Ophthalmology experts ponder consequences of health care reform, Medicare fee cuts

As health care reform takes effect, physicians in specialties such as ophthalmology face a series of challenges related to fundamental changes in the health care delivery infrastructure.

With the re-election of President Barack Obama and a Democratic majority in the U.S. Senate, the Affordable Care Act (ACA) is likely to stand largely unchallenged. Accountable care organizations (ACOs), a key component of the law, are expected to affect ophthalmologists in largely unspecified but tangible ways.

Simultaneously, outside the purview of the ACA, potential Medicare fee cuts present further challenges. Physicians faced a possible 26.5% cut in Medicare reimbursement on Jan. 1, unless Congress intervened. The payment cut stems from the sustainable growth rate (SGR), a key factor in annual Medicare payment updates. As of Dec. 21, 2012, Congress and the Obama administration had not completed a budget deal and Congress had not intervened to forestall the Medicare payment cut. Congress had intervened to delay the cut several other times in recent years.

Furthermore, the 2013 Medicare Physician Fee Schedule calls for an approximate 13.5% reduction in payments for cataract surgery and a roughly 3% cut in fees for ancillary services in ophthalmology. The Centers for Medicare and Medicaid Services (CMS) issued a final rule on the fee schedule on Nov. 1.

Physicians and other providers face an additional 2% reduction in Medicare fees because of automatic budget cuts related to sequestration, a mechanism already in current law designed to reduce overall federal spending by imposing across-the-board cuts. As of Dec. 21, Congress had not acted on budget proposals or possible revisions to sequestration.

At the joint meeting of the American Academy of Ophthalmology and Asia-Pacific Academy of Ophthalmology in Chicago, Michael X. Repka, MD, AAO medical director for governmental affairs, and David W. Parke II, MD, AAO executive vice president and CEO, held a news conference to discuss the ACA and Medicare payment cuts.

In a subsequent interview, Parke outlined a three-pronged strategy for physicians to reduce costs and improve quality, key goals of the ACA and other regulatory initiatives.

“Unsustainable costs drive not only health care reform but physician payment discussions. If ophthalmology can demonstrate a real concern for reduction in unnecessary system costs, our voice becomes more credible as we advocate for issues important to Academy members. Those costs do exist, such as performing routine and frequently unnecessary preoperative testing,” Parke said. “The second is having real data as to outcomes. The third is having programs, processes and technology that lead to truly demonstrable improved outcomes,” Parke said. “Only by paying attention to those three things can you drive outcomes up and drive the costs down that don’t really directly impact ophthalmologists but do impact the system.”

Affordable Care Act

During the news conference, Parke dispelled assumptions that the election of Mitt Romney would have involved the complete dismantling of the ACA.

“None of us really thought that was going to be the case unless there was control by the Republican Party of the House, the Senate and the White House — and the Senate control would have to be filibuster-proof. Even House Republicans recognized that turning back the clock to 2008 was not a reality,” Parke said.

Parke said that health care reform is inevitable, given underlying factors such as costs, quality of care and access to care.

“The drivers of change are out there. They’ve been there since the beginning,” Parke said. “If anything, they’ve only gotten more significant. And we all know that the biggest driver is cost.”

Currently, health care comprises more than 16% of the U.S. gross domestic product, and that percentage is rising, Parke said.

“That’s unsustainable, particularly when you consider that on an individual basis, which is the way many politicians and policymakers look at it, a typical American’s after Medicare health care costs, between age 65 and death, is about $300,000 to $500,000. The average American has $61,000 in his or her retirement account,” he said.

In addition, Parke said that regulations enumerated in the ACA and the U.S. Supreme Court decision upholding the health care mandate and other provisions of the law are largely unwritten.

“Yes, ACA is out there. But for about every page of legislation, there are 20 to 40 pages of enabling regulations. Those regulations have only partially been written. Some that have been written are still in the comment period and will be changed further,” Parke said.

Thomas A. Gustafson, PhD, a senior policy advisor at the law firm Arnold & Porter LLP, echoed Parke’s statement that health care reform is unavoidable.

“You can’t just keep whistling Dixie and hope everything is going to come out all right,” Gustafson said.

He said there is uncertainty about how specific provisions of the ACA will be carried out.

“If I were with CMS right now, I would be running like crazy trying to get things going,” Gustafson said. “I know they are. They’re smart people, and they’ll do as good a job as can be done under the circumstances.”

The ACA falls short in terms of addressing the issue of skyrocketing health care costs, Gustafson said.

“The part not as fully addressed by the ACA is how to try to bring costs under better control,” Gustafson said. “That remains a significant agenda item for the next decade of our intellectual activity in this sphere. The pressures are going to be strong.”

In the long run, cost containment may hinge on gradual movement away from the fee-for-service model and toward a more robust managed-care paradigm. Gustafson said.

“I’m not wildly confident that we’re going to be able to knock it out of the park just by passing another couple of bills here and there,” he said. “It’s going to take sustained effort.”

Accountable care organizations

ACOs are designed to coordinate care and improve patient access to care in multi-specialty groups while increasing efficiency and reducing health care costs.

