Reducing Health Care Costs: Consider Giving Your Physician a Pay Raise Instead.

Reducing Health Care Costs: Consider Giving Your Physician a Pay Raise Instead.

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Thoughts on Raising Your Doctor's Salary?

We often hear that doctors are well compensated, but the reality is different. Physician pay has actually decreased in real terms, particularly for those treating Medicare beneficiaries. This trend, coupled with other challenges, could lead to a healthcare market collapse and consolidation in the hands of major hospitals and insurers.

The primary issue is falling reimbursement. Medicare pay for physicians, for instance, has only grown less than 10% since 2001, while Medicare reimbursement for hospitals has significantly increased since then. Operating costs for physician practices have also climbed by 60%. This situation, where revenue and costs diverge so greatly, is tough for any business to navigate.

Consequently, many physicians have been selling their practices to hospitals or insurance companies. While the exact figures vary, approximately 60% of physicians ran independent practices in 2012. As of 2020, that number had dropped to just under half and is projected to rise to more than three-quarters by 2024. Hospitals, not surprisingly, are the primary drivers of this surge.

This trend, if unchanged, could mean fewer choices for patients, who often prefer building close relationships with their physicians. Moreover, raising pay for doctors could contribute to more affordable long-term healthcare costs.

In this context, Republican Rep. Greg Murphy, along with a bipartisan group of colleagues, recently introduced the "Medicare Patient Access and Practice Stabilization Act." This bill aims to reverse a pay cut for physicians under Medicare and increase payments by 6.6% in 2022, taking into account inflation and losses suffered so far this year.

But the issue goes beyond this single bill. Currently, Medicare reimburses providers differently depending on where services are delivered. For instance, hospitals get twice as much for outpatient procedures compared to physician practices, and "40 percentage points more than ambulatory surgical centers." This payment disparity is one reason why hospitals acquire physician practices—they can charge Medicare more afterwards.

The best solution, then, is to move towards site-neutral payments. By paying the same rate for the same service regardless of location, Medicare could reduce incentives for health systems and insurers to vertically integrate, saving the government \~$100 billion over a decade, according to the Congressional Budget Office. Not only would this make healthcare more affordable, but it could also contribute to a leaner, more efficient federal government.

Enrichment Insights:

• The financial viability of independent physician practices is crucial for patient access to affordable, quality care, particularly in rural and under-resourced communities.
• The trend of diminished physician reimbursements and rising administrative burdens is impacting the healthcare workforce, causing many physicians to retire early or stop accepting new Medicare patients.
• Bills like the “Medicare Patient Access and Practice Stabilization Act” have bipartisan support, aiming to boost physician reimbursements, increase practice sustainability, and offset inflation-level losses.
• The healthcare advocacy community, including the American Medical Association, strongly supports increased Medicare reimbursements, citing unsustainable financial pressures on providers and patient access concerns as primary motivations.
• Site-neutral payment policies are essential to addressing these issues, ensuring that providers receive payments commensurate with the actual costs of delivering care. This approach could also promote competition, drive down waste and inefficiencies, and improve healthcare affordability.

1. The declining physician pay, particularly for doctors treating Medicare beneficiaries, has led to concerns about the financial viability of independent physician practices.
2. Greg Murphy, a Republican Representative, recently introduced the "Medicare Patient Access and Practice Stabilization Act" to reverse a pay cut for physicians under Medicare and increase payments by 6.6% in 2022.
3. The act aims to boost physician reimbursements and increase practice sustainability, addressing the issue of diminished physician reimbursements that has contributed to hospital consolidation and layoffs.
4. The Congressional Budget Office estimates that site-neutral payments, which pay the same rate for the same service regardless of location, could save the government $100 billion over a decade by reducing incentives for health systems and insurers to vertically integrate.
5. By promoting competition and driving down waste and inefficiencies, site-neutral payments could contribute to a leaner, more efficient federal government and more affordable healthcare.
6. The trend of fewer choices for patients due to the sale of physician practices to hospitals or insurance companies highlights the importance of addressing the financial challenges faced by independent physician practices.
7. Stabilizing physician pay through measures like site-neutral payments and legislative action, like the "Medicare Patient Access and Practice Stabilization Act," could help prevent further consolidation in the healthcare industry.

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