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"Physicians will see a 2 percent reduction in Medicare payments beginning April 1 unless Congress can agree upon a plan to prevent the across-the-board federal budget cuts before the sequester goes into effect March 1.
The 2 percent Medicare cut is part of broader cuts required under the Budget Control Act of 2011, which will slash domestic and defense spending to eliminate a total of $1.2 trillion from the federal budget over the next decade. The sequestration cuts originally were scheduled to hit Jan. 1 but were delayed two months when the American Taxpayer Relief Act became law Jan. 3."
Recognize and cover physicians’ cost of providing care
Physicians’ practice costs — like any other business’ operating costs — continue to march upward. While the rate of increase, thankfully, has slowed in the past several years, physicians face growing demands to cover the salaries and benefits of their professional and office staff, purchase new clinical and practice management equipment, buy liability insurance, and pay the rent and utilities.
The Medical Group Management Association’s (MGMA’s) data show that, for 2010, most physician groups were operating on razor-thin margins. MGMA each year compares physicians’ office costs and revenue in dollars per unit of service. (To simplify the accounting for the thousands of different types of services physicians provide, one unit of work is measured in relative value units or RVUs. This is a Medicare measure of the units of service produced. One unit of work is approximately the value of the simplest office visit for a new patient. Physician compensation is 30 percent of the total cost.) In 2010, physician-owned multispecialty groups brought in an average of $59 per unit of work while spending $60 to keep their clinics open, for an operating loss of $1 per unit of work. Family practice groups brought in less ($46 per unit of work) but only spent $45, for an operating profit of $1 per unit of work.
To stay open, any business must collect enough revenues to cover costs. Especially for patients covered by government insurance programs, this isn’t happening for physicians. MGMA data show that Medicare pays only 61 percent of physicians’ average costs. Medicaid payment per unit of work varies, but for most services, Medicaid payments cover less than half of the average cost to provide services. Faced with losses on every service delivered, physician practices are often forced to limit services to Medicare and Medicaid patients if they cannot make up the losses elsewhere. Physicians in a number of Texas communities say they have no other options but to move or retire.