'Doc fix' might hurt a little

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John O'Connor, editorial director, McKnight's Long-Term Care News
John O'Connor, editorial director, McKnight's Long-Term Care News

President Obama has signed legislation that delays a pay cut for doctors treating Medicare patients. That comes as good news for physicians, but not so much for nursing facilities.

That's because the so-called “doc-fix” will trim payments to nursing facilities and other non-physician providers by more than $21 billion. A sizable chunk of that will come from a $6.8 billion reduction in federal payments to skilled nursing facilities and hospitals that collect bad debt.

Currently, nursing facilities can collect 70% of beneficiary cost-sharing expenses from Medicare, and 100% of bad debt related to dual-eligible care. The new legislation trims bad debt payments to 65% for both categories.

Clearly, this payment reduction is going to put a strain on many long-term care facilities. According to the American Health Care Association, operators in Florida, Illinois and Pennsylvania are likely to be hardest hit. But others in as many as 25 states could be affected.

For years, lawmakers have essentially tabled the doc fix challenge. The problem stems from a “Sustainable Growth Rate” formula that was put in place in 1997. The SGR required per beneficiary payments to grow no faster than the per capita Gross Domestic Product. Every time Congress permitted beneficiary payments to exceed economic growth — which it did nearly every year— the amount by which physician payments would need to be cut the following year would expand.

The problem is, the physician payment cuts never actually happened. Instead, they grew like the balance on an unpaid credit card. To the credit of the American Medical Association (whose membership comprises physicians), it did a masterful job of framing the issue. Rather than calling the problem what it was — a cut that was never enforced — they described it as a looming 25% pay cut. It was almost as if a monster of a pay cut came out of nowhere. In reality, it was an IOU that just kept growing.

It can be argued that at least Congress has finally dealt with this issue.

Of course, it also can be argued that lawmakers settled the matter by making sure those with the most clout got the best deal. In this case, the American Medical Association lobbied hard to prevent a 25% pay cut by convincing Congress that others with less lobbying influence (including nursing homes) should pick up the tab.

National Football League Hall of Famer Dan Hampton once said that football is a sport in which big men knock down smaller men. Looks like Washington is playing a very similar game these days.

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Daily Editors' Notes

McKnight's Daily Editors' Notes features commentary on the latest in long-term care news and issues. Entries are written by Editorial Director John O'Connor, Editor James M. Berklan, Senior Editor Elizabeth Newman and Staff Writer Emily Mongan.

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