Medicare Payment Formula Triggers Specialists' Suit

Ten medical societies representing specialists have filed suit in federal court to block the Health Care Financing Administration from enacting a new Medicare payment formula. HCFA says the formula compensates all physicians more fairly, but specialists, who could lose upward of a billion dollars over three years under the plan, say the scheme is illegal.

HCFA's 1999 physician fee schedule bases reimbursement for physician practice expenses on actual costs of labor, equipment and medical and office supplies. Payment rates are delineated by procedure and are based on 1998 estimates of those expenses. Previously, practice-expense reimbursement was pegged to physicians' historical charges. HCFA says primary care doctors can expect higher payments, while compensation for physicians who provide services in hospitals will decrease.

The medical societies claim that the formula would divert $890 million to primary care physicians by 2001. According to the suit, the Balanced Budget Act, which provided for the change, specifically says that no more than $390 million can be transferred from specialist reimbursement over three years.

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