Practice Strategies

Lower Medicare Reimbursements Could Lead to Cost Cutting

The proposed cuts in Medicare reimbursements could force many medical practices to reduce the number of Medicare patients they treat, lay off staff, and trim employee benefits, according to a survey by
the Medical Group Management Association (MGMA).

MGMA surveyed more than 1,600 medical group practice representatives in June 2006, which was six months after the initial freeze in reimbursements and six months before a further reduction of 5.1% in the Medicare physician fee schedule is due to take effect.

Results showed that 39% of practices may be forced to limit the number of Medicare patients they see if the payment cut is made in January 2007. When asked what other negative consequences a reduction in Medicare reimbursements would have on their practices, 39% of respondents indicated they would lay off clinical staff, 54% said they would lay off administrative or support staff, and 67% said they would modify or eliminate health benefits for their own employees.

“These responses reflect the seriousness of the operating environment confronting physician practices,” said William F. Jessee, M.D., FACMPE, president and CEO, MGMA. “It’s vital that Medicare beneficiaries have adequate access to the full range of medical services in their communities. But if medical practices are to continue providing high-quality care, they may have to make some very painful decisions in order to stay financially viable.”

Researchers noted that, according to another 2006 survey conducted by MGMA, the cost of operating a group practice increased by 7% in 2005.

Jessee called upon Congress to replace the Medicare’s current Sustainable Growth Rate (SGR) formula, which is tied to the performance of the nation’s economy, with a formula that more accurately reflects the cost of providing care.

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The articles in this newsletter are general in nature and are not a substitute for accounting, legal, or other professional services. We assume no liability for the reader's reliance on this information. Before implementing any of the ideas contained in this publication, consult a professional advisor to determine whether they apply to your unique circumstances.
© 2007