Although ophthalmology will not be directly affected by ACOs, the specialty will need to adapt to the integrated health care delivery model intrinsic to ACOs, Parke told Ocular Surgery News.

“System integration is going to fundamentally change the way that most ophthalmologists interact with facilities and payers,” he said. “In order to have access to their patients, ophthalmologists are going to need to have interoperable [electronic medical records], service and clinical standards that are designed to improve patient satisfaction, to control resource utilization and to improve quality. Will it accomplish that? I don’t know. No one does. But those will be the system requirements, and that’s going to be a truly significant impact of ACO-type organizations on ophthalmology.”

Despite the momentum shift to a value-of-service model, the traditional fee-for-service model in Medicare is not extinct, Parke said.

“Even in an ACO environment, payment is going to be, at least for a period of time, largely fee-for-service-based,” he said. “But here’s the key thing: There’s going to be increasing incorporation of a value-of-services component. This is one place where ophthalmology has a strong position. People value what we do, and what we do, we tend to do very well. What I mean by that is that when you look at the outcome, for example, of cataract surgery, cataract surgery works very well the vast majority of the time. … [Patients] value their vision tremendously, but we have consistently high-quality outcomes. That’s going to work in our favor.”

In a subsequent interview, Repka said that the issue of payments from ACOs to ophthalmologists is a largely unknown quantity.

“I think the biggest challenge is getting those organizations to even worry about ophthalmology in the short term,” he said. “Then, in the long run, it’s going to be fighting over what the relative payment should be because it’s still going to be some kind of relative fee schedule to value physician services. The ACO is going to need a mechanism to pay for ophthalmic care. The participating organization plans to save money by integrating care and doing things more efficiently and having better outcomes. But if they don’t have that experience, then they’re going to end up having to cut fees to make their agreements work.”

For now, ophthalmologists need to exercise diligence in making agreements with ACOs that are based on reasonable estimates of volume and payment, Repka said.

“I think that they should be very careful of what contracts they sign or what agreements they enter into so that they are not placed in an unfavorable position,” he said.

Medicare payment cut and the SGR

The AAO and other medical societies have called for the SGR to be altered or repealed to forestall future payment cuts and align payments with increasing costs. Even so, organized ophthalmology would accept a short-term fix in order to maintain existing payments, Repka said at the news conference.

“We don’t like short-term fixes but if that’s what it takes at this late date in 2012, we’re certainly not going to decline it, at least not this time,” he said. “We believe that it’s in the best interest of medicine and ophthalmology to see a long-term fix for us on SGR.”

In the interview, Repka said Congress will likely pass a temporary fix.

“I think that Congress will decide that they aren’t going to solve it in this lame-duck [session] but that they will sort of get it to where we don’t have to actually go through the pain of having a reduction and then a later elevation,” Repka said. “Anything could happen, but I think that the likelihood is that [the payment cut] will get kicked down the road.”

Parke also doubted that Congress, immersed in deliberations over the federal budget and debt ceiling, will pass a permanent SGR fix anytime soon.

“The so-called ‘fiscal cliff’ is sucking all the air out of policy debate,” Parke told OSN. “When you get to issues that are particularly important to the practice of medicine and to the practice of ophthalmology, let’s say an SGR fix, there’s absolutely no way that Congress is going to appropriate $300 billion for a so-called doc fix when you’re trying to find new moneys to avoid massive spending cuts under sequestration. … It’s going to make dealing with physician payment issues specifically very challenging.”

In a news release issued Nov. 1, the American Medical Association said members were concerned about the looming payment cut.

“Eliminating this failed formula will allow us to enter a period when physicians can begin transitioning to new payment and delivery models to help meet the overall goal of improving health care and moving to a higher performing Medicare program. We look forward to fully reviewing the rule in more detail,” the release said.

In addition, in a news release issued Nov. 21, the AMA reported that the Congressional Budget Office (CBO) estimated the cost of delaying the physician payment cut has increased by $7 billion.

“The latest estimates from the [CBO] on the cost to delay a cut of nearly 27%, scheduled to hit physicians who care for Medicare patients on January 1, is a prime example of why this broken system must be eliminated,” the release said. “When lower rates of spending growth lead to a higher cost for reform, it is clear that the SGR does not work. It is time to stop this broken cycle in Medicare and move toward a program that ensures the best health outcomes for patients and a stable, rewarding practice environment for physicians. [The AMA] is ready to work with Congress and the administration on a system that emphasizes quality innovations for patients and reduces costs so Medicare will be there for seniors now and in the future.”

Medicare valuation and sequestration

The approximate 13.5% fee cut for cataract surgery is largely driven by a reduction in the average duration of a cataract procedure reported in a CMS-mandated survey from 35 minutes to 21 minutes, Repka said at the news conference.

Repka told OSN that the fee cut for cataract surgery would be around 13.5% if the 26.5% physician payment cut is delayed; the cataract surgery cut would be significantly greater if the physician payment cut takes effect Jan. 1.

Repka said that the reductions may be offset by bonuses from the Physician Quality Reporting System and electronic prescribing.

