Slashing Healthcare

Physicians don’t really need to cover their expenses, right? And we don’t really want our physicians to care for Medicare patients, do we? It appears the U.S. government is paving the way to answer both of these questions . . . so physicians, take heed.

The Sustainable Growth Rate (“SGR”) has been a point of contention for years and there certainly is no end in sight. The latest SGR fix expires at the end of March, at which point physicians will immediately face a 21.2% payment reduction. As always, there is much talk about resolutions, but never any action. It appears that 2015 will be no exception as many congressional members and staffers are already accepting of another six- or nine-month punt next month, which would once again put physician practices in limbo through the end of this year. And with 2016 being an election year, does anyone really think the SGR fix will be tackled next year?

What may be of more immediate concern is President Obama’s proposed Medicare cuts. The President’s budget proposal included $423 billion in Medicare spending reductions over the course of ten years. Here is the breakdown as outlined in his 2016 budget proposal:

  • $116.1 billion reduction by requiring drug companies to pay rebates on payments for low-income beneficiaries
  • $102.1 billion reduction by cutting post-acute care provider reimbursement at the rate of 1.1% per year
  • $36.2 billion reduction by lowering Medicare Advantage reimbursement
  • $31.1 billion reduction by lowering bad debt coverage to physicians
  • $29.5 billion reduction by equalizing outpatient care reimbursement of hospitals and physicians
  • $20.9 billion reduction by lowering the trigger of the Independent Payment Advisory Board to GDP +0.5%
  • $16.3 billion reduction by cutting 10% of the hospital graduate medical education payments
  • $9.3 billion reduction by bundling half of the provider reimbursement attributed to post-acute care.

This outline is by no means all-inclusive as it relates to the impact on healthcare. There are many other significant proposals the President included, such as the increase in authority given to the Secretary of Health & Human Services (“HHS”). President Obama proposes to give the Secretary the power to negotiate the prices of high-cost drugs in the Medicare Part D program. He has also proposed to give the Secretary the power to suspend payment and coverage for “questionable” Part D prescriptions.

Recipe for success? Or formula for disaster?


Contact ABISA, a consultancy specializing in solo and small group practice management. Visit us at

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