Blue Cross Insurance for Locke Family Medicine

[Guest guest]

Probably shouldn't have sent this e-mail to the Anthem rep while I was in a foul mood about the recent insurance discussions...but did it anyway.

During my first conversaton with her at the end of November, her comments were along the line of...

--- Insurance tagged to Medicare must not be a bad deal -- most of our doctors accept it

--- Medicare hardly ever goes down on their fee schedule

Well, I suppose she has to drink the Anthem Kool-Aid® if she works for them, but please don't try to pass it over to me to drink.

Will be interesting to see if she writes me off and doesn't respond.

Locke, MD

From: Locke's in Colorado Sent: Saturday, January 05, 2008 11:17 PMTo: 'Ricke, Audra'Cc: 'kelly@...'; 'Locke's in Colorado'Subject: Blue Cross Insurance for Locke Family Medicine

Hi Audra,

It's been awhile since we spoke (see e-mail below).

You had said it would be about a month, 6 weeks ago.

I would be interested in what Anthem can offer.

Also, per our conversation about Medicare never or rarely going down, it actually has gone down several times in the past...see info below...And certainly hasn't kept pace with the cost of running a business.

You can see why I am reluctant to take a contract that ties my fees (essentially my salary) to Medicare.

I feel certain that you would not be willing to accept a contract from Anthem that ties your salary to the annual "increases" in Medicare fee schedules.

If so, you would sweat every year whether congress would give you a Cost of Living raise -- not based on your performance, but rather on some complicated calculation that you have no control over.

Also, your yearly salary "increases" since 1998 would have been...-5.3, 5.4, 4.5, -5.4, 1.6, 1.5, -4.5 = -0.7

Of course, your 10% pay CUT in salary for the upcoming 2008 year would have been postponed and you would have received a 0.5% increase -- and been releived to get that!

Sorry to sound jaded, but the system is dysfunctional and while many practices feel they can't afford to say no to poor contracts, I can.

Anyway, let me know what Anthem can offer and perhaps we can work out an agreement.

Thanks for your time,

Locke, MD

Locke Family Medicine

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From: Ricke, Audra Sent: Tuesday, November 27, 2007 9:45 AMTo: Locke's in ColoradoCc: kelly@...Subject: RE: Anthem BCB/HMOC - Information

Thank you so much for the attached and below. I will see what I can do and get back with you early next month. Thanks again.

Audra K. Ricke

Anthem Blue Cross and Blue Shield

Network Representative/Provider Contracting

Phone: or x3140

Fax:

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Per the recent article posted.

http://online.wsj.com/article/SB119732809319620055.html?mod=moj_columnis

I thought this link in the article was interesting --> History of the conversion factor http://www.ama-assn.org/ama1/pub/upload/mm/380/cfhistory.pdf

Since 1998, the Conversion Factor has done the following... -5.3, 5.4, 4.5, -5.4, 1.6, 1.5, -4.5 = -0.7

See graphic below

Also of note, the Medicare Economic Index...The MEI was designed to measure changes in costs of physician's time and operating expenses, adjusted for changes in physician productivity.

http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=1944

The Medicare Physician Fee Schedule (MPFS) is updated on an annual basis according to a formula specified by statute. The formula specifies that the update for a year is equal to the Medicare Economic Index (MEI) adjusted up or down depending on how actual expenditures compare to a target rate, called the sustainable growth rate, or SGR. The SGR in turn is calculated based on medical inflation, the projected growth in the domestic economy, projected growth in the number of beneficiaries in fee-for-service Medicare, and changes in law or regulation.

The MEI is a measure of inflation faced by physicians with respect to their practice costs and general wage levels. The MEI includes a bundle of inputs used in furnishing physicians’ services such as physician’s own time, non-physician employees’ compensation, rents, medical equipment, etc. The MEI measures year-to-year changes in prices for these various inputs based on appropriate price proxies.

The economy-wide wage indices used in the MEI as a proxy for changes in the wages of physicians and their employees already include an adjustment for multi-factor productivity (MFP). If the MEI did not net out either the MFP in the wage index proxy or the MFP in the outputs furnished by physicians, it would effectively double-count productivity and result in an overstatement of the MEI.

The MEI has gone up every year from what I can tell...

http://www.cms.hhs.gov/MedicareProgramRatesStats/downloads/mktbskt-economic-index.pdf

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http://www.ama-assn.org/ama/pub/category/16397.html

The Medicare Conversion FactorThe Medicare conversion factor is a scaling factor that converts the geographically adjusted number of relative value units (RVUs) for each service in the Medicare physician payment schedule into a dollar payment amount. The initial Medicare conversion factor was set at $31.001 in 1992. Subsequent conversion factor updates have been based on three factors:

The Medicare economic indexAn expenditure target “performance adjustment”Miscellaneous adjustments including those for “budget neutrality”

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http://en.wikipedia.org/wiki/Medicare_(United_States)

Payment for physician services under Medicare has evolved since the program was created in 1965. Initially, Medicare compensated physicians based on the physician's charges, and allowed physicians to bill Medicare beneficiaries the amount in excess of Medicare's reimbursement. In 1975, annual increases in physician fees were limited by the Medicare Economic Index (MEI). The MEI was designed to measure changes in costs of physician's time and operating expenses, adjusted for changes in physician productivity. From 1984 to 1991, the yearly change in fees was determined by legislation. This was done because physician fees were rising faster than projected.

