Urbanizing counties sue to win physicians better Medicare pay

Doctors also are pushing for legislative measures to remedy what they say is an outdated Medicare geographic formula.

By Amy Lynn Sorrel, AMNews staff. July 2, 2007.

California family physician Jack R. Watson, MD, said his practice is the last primary care office to keep its doors open to new Medicare patients in Santa Cruz County.

In the eight years he has worked there, Dr. Watson has watched the cost of practicing medicine in the urbanizing area rise to that of neighboring giant Silicon Valley. But his reimbursements reflect that of rural California.

"It's becoming economically unsustainable," Dr. Watson said. "We are besieged with new patients, but it does represent the lack of access to primary care physicians."

Dr. Watson has lost staff to practices just across the county line in nearby Santa Clara, where reimbursements are 25% higher and doctors can afford to pay employees better wages. The physician shortage in Santa Cruz, mostly a retirement community, is forcing patients to travel more than an hour for care.

The reason for the disparity, doctors say, is that Medicare has failed to adjust properly physician payments for the geographic differences in the cost of practicing medicine. Costs include doctors' work; expenses, such as rent, supplies and staff; and medical liability insurance.

The problem, compounded by predicted overall Medicare physician payment cuts, is costing growth areas good doctors, said Dr. Watson, president of the Santa Cruz County Medical Society.

That's why Santa Cruz and six other California counties, on behalf of doctors, are leading a nationwide class-action lawsuit against the Dept. of Health and Human Services, said Dario de Ghetaldi, lead attorney in the case. The counties are asking Medicare to move areas where doctors' costs exceed those of their locality by 5% into a new locality that reflects actual expenses. The lawsuit, filed in June, seeks $2.4 billion in physician back pay since 2001.