Pinning Physician Bankruptcies on the Tail of the Federal Mule

A federal mule, sometimes called a fule, is the offspring of a male donkey and a female elephant.

Fakipedia

A federal mule is an animal with long funny ears.
It kicks at anything it hears.
Its back is brawny and its brain is weak.
It’s just plain stupid with a stubborn streak.
And, by the way, it loves to be a power fool,
And grows up to become a federal mule.

Lyrics, slightly altered, Swinging on a Star

January 11, 2012 - This blog’s thesis is that the federal government is like a mule. In fact, that may be why it is sometimes called a fule, short for federal mule. It is the offspring of a donkey and an elephant. It has no pride of ancestry and no hope of posterity. It breeds by artificial cash insemination. It grows in size after each breeding selection and each election. The fule is no fool. It never dies. Its breeders grows wealthier each year. Its back is brawny. Its brain is weak. It can be stupid with a stubborn streak. It is massive. It has a small brain. It has the capacity to trample most of us under its feet, often without knowledge or concern of the consequences.

Take physicians. It controls their economic and clinical destinies. Each year, it dictates the fees they are to receive the next year. It has no idea from year to year what these fees will be, making financial planning for physicians a tricky, prickly, daunting task, sometimes leading to bankruptcies.

To be specific, take the fees the mule pays :

• for cancer drugs, and what oncologists must pay to buy these drugs and to administer them to patients;

• for imaging reading or equipment – which constitute the income of radiologists and/or other physicians who read images and own the equipment.

• For fees to cardiologists, who insert stents and need the equipment to read where to put the stents.


• for fees to primary care physicians, who make up 30% of all American physicians, and who care for perhaps 70% to 80% of health care needs. The RUC (reimbursement update committee), a hybrid creature of the AMA and CMS, that sets the fees for primary care doctors.

Sit back and think what happens if the federal mule, arbitrarily, capriciously, and dramatically doubles or triples costs to obtain and administer cancer drugs, or cuts the fees by one-fourth to one-half for cardiologists, radiologists, and primary care physicians.

Then ponder this article from the January 6, 2012 CNNMoney News.

Doctors Going Broke

Doctors in America are harboring an embarrassing secret: Many of them are going broke.

This quiet reality, which is spreading nationwide, is claiming a wide range of casualties, including family physicians, cardiologists and oncologists.

Industry watchers say the trend is worrisome. Half of all doctors in the nation operate a private practice. So if a cash crunch forces the death of an independent practice, it robs a community of a vital health care resource.

"A lot of independent practices are starting to see serious financial issues," said Marc Lion, CEO of Lion & Company CPAs, LLC, which advises independent doctor practices about their finances.

Doctors list shrinking insurance reimbursements, changing regulations, rising business and drug costs among the factors preventing them from keeping their practices afloat. But some experts counter that doctors' lack of business acumen is also to blame.

Loans to make payroll: Dr. William Pentz, 47, a cardiologist with a Philadelphia private practice, and his partners had to tap into their personal assets to make payroll for employees last year. "And we still barely made payroll last paycheck," he said. "Many of us are also skimping on our own pay."

Pentz said recent steep 35% to 40% cuts in Medicare reimbursements for key cardiovascular services, such as stress tests and echocardiograms, have taken a substantial toll on revenue.

"These cuts have destabilized private cardiology practices," he said. "A third of our patients are on Medicare. So these Medicare cuts are by far the biggest factor. Private insurers follow Medicare rates. So those reimbursements are going down as well."

Pentz is thinking about an out. "If this continues, I might seriously consider leaving medicine," he said. "I can't keep working this way."
Also on his mind, the impending 27.4% Medicare pay cut for doctors. "If that goes through, it will put us under," he said.

Federal law requires that Medicare reimbursement rates be adjusted annually based on a formula tied to the health of the economy. That law says rates should be cut every year to keep Medicare financially sound.

Although Congress has blocked those cuts from happening 13 times over the past decade, most recently on Dec. 23 with a two-month temporary "patch," this dilemma continues to haunt doctors every year.

Beau Donegan, senior executive with a hospital cancer center in Newport Beach, Calif., is well aware of physicians' financial woes.

"Many are too proud to admit that they are on the verge of bankruptcy," she said. "These physicians see no way out of the downward spiral of reimbursement, escalating costs of treating patients and insurance companies deciding when and how much they will pay them."

Donegan knows an oncologist "with a stellar reputation in the community" who hasn't taken a salary from his private practice in over a year. He owes drug companies $1.6 million, which he wasn't reimbursed for.

Dr. Neil Barth is that oncologist. He has been in the top 10% of oncologists in his region, according to U.S. News Top Doctors' ranking.
Still, he is contemplating personal bankruptcy.

That move could shutter his 31-year-old clinical practice and force 6,000 cancer patients to look for a new doctor.

Changes in drug reimbursements have hurt him badly. Until the mid-2000's, drugs sales were big profit generators for oncologists.

In oncology, doctors were allowed to profit from drug sales. So doctors would buy expensive cancer drugs at bulk prices from drugmakers and then sell them at much higher prices to their patients.

"I grew up in that system. I was spending $1.5 million a month on buying treatment drugs," he said. In 2005, Medicare revised the reimbursement guidelines for cancer drugs, which effectively made reimbursements for many expensive cancer drugs fall to less than the actual cost of the drugs.

Tweet: The federal government sets the price for cancer drugs and for fees paid to cardiologists radiologists, and primary care physicians.