Patterico's Pontifications

1/1/2010

Glendale Mayo Clinic Won’t Accept Medicare

Filed under: Health Care — DRJ @ 12:48 pm



[Guest post by DRJ]

The Mayo Clinic’s family care clinic in Glendale, Arizona, will not accept Medicare patients in 2010:

“The Mayo Clinic, praised by President Barack Obama as a national model for efficient health care, will stop accepting Medicare patients as of tomorrow at one of its primary-care clinics in Arizona, saying the U.S. government pays too little.

More than 3,000 patients eligible for Medicare, the government’s largest health-insurance program, will be forced to pay cash if they want to continue seeing their doctors at a Mayo family clinic in Glendale, northwest of Phoenix, said Michael Yardley, a Mayo spokesman. The decision, which Yardley called a two-year pilot project, won’t affect other Mayo facilities in Arizona, Florida and Minnesota.”

My family has received medical care from two Mayo Clinic locations, although not in Glendale. It does offer excellent care and one of the reasons is it watches its bottom line:

“The Mayo organization had 3,700 staff physicians and scientists and treated 526,000 patients in 2008. It lost $840 million last year on Medicare, the government’s health program for the disabled and those 65 and older, Mayo spokeswoman Lynn Closway said.

Mayo’s hospital and four clinics in Arizona, including the Glendale facility, lost $120 million on Medicare patients last year, Yardley said. The program’s payments cover about 50 percent of the cost of treating elderly primary-care patients at the Glendale clinic, he said.”

The Mayo spokesman indicated it will assess the Glendale experiment “to see if it could have implications beyond Arizona.” More doctors and hospitals may follow Mayo’s lead. The article notes that “doctors made about 20 percent less for treating Medicare patients than they did caring for privately insured patients in 2007, a payment gap that has remained stable during the last decade.” In other words, reform is coming and it won’t all be from the government.

Thanks to redc1c4 for the great H/T.

— DRJ

19 Responses to “Glendale Mayo Clinic Won’t Accept Medicare”

  1. Medicare has been losing primary care physicians for several years. I don’t think most non-physicians know how low the payments are. They need to look at the EOB, the Explanation of Benefits. There they will see that Medicare payment is often about 10% of billed charges. Physicians are not allowed to charge a patient in addition to the co-pay. Thus, total payment, including co-pay, is usually about 20% of the bill. Payment may take months and there are denials at about 7%, many of which require appeals with further delay.

    The alternative is cash payment, often called “retainer practice” in which the patient pays around $100/month per person for total primary care, including e-mail, phone calls and house calls if necessary. The Mayo report sounds like they will not be as generous as many of the private docs who have gone this way.

    The private doc can cut overhead quite a bit by simply dispensing with the billing staff. Mayo may be less flexible in cutting overhead. A general internal medicine practice can do quite well with about 600 patients signed up. I’ve known for years about a primary internist in Santa Barbara who refused all insurance for years. He was considered an oddball. It looks like he was prescient. I know he enjoyed his practice more than a lot of his colleagues, even then.

    Mike K (2cf494)

  2. Changing the face of medicine in America….
    Barack should be so proud of his significant accomplishment.

    …File under: Unintended Consequences.

    AD - RtR/OS! (cd4296)

  3. Undoubtedly one of the provisions that will come out of the conference “process” in the spring will be a dictate that Medicare and Medicaid patients cannot be refused. With the broadening of who can be covered under those two plans, the “public option” will be a reality, brought in through the back door.

    chaos (9c54c6)

  4. Can’t refuse…
    Well, we won’t let that inconvenient 13th Amendment get in the way…

    Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted,
    shall exist within the United States, or any place subject to their jurisdiction.”

    AD - RtR/OS! (cd4296)

  5. They haven’t allowed the Constitution to get in their way when it comes to the “mandate.” What I said is just one of several ways they could try to get a public option in reality if not explicitly in the language of the bill.

    chaos (9c54c6)

  6. Most providers could not survive without Medicare. Some, not without Medicaid. Mayo can be a boutique practice if it wants to, but I doubt that it will become any kind of a trend.

    nk (df76d4)

  7. Comment by nk — 1/1/2010 @ 1:45 pm

    I don’t think that is the case.
    What I do think is that they just aren’t energetic enough to try –
    survival is hard work, and they have opted to take the route of least resistence, not the one of most independance.

    AD - RtR/OS! (cd4296)

  8. I agree that medicare probably pays too little, and should be changed to pay something pegged to private insurance negotiated rates.

    However, the amount of loss claimed should be considered with a skeptical eye. What “normal” charge was used to compute the loss due to medicare? A one day stay in the hospital for an elective surgery is billed at $35,000 but Blue Cross will pay about $7,500 negotiated rate. If medicare pays $5,000, is the hospital claiming a $2500 loss or a phony $30,000 loss?

