Physician Income Cut
BY LAING RIKKERS, AUGUST 11, 2006
This week CMS proposed a 5.1% reduction in payments to physicians for 2007. The proposal will impact the 875,000 doctors who care for the elderly and disabled in the US.
The explanation for the cut is that spending on physician related services and other Part B services have been growing faster than expected. These services are for labs, imaging and physician-administered drugs.
What the system is experiencing is a cost shift from direct payments to doctors for patient care to payments to doctors for other ancillary services they can provide. Simply put, doctors are preserving their incomes by accepting lower payments for patient care while charging more (or more often) for other services.
Looking back to 1995-2003, physicians' net income dropped 7% and surgical specialists' income dropped 8.2% after adjusting for inflation. This is in contrast to a 6.9% increase for professional and technical workers in the same period. (Tu and Ginsberg, "Losing Ground: Physician Income, 1995-2003" Tracking Report No. 15 (2006)) So it is not surprising that doctors would like to find alternative sources of income. These are, we should remember, some of the brightest and most highly trained individuals in society. Many of them endured arduous training with the expectation of a financial pay-off down the road. Now that promise is eroding.
Doctors finding alternative income streams is nothing new. For years, entrepreneurial doctors have been investing in diagnostic facilities and specialty facilities such as specialty hospitals and ambulatory surgical centers. They also have been selling retail products, such as braces, directly to patients/consumers.
Other ways physicians have been augmenting their paychecks is by consulting to industry on product development, performing clinical trials, and sitting on advisory boards. In addition, physicians participate in Gainsharing, form their own companies to develop products and are investing in Group Purchasing Organizations (GPOs).
As anyone following orthopedics knows, the DOJ is very interested in physician relationships with industry. Most of these relationships are above board and critical for innovation and product development. Unfortunately, it is alleged that some companies were able to tempt doctors with lucrative deals tied to product usage. Depending on the offenses, companies and individuals may be subject to penalties under the Civil Monetary Penalty, Anti-Kickback Statute and/or the Stark Laws.
Mark McClellan also announced this week that CMS will require hospitals to provide physician investment activities in hospitals to be sure there are no violations or self-referral or anti-kickback statutes. This is part of the Medicare final report to Congress regarding Speciality Hospitals.
So while the predicament of surgeons is understandable, the government is making a strong stand about acceptable and unacceptable ways to earn additional income and they are paying close attention.
