BLOG: Mitigating Medicare fee cuts

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Based on current expectations, we could see a roughly 18% drop in Medicare fees within the next 5 years. Of course, private insurance companies index their payments to Medicare rates, so an across-the-board revenue drop should be plugged into one’s planning metrics as a practice owner or administrator.

Fee reductions at this level will translate to a roughly 25% cut in pre-tax income for the average ophthalmologist. The most thoughtful surgeons are already factoring this into their personal spending and saving decisions and have been doing so for some years.

It’s pretty certain that for all but a handful of the best-placed ophthalmologists in the country, the payer mix will not materially change. It’s an impractical pipe dream for most ophthalmologists to drop out of Medicare.

Key, practical, very doable mitigation strategies include:

Tapping into passive ancillary profits from owned ASCs and optical
Generating passive income from employee providers
Nailing optimal levels of special testing and surgical utilization
Boosting direct-to-patient charges for phakic IOLs and refraction fees
Boosting personal work hours and work intensity (eg, seeing 55 patients in a 9-hour day rather than 40 patients in a 7-hour day)
Tapering expenses so as to reduce the core operating costs per visit to under $100

In the last 35 years, the net-effective, inflation-adjusted fees paid for cataract surgery have fallen more than 90%. And yet, well-managed practices are still thriving. Thirty-five years from now, when this year’s residency trainees will be approaching retirement, there will still be happy ophthalmologists in well-run, financially fruitful settings. The bar is rising, but economic success for the hardest- and smartest-working surgeons will always be attainable.