Overall, Repka said, physicians would handle the cut for cataract surgery in various ways.

“They’ll look at the balance of what things they’re doing in their practice that might be more remunerative,” Repka said. “They would look to see how they can deliver cataract surgical care more efficiently. Some may decide, frankly, that it isn’t worth their effort and focus elsewhere. I think that what we’re going to see is every reaction to it, but we don’t know exactly what they’re going to do.”

Like the physician payment cut, the 2% reduction in Medicare funding from sequestration would take effect automatically unless Congress intervenes, Gustafson said. The reduction would result from budget sequestration, an automatic spending cut to rein in appropriations to levels specified in the original Congressional
budget resolution. Under sequestration, a sum of money equal to the difference between the cap set in the budget resolution and the amount actually appropriated is “sequestered” by the Treasury Department and withheld from the agencies to which the funds were originally appropriated by Congress.

Sequestration is one component of negotiations in Congress surrounding the federal budget and debt ceiling.

“Two percent, in the grand scheme of things, is not such a bad deal for the Democrats interested in entitlements,” Gustafson said. “In order to get what they want on taxes and deal with the Republicans on defense, they may have to give up a little bit. So, maybe 2% becomes 3% or something like that. … It seems to be less likely there would be a 3% cut, that they would keep sequester and make it deeper, but not that unlikely that they would come up with some other list of changes that would wind up, overall, resulting in a larger cut for Medicare but with more of a rationale in terms of its policy content.”

Repka said that Congress would most likely resolve sequestration because of the high-stakes budget line items involved.

“I personally think they will solve sequestration as part of what’s going on now with the ‘fiscal cliff’ situation because it involves too many big entities such as defense,” Repka said. “There are a lot of interest groups that are involved there, so the expectation is that they’re going to try to solve that. They’re not going to do it well in advance, that’s for sure.”– by Matt Hasson

With Medicare physician payment cuts looming, is it feasible for ophthalmology practices to shift to a direct patient payment model rather than continue under third-party reimbursement?

Switch to 100% self-pay unrealistic for most surgeons

This is, quite literally, the million dollar question. 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 is pretty certain that for all but a handful of the best-placed ophthalmologists in the country, the payer mix will not materially change. It is an impractical pipe dream for most ophthalmologists to drop out of Medicare.

One must focus on attainable goals and not be distracted by pipe dreams, nor by useless frustration and anger at the “system.”

Key, practical and very doable mitigation strategies include tapping into passive ancillary profits from owned ASCs and optical, optimizing 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, and tapering expenses to reduce the core operating costs-per-visit to less than $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.

John B. Pinto is OSN Practice Management Section Editor. Disclosure: Pinto has no relevant financial disclosures.

Private pay has place in diverse revenue pool

I work in a large practice of 27 ophthalmologists in four offices. Sixty percent of our business is Medicare. We provide comprehensive and subspecialty eye care to multiple communities. In particular, we have a large retina and glaucoma practice, so Medicare is key to our business. None of us likes the reimbursement cuts that are inevitable, but the cuts are coming not just from Medicare — they are coming from private payers as well.

A comprehensive and robust practice cultivates multiple payers, and Medicare is a primary source. Our practice will continue to participate in Medicare along with other payers, including emerging accountable care organizations. Part of a diversified portfolio of services and payer sources includes providing premium services, but that is only for a small percentage of our patients.

Ruth D. Williams, MD, is past president of the American Academy of Ophthalmology. Disclosure: Williams has no relevant financial disclosures.

Impending shortage of ophthalmologists

Regardless of the U.S. budget, the need for ophthalmic services continues to grow, and the number of trained ophthalmologists will not keep pace with the graying U.S. population, one ophthalmologist said at the news conference held at the joint meeting of the American Academy of Ophthalmology and Asia-Pacific Academy of Ophthalmology.

The portion of Americans aged 65 years and older is expected to increase 39% by 2020 and 79% by 2030, Robert A. Copeland Jr., MD, said, quoting data from the 2000 U.S. census.

“In short, it’s a dire need that we need more specialists. Going forward, we have to make sure that the emphasis in training specialists is equal to the emphasis on individuals who are going into primary care,” he said.

Currently, there are about 18,305 active ophthalmologists in the U.S., or about 5.3 per 100,000 people. The number of ophthalmologists is expected to increase by only 10% in the next 2 decades, Copeland said.

In 2006, the Association of American Medical Colleges recommended a 30% increase in medical school enrollment by 2015; to date, enrollment has risen 13%, Copeland said.

In a subsequent interview with OSN, Copeland said that to mitigate the shortage of eye care specialists, ophthalmologists and optometrists can work together in certain settings, provided such collaboration is led by an ophthalmologist and the optometrists do not have surgical privileges. – by Matt Hasson

• Robert A. Copeland Jr., MD, can be reached at Department of Ophthalmology, Howard University Hospital, 2041 Georgia Ave. NW, Washington, DC 20060; 202-865-3302; fax: 202-865-4259; email: racopeland@howard.edu.
• Disclosure: No products or companies are mentioned that would require financial disclosure.