Leaving Medicare Tempting, But Possibly Costly
Medical Economics Feature – July 2012
Tex Med. 2012;108(7):27-30.
By Ken Ortolon
Frisco family physician Chris Noyes, MD, says he had a "straw that broke the camel's back moment" with Medicare in 2009.
"I had a patient who moved from out of state to be with his kids. He had lung cancer when he came in, and when he died, we wrote off a fairly large balance because I didn't think it was right to charge his estate," Dr. Noyes said. "Two years after he died, we got a letter from Medicare saying they had overpaid for a flu shot for him by $2 and they wanted the money back with interest and a penalty, and if I didn't pay it all within 30 days, they would prosecute me."
Dr. Noyes says he already had considered opting out of Medicare because of low pay and increasing hassles. Staying in the program "just didn't make sense businesswise," he said. "We get paid less for seeing a Medicare patient than we do for doing the same thing for a private insurance patient, and the patients are more complicated. You have to spend more time with them."
But Dr. Noyes says he stayed in Medicare out of "a desire to serve the community." That changed after he received the $2 threatening letter. He opted out of Medicare in early 2009.
After consulting the Texas Medical Association Knowledge Center, he sent letters to all of his Medicare patients telling them he would stop accepting Medicare in 90 days.
Physicians who opt out of Medicare need to make sure they notify their Medicare patients of their decision.
Genevieve Davis, director of TMA's Payment Advocacy Department, says Medicare requires opted-out physicians to enter into a private-pay agreement with Medicare patients who decide to stay with the practice "so that they clearly understand that the services that you are going to be providing are not reimbursable under the Medicare program."
Dr. Noyes says he offers Medicare patients who stayed in his practice a discount similar to other patients who pay cash at the time of service. And Angleton family physician Su Zan Carpenter, MD, who also opted out of Medicare in 2011, says she bases rates for Medicare patients who remained in her practice on the Medicare fee schedule.
Drs. Noyes and Carpenter are among a small but growing number of physicians across the country who have opted out of Medicare, which means their Medicare patients either have to find a new doctor or pay for that physician's services out of their own pocket.
While Dr. Noyes says his decision to opt out made good business sense for him, TMA officials warn that physicians need to take a close look at their practices and consider a number of potential pitfalls before they take that step.
Opt Out vs. "Nonpar"
Formally opting out of Medicare means a physician cannot bill Medicare at all for the care he or she provides a Medicare beneficiary. And Medicare will not reimburse a patient for any out-of-pocket expenses incurred in seeing an opted-out physician. There are exceptions for emergency services.
Physicians who opt out of Medicare must do so for two years. Then they must decide if they want to opt out for another two years or rejoin the program.
To opt out of Medicare, a physician must submit an opt-out affidavit to the Medicare administrative contractor for his or her region. The contractor must receive the affidavit at least 30 days before the start of the calendar quarter in which the opt-out decision is to become effective.
Ms. Davis says there sometimes is confusion between opting out of Medicare and becoming a nonparticipating – or "nonpar" – physician.
A nonparticipating physician can still bill Medicare and elect to accept assignment on a claim-by-claim basis. A nonparticipating physician normally will receive 5 percent less than a participating physician for the same service, even if assignment is accepted on the claim. And, nonparticipating physicians who collect from or balance bill the patient cannot collect more than the limiting charge, which is just 9.25 percent more than the Medicare fee for participating physicians.
Federal officials say there is not enough data to accurately determine how many physicians across the country have opted out of Medicare, but the number appears to be growing.
In April 2011, the U.S. Department of Health and Human Services Office of the Inspector General (OIG) set out to study the impact of physicians leaving Medicare, including the characteristics and number of physicians opting out and their reasons for doing so. OIG concluded, however, that neither the U.S. Centers for Medicare & Medicaid Services (CMS) nor its Medicare administrative contractors across the country were maintaining sufficient data to conduct the study.
Still, OIG concluded the number of doctors opting out of the program was growing. "Based on the limited data that we received, the number of opted-out physicians appears to have increased each year from 2006 to 2010," OIG stated in a report issued in January.
TrailBlazer Health Enterprises, the Medicare contractor for Texas, appears to be one of the few contractors who keep data on opted-out physicians. A review of a list of opted-out doctors on TrailBlazer's website found more than 400 in Texas alone. The list also included dozens of opted-out psychologists, physician assistants, dentists, and other health care professionals.
While those numbers may be small, it is likely they will continue to increase. Preliminary results from a new TMA survey found that 44 percent of Texas physicians were considering opting out of the Medicare program.
Getting out is not the only way physicians reduce their Medicare exposure. According to the TMA survey, the number of physicians accepting all new Medicare patients dropped from 66 percent in 2010 to 58 percent in 2012 (see "Texas Physicians Who Will Accept All New Medicare Patients"). That's part of a trend that's seen the number decline steadily from 78 percent in 2000. Meanwhile, the number of physicians who limit the number of new Medicare patients they accept and the number who decline all new Medicare patients each rose by 4 percent in the past year.
Donna Kinney, CPA, TMA's director of health care research and data, oversaw that survey and called the 8-percent decline in physicians accepting all new Medicare patients "a stunning drop."
