Inflation is impacting specialty physician practices; Medicare needs the tools to respond

Individuals experiencing symptoms of age-related macular degeneration (AMD), a blinding retinal disease, need to see a specialist immediately to save their sight. But how will their vision fare if they have to wait weeks or months to see a physician? Most people with retinal conditions like AMD and diabetic retinopathy see a specialist up to once a month for treatment and typically need help to get to and from the appointment. But what if nearby retina specialist offices close, resulting in driving an hour or more every few weeks for treatment?  

We’ve all seen the headlines: supply chain issues and worker shortages are contributing to the highest inflation in decades. While you might expect inflation in the form of higher prices at the grocery store, you might not realize the impact it’s having on physicians and, ultimately, the health care patients receive. 

Specialty practices, especially private practices like mine, have been particularly hard hit by higher market prices. Recruiting and hiring new clinical or administrative staff is challenging in this competitive environment — causing us to increase our starting salaries and adjust the compensation of existing staff. This, in turn, increases the cost of our benefits packages. Beyond human capital, we face the same high prices of goods we need to provide patient care, from specialized medical equipment to the most mundane cleaning supplies. Even when we can invest in new equipment or office space, which can help improve patient outcomes, the shipping delays make delivering them unpredictable.  

So, if physicians are facing such tough cost challenges, why aren’t the prices of physician services rising like other prices across the economy and even other health care services? Unfortunately, it’s not so easy. For retina specialists like myself, our patients tend to be older and on Medicare. Medicare rates are set annually by the Centers for Medicare & Medicaid Services (CMS); however, by law, CMS lacks the authority to apply an inflationary adjustment to physician payments.  

Unlike every other Medicare payment system, from hospitals to skilled nursing facilities, physician pay has not kept pace with inflation for more than two decades. What’s more, Medicare’s physician fee schedule is budget-neutral, so when CMS increases payments for certain services, other services are arbitrarily cut if the increase exceeds the budget limit. This recently happened to many specialty services when CMS increased the office visit codes. Since most private insurers’ rates reference Medicare prices, the artificially low rates in that program are reflected across the board.     

Members of the Medicare Payment Advisory Commission (MedPAC) have voiced similar concerns. During its January 2022 public meeting, Commissioners emphasized the disparity between Medicare reimbursements to hospitals and physicians, highlighting that both providers are subject to the same effects of inflation related to their operating costs. According to an American Medical Association (AMA) analysis of the Medicare Trustees data, the cost of running a medical practice increased 39 percent between 2001 and 2021, while inflation-adjusted Medicare physician reimbursements declined 20 percent during that same period.

How will this impact patients? Fortunately, doctors will continue to do everything in their power to care for their patients. But it might mean your doctor won’t be able to hire enough clinical staff, and you’ll have to wait longer for an appointment with your physician, or you may have to travel a further distance to receive care because they don’t have the necessary staff to keep smaller, satellite or rural branches open. For some patients, this might be tolerable, but many of my patients need immediate sight-saving care and almost always need a family member or caregiver for transportation to appointments. 

Congress can and should step in and help this situation. With long-term reform to the Medicare physician fee schedule, lawmakers can ensure stability for beneficiaries and help physician practices keep up with the cost of doing business today.  

Michael M. Lai, MD, PhD, is chairman of Federal Affairs Committee for the American Society of Retina Specialists.