    Ken in Camarillo (aa2192)

  9. First, you can’t claim missed income as a “loss.” I would have if I could have. Second, the billed charges are high because Medicare will not let you lower them. If you do, they discount the new “profile.” You can’t even find out the contract rate for most insurance. It is a confidential trade secret. They negotiate contracts with all providers who, by the way, are not permitted by the FTC to negotiate as a group. Each doctor is at a great disadvantage, which is one reason why large medical groups are becoming the only game in town.

    The change is not try to force Medicare to pay more. It is to allow balance billing so the doctor and patient can arrive at a private agreement. The patient then gets the Medicare payment as a reimbursement but the amount paid is a choice negotiated with the doctor. The French system, which works this way, requires all charges to be posted.

    This would introduce a market mechanism which is anathema to the Marxists who are in charge.

    Mike K (2cf494)

  10. First….you just can not cover all the people that have no insurance. Regardless of what our government says, we have illegals, and people that live lifestyles that are unhealthy AND, We have the welfare group. Sorry but i’M tired of paying for all this. We have so many government agencies that pay to help the low income, we have all sorts of charities to help, God knows, we have the Celebrities and politicians to help but enough is enough. I work and I want to keep MY money.

    Patty (855df3)

  11. Do you ever wonder why you pay $150 a night for a $40 hotel room?

    Well it’s the same reason the Dr. charges $80 for a $35 office call.

    ************

    Another thought.

    Guess what the baker will be making when the shoemaker is making $600 an hour?

    ***********

    It’s just a game of ever increasing numbers. It’s a fun game right up to the day your own numbers reduce and you can do nothing about raising them. (That would generally be cuz yer old and retired, or just fired).

    TC (0b9ca4)

  12. There is the issue of “you get what you pay for”. Perhaps Mayo is not willing to increase patient volume at the expense of less time per patient to make it financially worthwhile to see Medicare patients.

    Some practices have a large population of medicaid patients, but they can not give good* care unless they are subsidized by charity or the government (in addition to the base medicaid reimbursement), along with staff that are willing to work for below market pay. (* Good as in what I would want my grandmother to have).

    Medicaid was never intended to pay for medical care, it was intended to cover office overhead only so that the physician would not be losing money when he/she saw a patient for free. Of course, that assumed that medicaid patients would be equally distributed throughout physician practices so everyone would do “their fair share”. In reality, offices that had routinely given care to some who could not pay stopped doing so rather than be encumbered with medicaid, and those who relied on medicaid for payment needed to have high volume/very short visit time practices to make ends meet. Another in the long series of unintended consequences that have accumulated with government programs.

    And yes, a huge issue in figuring out medicine and finances is how cost burdens get shifted around from one patient group to another, from one form of insurance to another. The big boys can negotiate what they will pay, the individual doc is penalized if they either want to discount prices for some or set prices in a way to compete with others.

    I think there needs to be a Constitutional Amendment that says as long as lawyers, business men, and politicians determine what doctors can make, doctors get to determine fees for lawyers, businessmen, and politicians.

    MD in Philly (d4668b)

  13. #11, I’m not sure I understand. I assume you mean that you will pay $40 if you show up and they have empty rooms while reserving the room ahead of time may cost you $150. Those are called opportunity costs.

    What happens now is that physicians still see Medicare patients because they have already paid their overhead with private insurance patients. That is coming to an end as the cost of seeing the Medicare patient is now higher than the reimbursement. While doctors offices have fixed costs, less than Mayo Clinic but still significant, they can reduce costs by dropping Medicare and even all insurance. They employ as many, or even more, people to handle billing, than to see patients.

    By dropping Medicare, they cut some overhead and dropping all insurance may turn out to be cost effective, too. A primary care office used to take about 60% overhead to run. It may be more now. By dropping insurance, they could cut that overhead substantially, maybe to 40%. With that much saving, a lower gross income is not such a sacrifice.

    Mayo may have more fixed costs and the fact that they are experimenting with this is significant. More so than the small practice.

    Mike K (2cf494)

  14. The following relates to this topic because one reason dealing with healthcare in the US is even more difficult is due to the issues raised in the excerpts pasted below.

    BTW, a few weeks ago I came across an article originally published in USA Today that gave the impression (at least to me) that healthcare in Mexico — in impoverished, socialistic Mexico — actually was somewhat better in general than what’s true here in the US. Or I should say I had the impression that among major nations of the world, even lowly Mexico was a bit better in caring for its huge underclass than we in First-World America are.

    I was surprised to learn that, but willing to give our neighbors to the south the benefit of the doubt.

    I should have known better.