TMA Immediate Past President C. Bruce Malone, MD, of Austin, says uncertainty over Medicare physician payment rates because of the Sustainable Growth Rate (SGR) formula drives many physicians to contemplate dropping out of Medicare.
"It all boils down to economic decisions doctors make to keep their practices viable," Dr. Malone said. "The charade of Congress 'fixing' the SGR problem has gone on long enough. I think some doctors have just given up and may resort to a cash-only primary care practice."
And it's not just payment issues driving physicians out of the program.
Dr. Carpenter opted out in October 2011 because Medicare's regulatory burden was getting to be too much. It includes new requirements for adopting electronic medical records, e-prescribing, and providing bank account information so Medicare can pay them electronically.
"Every time you turn around, someone has a new rule or a new regulation or a new audit or a new something," Dr. Carpenter said. "There's a point where enough is enough. All that stuff was starting to get in the way of practicing medicine and helping people."
Pros vs. Cons
Ms. Davis says opting out of the Medicare program definitely can reduce paperwork and other administrative hassles in a physician's practice, as you no longer have to file Medicare claims for patients, comply with CMS regulations, or worry about Medicare audits. But she says opting out may not be a smart decision for all physicians.
Physicians who have a large Medicare patient population might take a significant hit to their practice revenues if they pull out of the program and their patients go elsewhere, she says. It might be particularly difficult for rural physicians to opt out since they tend to have high numbers of Medicare patients who likely could not afford to pay out of their own pocket for care.
It also might not be feasible to opt out if you are in certain specialties that tend to see a lot of older patients, such as orthopedics, endocrinology, and oncology, adds Joseph Gave, director of TMA's Clinical Advocacy Department.
Dr. Noyes says he had very few Medicare patients, so that was not a big consideration for him. "We're in Frisco, Texas, and it's a young, affluent suburb, so combined Medicare, Medicaid, and TRICARE were only about 3 percent of our income."
Dr. Carpenter, on the other hand, says about 25 percent of her patients were Medicare beneficiaries before she opted out. Fortunately, she also practices in an affluent area and many of her Medicare patients decided to stay with her and pay out of pocket for her services.
Only about 20 percent of her Medicare patients decided to change physicians, she says.
Physicians who opt out also stand to lose out on a number of Medicare incentive programs. The most lucrative of these is the electronic health record (EHR) incentive programs.
Physicians who achieve meaningful use of an EHR system can receive up to $44,000 to offset the cost of that EHR system. The first payments of $18,000 were made in 2011 with the remainder of the funds to be paid out in installments until 2015. Physicians who begin meeting the meaningful use requirements this year still can receive the full $44,000 between now and 2016. Physicians who meet the requirement in 2013 are eligible to receive up to $39,000, and doctors who meet the requirement in 2014 can receive up to $24,000.
But physicians who opt out of Medicare before receiving the full EHR incentive payments would lose any future payments, says Shannon Moore, TMA's director of health information technology. For example, a physician who received the $18,000 initial payment in 2011 but opted out of Medicare this year would forfeit the remaining $26,000 in incentive payments.
The same is true of bonuses paid for e-prescribing and reporting to the Medicare Physician Quality Reporting System (PQRS). Medicare will pay a 0.5-percent bonus in 2012 and 2013 to physicians to report quality data to PQRS. In 2012, the Medicare e-prescribing initiative pays a bonus equal to 1 percent of all of a physician's Medicare allowable charges; in 2013, the bonus is 0.5 percent.
Ms. Moore says doctors who leave Medicare are not eligible for any of those bonuses and still might find themselves having to comply with those programs down the road if they decide to opt back into Medicare in the future.
A Business Decision
Dr. Carpenter says revenues in her practice haven't changed much as a result of her decision to opt out, but she has seen a definite decrease in paperwork and administrative hassles because she no longer has to file Medicare claims.
Dr. Noyes says his revenues actually increased because he has been able to fill those Medicare patient appointments with private-pay patients who pay at higher rates. And, he is seeing more patients per day because the privately insured patients tend to have less complicated visits that require less time.
Still, he warns other physicians that they must look at opting out of Medicare truly as a business decision. "You've got to look at your percentage of Medicare, how much you get from that, and how many of those patients you think you'll retain if you go off Medicare," he said. "And once you have that, then you can decide if it's worth it to stay in Medicare or not because then it's more of a social question. Do you want to continue to take care of those patients even though maybe financially it's better to not do it?"
Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email.
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Opt-out Calculator Tool Available From TMA
Are you thinking of formally opting out of Medicare? If so, TMA has a tool that can help you determine the likely financial impact on your practice.
The TMA Medicare Opt-out Calculator makes it easy to estimate the likely change to your practice revenues if you drop out of Medicare entirely. The calculator asks the physician to plug in total annual revenues from Medicare patients, then estimates changes that would occur if the physician were to opt out of Medicare, including the percent of Medicare patients likely to stay with the practice paying cash, the percent of empty appointment slots likely to be taken by commercially insured patients, and the percent of vacated appointment slots that likely would remain empty.
The calculator also allows physicians to gauge the impact of potential fee cuts that could result from the Medicare Sustainable Growth Rate formula.
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