Where's the Charity? Financial Woes Force Physicians to Rethink Charity Care

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Medical Economics Feature - July 2008


Tex Med. 2008;104(7):31-33.

By  Ken Ortolon
Senior Editor

A Houston internist who says she has always donated her time and professional skills to charity care has a problem. She would like to do more, but financial pressures on her solo practice make it impossible.

"I would like to volunteer at the San Jose Clinic, but I can't," said the physician, who asked not to be named. She can't spare the time from her practice.

"I can't work for free," she said. "I'm already working for free for the insurance companies."

The physician is just one of many physicians across Texas and the nation making tough choices to limit or eliminate charity care and Medicaid and Medicare patients from their practices because of declining incomes. A  national study by the Center for Studying Health System Change (CSHSC) recently found that declining incomes significantly increased the likelihood that physicians would stop accepting new Medicaid patients.

Furthermore, preliminary results from the 2008 Texas Medical Association survey of physicians indicate that ongoing problems with Medicare fees already have or will force many Texas physicians to reduce the number of Medicaid, Medicare, and charity care patients they see.

That, say TMA officials say, presents serious concerns about access to care for low-income and senior Texans.



Low Pay Takes Toll

"It's not rocket science that if you are having trouble making it on your normal patients, you will - reluctantly or not - decide not to do charity care," said Houston ophthalmologist Keith Bourgeois, MD, chair of TMA's Council on Socioeconomics. "If the commercial carriers keep squeezing you and you have declining or neutral revenues with Medicare, then you're going to shun charity care."

According to the CSHSC study, "Effects of Changes in Incomes and Practices Circumstances on Physicians' Decisions to Treat Charity and Medicaid Patients," declining income has had a significant impact on doctors' willingness to take Medicaid patients. CSHSC Senior Fellow Peter J. Cunningham, PhD, one of the authors of the study, says the impact on charity care was much smaller.

"Definitely, we've seen a decrease in physicians' willingness to accept both charity care and Medicaid patients over the past 10 years," said Dr. Cunningham, whose study was published in the March edition of the Milbank Quarterly . Low reimbursement is the primary reason, he says.

"Reimbursement is low so there is never much of an incentive for physicians to either keep or add new Medicaid patients," he said, adding that private insurers, as well as Medicaid and Medicare, are "putting the squeeze" on physicians.

"Physicians' income, in general, has been declining after adjusting for inflation," he said. "Physicians are encountering a lot of financial pressures. It induces them to give up on some of their lower paying patients," while trying to focus more attention on higher paying revenue sources.

The CSHSC study also found that changes in practice type influenced willingness to see charity care and Medicaid patients. Physicians moving from solo or small group practices to large groups or organizations are more likely to drop charity care and accept Medicaid patients. Those moving from large groups to smaller practices are likely to do the opposite.

More physicians moving into larger groups are having a negative impact on charity care, Dr. Cunningham says.

"The traditional solo-practice physician is more likely to take on charity care patients," he said. "We don't know exactly why, but part of that just may be because they have ongoing relationships with patients. They're more informal, they can decide that maybe for a patient who is going through a spell of being uninsured, they'll just write off the bills for awhile."

Physicians employed in large practices have less control over decisions about charity care, and their organizations may have formal barriers to uninsured patients, even though the economy of scale may make it more viable for them to see Medicaid patients, Dr. Cunningham adds.



Participation Sags Again

TMA officials have warned state and federal lawmakers for some time that low physician payments are hurting patients' access to care and driving some doctors out of the Medicaid and Medicare programs.

In 2007, then-TMA President Ladon W. Homer, MD, urged Texas lawmakers to begin increasing Medicaid fees to approach parity with other payers. More recently, immediate past TMA President William W. Hinchey, MD, warned Congress that low fees are having a serious negative impact on physician participation in Medicare.

"If Medicare keeps dropping its rates - and it's already below cost - doctors can't afford to see those patients," Dr. Hinchey said. "The bottom line is, as reimbursement gets squeezed down, you've got to squeeze out what doesn't pay for your office staff. Unfortunately, that boils down to Medicare, Medicaid, and the uninsured."

TMA's most recent physician survey shows the number of Texas physicians willing to accept new Medicare patients dropped from 78 percent in 2000 to 64 percent this year. Meanwhile, the number of Texas doctors accepting new Medicaid patients dropped from 67 percent in 2000 to 42 percent this year. That's up about 4 percent from 2006, likely due to the substantial Medicaid fee increases the Texas Legislature passed in 2007 because of the  Frew v. Hawkins lawsuit .

Some 12 percent of physicians who responded to the survey said they accept new adult Medicaid patients, and 13 percent said they accept new children because of the fee increases. But, 67 percent and nearly 70 percent said they do not accept either new Medicaid adults or children, respectively, despite the fee increases.

Meanwhile, stagnant Medicare fees hurt not only Medicare patients' access to care, but also that of Medicaid and uninsured patients. The survey found that ongoing problems with the Medicare fee schedule prompted nearly 40 percent of respondents to limit new Medicaid patients, while more than 20 percent have reduced charity care. Another 10 to 15 percent of physicians said they would limit new Medicaid patients or reduce charity care.

Low reimbursement hurts both patients and physicians, says Dr. Bourgeois. He knows of several Houston-area doctors who are having serious financial problems because of declining incomes.

"I've talked to a bunch of primary care doctors who tell me they literally ran negative for the last year or so and had to dip into their savings to keep their practice afloat," he said. "That's a frightening thing because that's not sustainable."



Getting a Fix

In the CSHSC study, Dr. Cunningham and coauthor Jack Hadley, PhD, of George Mason University, recommended policymakers consider increasing Medicaid fees and subsidizing organizations that encourage private physicians to provide charity care.

Dr. Cunningham says they did not recommend a specific increase, but he thinks Medicaid fees must at least approach Medicare rates if lawmakers want more physicians to return to the program.

Only Arizona and North Carolina have Medicaid fees comparable to Medicare, he says, adding that his examination of the Medicaid market in Arizona gave him a sense that access to Medicaid there is much better than in other areas because of the higher fees.

"If physicians are chafing at what they're getting paid by Medicare, I think at a minimum you would need to see Medicaid fees increase to the level of Medicare for them to actually consider Medicaid a worthwhile payer," Dr. Cunningham said.

TMA officials say they will continue to advocate for improved Medicaid and Medicare fees at the Texas Legislature and in Congress. Dr. Hinchey says last year's Medicaid fee hike was only a down payment on the increases needed to help Texas doctors afford to see those patients.

Meanwhile, the Houston physician says low reimbursement and high hassles already have forced her to drop out of Medicare and Medicaid. She also is considering dropping her private payer contracts and going to a "retainer" model where she would charge her patients a flat monthly fee to provide all of their primary care needs.

The physician says it is frustrating that the practice of medicine is being "dismembered" by financial constraints imposed by both public and private payers.

"It's frustrating because I have a lot of years left to practice medicine," said the 58-year-old internist. "I enjoy practicing medicine. I like to take care of people."

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 e-mail at  Ken Ortolon .



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