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New estimate of Obamacare’s fiscal impact on private doctor practices
By Scott Gottlieb of AEI.
"Under Obamacare, doctors have been strained by costly new
regulations, intricate payment “reforms” that tie their Medicare
reimbursement to complex federal reporting requirements, and mandates
that they install and make “meaningful” use of electronic health
records.
Add a new burden to the mix: The proportion of patients
they see are rapidly shifting away from commercial health plans and
toward Medicaid, which sometimes pays doctors pennies on the dollar that
they were previously reimbursed under private insurance.
The data comes from ACAview, a product of athenahealth
that aims to measure the impact of Obamacare on medical practices. The
project, jointly funded with the Robert Wood Johnson Foundation, is the
first large-scale examination of data derived directly from outpatient
medical practices belonging to more than 60,000 providers. It gives a
unique insight into how the Affordable Care Act is impacting patients at
the point of care.
The analysis was first released in February 2015, and this new data is an update on those initial results. It is being released today
for the first time. It shows that in states taking Obamacare’s Medicaid
expansion, Medicaid visits as a proportion of all visits to doctors
increased from 15.6% in 2013 to 17.7% in 2014, and continues to climb,
to 21.5% in 2015.
Meanwhile, in states that didn’t expand their
Medicaid programs, the proportion of visits covered by Medicaid remained
largely flat at 9.4% for 2013, 9.2% for 2014, and 8.9% for 2015. The
results were based on a subset of 16,000 providers who have been on the
athenahealth network prior to 2011 and tracked the longest.
But
here’s the rub. The proportion of commercially insured patients, either
through Obamacare’s exchanges or through workplace coverage, actually
fell in states that expanded their Medicaid programs. In those states,
commercially insured patients comprised 65.2% of all patients in 2013,
64.4% in 2014, and then fell to 62.8% in 2015. In states that didn’t
expand their Medicaid programs, the percentage of commercially insured
patients rose slightly, from 66.1% in 2013 and 2014, to 68.1% in 2015.
It’s important to note that the number of uninsured patients fell across
all states, as previously reported, from 4.6% to 2.4% in states that
expanded Medicaid, and by slightly less in states that did not.
Nonetheless, this three-year trend is going to add fiscal strains to physician practices.
Obamacare
is already paying close to Medicaid rates for many ambulatory
procedures. Moreover, there is evidence that many of the people who are
now “privately” insured under Obamacare were previously insured in the
individual or group market, and got bumped off their prior commercial
coverage and forced into the ACA’s exchanges. That alone is going to
lower provider revenue right at the very moment when their practice
costs are escalating.
Now, add to the mix the new trend unearthed
by the athenahealth data. In states that expanded their Medicaid
programs, the proportion of Medicaid patients visiting doctor offices as
a percentage of physicians’ total patient volume is rising sharply, by
almost 40% since 2013. Accepting that Medicaid pays much less than
private coverage, this sharp change in payer mix will wreak havoc on
doctors’ bottom lines. Even if Obamacare is reducing the number of
uninsured, doctors’ total revenue is falling as a result of this mix
shift.
Just how much revenue is this taking out of doctor
practices? It’s hard to estimate, but here’s one admittedly crude
calculation. Data shows
that the average medical provider, across all specialties, generates
about $1.45 million a year in total billing revenue. This is gross
revenue, before any practice costs are netted against the doctor. Next,
assume that Medicaid pays doctors, on average, 50% of what private
insurance pays (which is consistent with prior estimates). Then assume that there are about 900,000 professionally active doctors
in the United States. Finally, figure that Medicaid and commercial
insurance together accounted for 80 percent of the patients that a
doctor sees (roughly in line with the athenahealth estimates).
If
you accept that Medicare pays close to commercial insurance rates (about
90% on average), then looking only across the insured patients who
support a practice’s revenue, a shift in total average payor mix between
Medicaid and commercial coverage — of the magnitude reported by the
athenahealth survey between 2013 and 2015 — would already cost the
“typical” doctor practice close to about $50,000 in top line revenue,
even after factoring in that more of the previously uninsured are now
covered (mostly by Medicaid). Figuring that 40% of practicing docs work
in privately run medical offices, and the aggregate hit would come out
to $18 billion in less total revenue going into private medical
practices.
Now there’s no evidence that private doc practices
have, on average, seen reductions in their average top-line revenue.
Most data shows that revenue growth has remained flat. Moreover, that
rough estimate is based on what would happen if every state experienced
the kinds of mix shift that the expansion states saw. Many states didn’t
take the Medicaid expansion money.
But there’s no question that
in states that did expand Medicaid, as the payer mix has changed,
medical practices have on average, seen a sharp reduction in their
average paying-patient reimbursement. That change was too steep to be
offset by the reduction in the number of uninsured patients. This
suggests that doctors are (so far) making up the shortfall caused by a
worsening mix of insurance types.
Probably by expanding their volumes.
Either they are increasing the total number of patients they see in an
average day, or increasing the number of reimbursed tests and procedures
that they perform. They may also be making up some of the deficit
through higher out-of-pocket charges to privately insured patients. Keep
in mind that none of these estimates factor in the additional revenue
reductions seen as commercial patients shift out of group coverage and
into the lower paying Obamacare plans.
All of these are admittedly
rough estimates with lots of assumptions baked in. But they give a very
basic measure of just one fiscal strain that doctor practices are
feeling. With medical practice costs rising under the ACA, and revenue
falling, it’s no wonder so many doctors are choosing to sell their
private practices and become salaried employees of hospitals."
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