The Omnibus Budget Reconciliation Act of 1989 made several changes to physician payments under Medicare. Firstly, it introduced the Medicare Fee Schedule, which took effect in 1992. Secondly, it limited the amount Medicare non-providers could balance bill Medicare beneficiaries. Thirdly, it introduced the Medicare Volume Performance Standards (MVPS) as a way to control costs.[9]

On January 1, 1992, Medicare introduced the Medicare Fee Schedule (MFS). The MFS assigned Relative Value Units (RVUs) for each procedure from the Resource-Based Relative Value Scale (RBRVS). The Medicare reimbursement for a physician was the product of the RVU for the procedure, a Geographic Adjustment Factor (GAF) for geographic variations in payments, and a global Conversion Factor (CF) which converts RBRVS units to dollars.

From 1992 to 1997, adjustments to physician payments were adjusted using the MEI and the MVPS, which essentially tried to compensate for the increasing volume of services provided by physicians by decreasing their reimbursement per service.

In 1998, Congress replaced the VPS with the Sustainable Growth Rate (SGR). This was done because of highly variable payment rates under the MVPS. The SGR attempts to control spending by setting yearly and cumulative spending targets. If actual spending for a given year exceeds the spending target for that year, reimbursement rates are adjusted downward by decreasing the Conversion Factor (CF) for RBRVS RVUs.

Since 2002, actual Medicare Part B expenditures have exceeded projections.

In 2002, payment rates were cut by 4.8%. In 2003, payment rates were scheduled to be reduced by 4.4%. However, Congress boosted the cumulative SGR target in the Consolidated Appropriation Resolution of 2003 (P.L. 108-7), allowing payments for physician services to rise 1.6%. In 2004 and 2005, payment rates were again scheduled to be reduced. The Medicare Modernization Act (P.L. 108-173) increased payments 1.5% for those two years.

In 2006, the SGR mechanism was scheduled to decrease physician payments by 4.4%. (This number results from a 7% decrease in physician payments times a 2.8% inflation adjustment increase.) Congress overrode this decrease in the Deficit Reduction Act (P.L. 109-362), and held physician payments in 2006 at their 2005 levels. Without further continuing congressional intervention, the SGR is expected to decrease physician payments from 25% to 35% over the next several years.

MFS has been criticized for not paying doctors enough because of the low conversion factor. By adjustments to the MFS conversion factor, it is possible to pay all doctors more or less depending on how much money the person paying (CMS in this case) is willing to pay.[10]

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From: Locke's in Colorado Sent: Tuesday, January 01, 2008 8:05 PMTo: Practice Management IssuesSubject: 1991 Medicare Rates - The Past is Present? --> was RE: [practicemgt] medicare non-participating

Perhaps this is what was referenced?

http://www.aafp.org/online/en/home/publications/news/news-now/archive/aafpacpaoa.html

Hedberg agreed. "After adjusting for practice costs, the Medicare pay to primary care physicians is about half what it was in 1991," he said. "The (SGR) formula is a disaster for primary care practices. Doctors have said they're unable to keep up with the constantly rising cost of running their primary care offices."

Of course, one could make the argument based on the graph in the handout at...

http://www.aafp.org/PreBuilt/Healthcare.pdf

If you really look at the graph, one could argue that the Medicare Payments in 2005 were the same as 1991 and the cost of giving Medicare care rose 35+% -- so, we have actually taken a 35% paycut since 1991.

Of course, if Medicare eventually does cut the fees 10%, then we will be 10% below 1991 rates (at least based on the graph) and a releative 45+% drop in the fee due to the increased cost of giving that care.

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Here is a letter from the AAFP -- it's a few years old and aimed at our congressman, but has the same points we have been getting out in the past.

http://www.aafp.org/PreBuilt/govphysfee.doc

Sample letter to the editor re: Medicare physician reimbursement cuts

[name of editor of letters section]

Editor

Letters to the Editor

[publication name

and address]

Dear Mr./Ms. [name of editor of letters section]:

Senior citizens and their physicians and other health care providers are facing a budget squeeze as never before, and it is affecting the ability of senior citizens to get the health care they need.

Using a deeply flawed formula, Medicare reimbursements to physicians were decreased 5.4 percent from last year. This decrease, the largest physician payment cut in the history of the Medicare program, is the result of a formula that is tied in part to the gross domestic product (GDP). Because the economy slowed substantially last year, the reimbursement rate was adjusted downward for 2002, even though GDP has no bearing on my practice costs or on the health care needs of my patients.

This cut is the fourth time in 11 years that Medicare physician payment rates have been reduced.

Forecasts made by the Centers for Medicare and Medicaid Services (CMS) now project reimbursement rates will be cut by a total 20 percent over the next four years. If this happens, payment rates in 2005 will be less than they were in 1991. No small business, my practice included, could expect to be viable after sustaining repeated payment cuts of that magnitude. It's time to repeal the flawed formula.

I urge Congress to move quickly to revise the complex formula and assure Medicare patients that their family physicians can afford to provide them the health care they need.

Sincerely,

[name]

Family Physician

[affiliation]

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Scary stuff.

Locke, MD