Medicare changes favor office-based physicians

As stipulated in the federal budget deal last summer, the new Medicare fee schedule, effective Jan. 1, is good news for office-based physicians such as primary care doctors, gynecologists and psychiatrists. The schedule widens the reimbursement differential between them and physicians whose practices are based in hospitals and ambulatory surgical centers. Surgeons hardly need to begin carrying signs reading "Will amputate for food," but the new rules will have the net effect of reducing Medicare incomes for most hospital-based specialists — in some cases, significantly. In addition, the new formula bases the relative value units assigned to practice expense and malpractice coverage on studies of actual costs, rather than estimated costs, as had been the case. Any drop in this part of the formula will have an even greater effect on hospital-based physicians.

Issues to watch resulting from Medicare changes

  • Will provider selection change to favor more office-based physicians?
  • Will managed care companies or primary care physicians change referral patterns to favor office-based specialists?
  • What are the implications for physician-hospital organizations and provider-sponsored organizations?

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