    NY Times, December 31, 2009:

    A decade after crossing illegally into the United States, Ms. Chavarria returned home [to Guadalajara, Mexico] in September after learning that Grady Memorial Hospital in Atlanta was closing the clinic that had provided her with dialysis, at taxpayer expense, for more than a year. Grady, a struggling charity hospital, had been absorbing multimillion-dollar losses for years because the dialysis clinic primarily served illegal immigrants who were not eligible for government insurance programs.

    Hospital officials decided the losses were threatening Grady’s broader mission of serving the region’s indigent population. But before closing the clinic on Oct. 4, they offered to pay to relocate patients to their home countries or other states, and to provide dialysis for three transitional months.

    …The dialysis unit at Guadalajara’s public hospital, which offers heavily discounted prices to the uninsured, has a waiting list that extends for months. Ms. Chavarria is not eligible for the insurance plan known here as Social Security, which is limited to salaried workers. The country’s five-year-old health program for the uninsured, Seguro Popular, does not cover end-stage renal disease.

    …And recent research has found that dialysis patients in Ms. Chavarria’s state of Jalisco, where half of the residents are uninsured, are three times more likely to die than Hispanic dialysis patients in the United States.

    The health care dichotomy in Mexico is stark. At Guadalajara’s Hospital Civil, the teeming public hospital where Dr. Garcia is chief of nephrology, the dialysis unit runs eight stations around the clock, and meets barely half the demand. Doctors there said they see uninsured patients die every week for lack of dialysis. By contrast, the private clinic for the insured where Ms. Chavarria received her Grady-sponsored treatments is operating at one-fourth of its capacity.

    There are an estimated 7 million illegal immigrants in the United States who have no medical coverage.

    Mark (411533)

  15. Excellent! Have the governments of Mexico, Nicaragua, etc., send us the checks, and we’ll be more than happy to provide dialysis treatment to illegal immigrants who need it at one of our underutilized facilities… for the duration of the deportation process.

    chaos (9c54c6)

  16. #11, I’m not sure I understand. I assume you mean that you will pay $40 if you show up and they have empty rooms while reserving the room ahead of time may cost you $150. Those are called opportunity costs.

    No Mike. I mean that currently we pay $150 a night for a room that really has only a $40 a night value.

    Why yo pay $150 is because of all the other hands that get a grab at those dollars before the innkeeper. For an innkeeper to see 50% or more of that rate go to others is very possible and probable.

    Dr.’s today also have many hands in their pockets before they ever get to touch the money. Ins co just complicate it all.

    TC (0b9ca4)

  17. TC,

    I could argue that if someone is willing to pay $150 a night, that is the actual value of the room.

    But I think the gist of what you’re saying is that the innkeeper wants to make $40 a night on the room, but an extra $110 needs to be charged to cover all of his overhead costs, fees and taxes.

    What the government does with Medicare is tell the doctors how much they are going to be paid for a procedure, and that number is a percentage less than 100% of some calculated “actual” cost for the procedure. But that calculated cost doesn’t include all of the real costs of doing the procedure, nor does it include the administrative overhead of filing the paperwork with the government or following up on missing payments. (According to the AMA, Medicare is about twice as likely to deny a claim as private insurer.)

    My point being, the doctor has no say in how much he wants to make from doing a procedure. The best he can do is try to game the calculations done by Medicare. The doctor can hope, in a Prisoner’s Dilemma sort of way, that all other doctors will report inflated prices to the Medicare board that determines the reimbursement rates.

    Xmas (873b70)

  18. […] – Glendale Mayo Clinic Won’t Accept Medicare: “The Mayo organization had 3,700 staff physicians and scientists and treated 526,000 patients in […]

    Glendale, AZ Mayo Clinic Stops Taking Medicare | Les Jones (dc5d7d)

  19. What happened early on in the Medicare world was the doctors learned they had better set their fees high when they first started in practice because, once you had established a “profile,” Medicare would not let you change it. I didn’t even realize this until my office manager told me I had been paid almost as much for assisting a new surgeon (who was not allowed to operate without an observer), as for doing the surgery myself. What I learned was that, by setting my fees low, I had locked myself into that rate with Medicare forever. She had come along a few years later and was smart enough to set her fees much higher than mine.

    In those days, Medicare paid a pretty high % of the fee so it wasn’t a hardship but over the years, Medicare has kept discounting. They are approaching Medicaid rates and they were so bad I figured them out very quickly. I knew many primary care docs who would see Medicaid patients if they were related to another patient or had some other personal connection. Many of them never even billed for the service as it wasn’t worth the stamps.

    I did a lot of Medicaid work because of the trauma center. The Medicaid people kept denying claims alleging that we had not submitted them within the time limit. That was a lie but I found that Medicaid (California’s DHS office) would not accept registered letters. There was no way we could prove the timeliness. I suspect it took them a month or two to look at the mail.

    Mike K (2cf494)


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