help share the work­load as they neared re­tire­ment.

“I nev­er thought I would be an em­ploy­ee,” Erb, 55, said. But now he is, hav­ing sold his prac­tice to Boze­man Dea­con­ess Hos­pit­al.

After dec­ades of of­fer­ing car­di­olo­gists one of the highest pay rates in medi­cine, Medi­care in­sti­tuted a new pay­ment sys­tem that has them run­ning for shel­ter. Last sum­mer, some 40 per­cent of car­di­olo­gists were in the pro­cess of join­ing hos­pit­als, ac­cord­ing to data from the Amer­ic­an Col­lege of Car­di­ology, and hos­pit­al con­sult­ants say the trend con­tin­ues. One con­sult­ant es­tim­ated that between 60 and 85 per­cent of all car­di­ology prac­tices are either owned by hos­pit­als or in talks about selling. “It was al­most like a mi­gra­tion of wilde­beests,” said Dr. Jack Lew­in, the ACC’s chief op­er­at­ing of­ficer. “It was amaz­ing.”

The car­di­olo­gists blame the pay­ment change on poor meth­od­o­logy. Medi­care of­fi­cials con­tend that the new rates bet­ter re­flect the true cost of provid­ing car­di­ology ser­vices. But no one pre­dicted the spe­cialty’s rap­id trans­form­a­tion. As Con­gress mulls yet an­oth­er “doc fix” to patch Medi­care’s per­en­ni­al pay prob­lem, this is a cau­tion­ary tale of un­in­ten­ded con­sequences. For bet­ter or worse, pay for­mu­las in­flu­ence be­ha­vi­or.

The re­im­burse­ment change stemmed from a sur­vey meant to as­sess vari­ous spe­cial­ties’ true cost of do­ing busi­ness. The Amer­ic­an Med­ic­al As­so­ci­ation so­li­cited funds from the med­ic­al-spe­cialty so­ci­et­ies to poll doc­tors about their over­head and the amount of time they spent on vari­ous pro­ced­ures. For un­clear reas­ons, car­di­olo­gists were reti­cent to re­spond. Only 55 car­di­olo­gists com­pleted val­id sur­veys, and their an­swers, which showed de­clin­ing over­head, were not rep­res­ent­at­ive of the spe­cialty as a whole, Lew­in said.

Des­pite the car­di­olo­gists’ howls, Medi­care used those res­ults to slash re­im­burse­ment rates for in-of­fice dia­gnost­ic ima­ging tests, such as echo­car­di­o­grams and nuc­le­ar stress tests, by as much as a third. Those tests, com­bined, make up about 30 per­cent of most car­di­olo­gists’ in­come, and some evid­ence shows that they were be­ing over­used. Ac­cord­ing to a 2009 Medi­care Pay­ment Ad­vis­ory Com­mis­sion study, doc­tors who owned their ima­ging equip­ment ordered nearly double the num­ber of tests than those who did not. Cuts in the ima­ging rates en­abled Medi­care to boost pay­ment rates for primary care and oth­er spe­cial­ties that of­fi­cials be­lieve are un­der­paid, said Jonath­an Blum, the deputy ad­min­is­trat­or and dir­ect­or of the Cen­ters for Medi­care and Medi­caid Ser­vices.

Iron­ic­ally, the at­tempt to re­duce car­di­ology re­im­burse­ments may ac­tu­ally raise Medi­care’s costs. Hos­pit­als bill the gov­ern­ment for the same tests us­ing a dif­fer­ent fee sched­ule, and the in-hos­pit­al rates are much high­er. That’s at least part of the reas­on why hos­pit­als have wel­comed car­di­olo­gists with open arms.

The dif­fer­ences vary, but for a ba­sic echo­car­di­o­gram, the most com­mon test per­formed, a private prac­tice can col­lect, on av­er­age, $165; a hos­pit­al gets $402. Un­less doc­tors be­gin prac­ti­cing car­di­ology very dif­fer­ently once they be­come hos­pit­al em­ploy­ees, more of those tests are likely to mi­grate, with the phys­i­cians or­der­ing them, to the high­er price point. Med­PAC data doc­u­ment sub­stan­tial shifts in the num­ber of these tests be­ing ordered in hos­pit­als: up to 29.1 per­cent of echo­car­di­o­grams in 2010, com­pared with 25.8 per­cent in 2009. (It’s worth not­ing that the num­ber was already rising be­fore the re­im­burse­ment change, though at a slower rate. In 2008, hos­pit­als ad­min­istered 22.4 per­cent of the tests.)

Blum says that Medi­care’s in­tern­al stud­ies do not show a big shift so far. The pro­gram tracked the num­ber of cer­tain car­di­ac ima­ging tests per­formed in 2010. Its data show that while of­fice test­ing de­clined by 13 per­cent, hos­pit­al tests grew by only 1 per­cent, sav­ing Medi­care $299 mil­lion. “This sug­gests to us that the change has been pos­it­ive for the Medi­care pro­gram,” Blum said, not­ing that of­fi­cials will con­tin­ue to watch the trend.

Heart spe­cial­ists’ move to hos­pit­al em­ploy­ment could be ex­pens­ive for pa­tients with private in­sur­ance, even if it does end up sav­ing the gov­ern­ment money. Car­di­olo­gists af­fil­i­ated with hos­pit­als gen­er­ally have more lever­age in ne­go­ti­ations over pay rates for all of their ser­vices than they do as in­de­pend­ent prac­ti­tion­ers. And private in­surers typ­ic­ally pay high­er rates for hos­pit­al ima­ging tests than in-of­fice ones, just like Medi­care. That dif­fer­ence could hit the pock­et­books of pa­tients with high de­duct­ibles or coin­sur­ance re­quire­ments.

But des­pite those li­ab­il­it­ies, the doc­tors and Medi­care of­fi­cials are op­tim­ist­ic about the unanti­cip­ated trend. A re­cent sur­vey of car­di­olo­gists who have switched found that 87 per­cent say they are as happy or hap­pi­er now that they work for hos­pit­als. Medi­care is “not try­ing to drive one kind of de­liv­ery mod­el,” Blum says, but he points out that the over­all de­creases in test­ing may re­flect a shift in in­cent­ives to­ward bet­ter care and away from prof­it­able pro­ced­ures. As Medi­care in­vest­ig­ates pay­ment paradigms that re­ward great­er co­oper­a­tion among pro­viders, the in­teg­ra­tion of phys­i­cians and hos­pit­als could prove to be a plus.

For Erb, the in­con­veni­ences of a hos­pit­al bur­eau­cracy have been out­weighed by the sta­bil­ity of his new po­s­i­tion. He col­lects a steady salary, he works reg­u­lar hours, and he doesn’t have to worry about how he’s go­ing to make payroll this month. “At this point in my ca­reer,” he said, “I don’t miss those kinds of pres­sures.”

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