Shifting Medicare costs to private payers tough for doctors

Limiting the number of Medicare patients may be the only way to deal with cuts.

By Markian Hawryluk, AMNews staff. Dec. 2, 2002.

Washington -- Small physician practices facing Medicare cuts cannot shift costs to private payers and must resort to limiting the number of Medicare patients they see to deal with spending shortfalls, a number of leading policy experts said.

At a November discussion organized by the Changes in Health Care Financing and Organization initiative, economists debated whether hospitals and nursing homes truly shift part of the cost of treating Medicare patients to private insurers. But there was widespread agreement that doctors in all but the largest of group practices did not have the market power to significantly alter their prices.

"Provider market power is really a key in an analysis of cost shifting," said Paul Ginsburg, PhD, a health care economist with the Center for Studying Health System Change. "You can't have cost shifting unless providers have the ability to raise their prices and not lose all their business."

There is evidence that larger group practices are trying to shift costs to the private sector, said Donald W. Fisher, PhD, president and CEO of the American Medical Group Assn.

One of association's largest members, the Marshfield Clinic, a private group practice in Marshfield, Wis., recovers only 68.5% of its Medicare allowable costs. As a result, Medicare reimbursement is only 10% to 50% of what commercial payers reimburse for identical services, he said.

"This is a large multispecialty group practice in rural America that has market power," Dr. Fisher said. "And when they don't get the reimbursement under the public programs, they have no choice but to go to the commercial payers and say, 'Look, if you want the employees from the commercial payers to receive health care services, you're going to have to pay more for these office visits.' " [...]