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WSMA Reports
cover of November/December 2023 issue of WSMA Reports
January 17, 2024

When Practicing Medicine is a Losing Proposition

By John Gallagher

When Sung-Won Kim, MD, became a partner in his ENT practice in Thurston County, he pushed hard for the practice to see Medicaid patients.

"We have a great policy in our practice where we accept all insurance," he says. "We don't pick who goes where. We don't prioritize whether it's Medicaid or commercial payers."

Now Dr. Kim finds himself in an ethical quandary. Because of the low reimbursement rates for Medicaid, it's not economically feasible to be so open to all patients.

"We lose money on our Medicaid patients," he says. "We just can’t sustain it anymore." In 2023, the practice dropped accepting one Medicaid plan. In 2024, the practice is taking even more drastic steps.

“We are unfortunately going to limit the remaining Medicaid patients over age 18 to just one a day,” Dr. Kim says. “That means the first appointments are nine months out right now. We’ll see all the cancers and urgent things, but everyone else will have to wait or go to Seattle or Tacoma. It puts three highly productive surgeons out of the pool, and there aren’t that many ENTs in the state to begin with.”

The toll the decision is taking on Dr. Kim is noticeable. “I feel terrible about this,” he says. “I’m losing sleep over it.”

Dr. Kim is hardly alone in dealing with the pressures from low Medicaid reimbursement rates. Specialists in Washington are reeling from a reimbursement system that has remained unchanged for decades, even though the number of Medicaid patients in the state has nearly doubled. The low rates effectively penalize them financially for treating Medicaid patients.

Penalizing physicians for providing care

The result is that access to care for Medicaid patients is increasingly hard to come by. Moreover, the low rates are exacerbating other disturbing trends affecting the profession in Washington state, including problems in recruiting and the financial stability of practices.

“It’s a systemic problem in terms of access and delivery,” says WSMA CEO Jennifer Hanscom. “We’ve seen devastating stories about the time it takes patients to get care and the unfortunate impacts on their health because people can’t get in for a timely visit. Additionally, the few independent practices we have left in our communities are shutting down or consolidating with larger systems, which in turn puts more pressure on the overall system by limiting competition and choice.”

"Lots of specialists have closed their doors to patients due to rising costs and inflation in general. It costs them more to see the patients than they are reimbursed, so as a business model, it's not sustainable." —Anna McKeone, MD

To address this urgent need, the WSMA is making raising Medicaid reimbursement rates for all specialties a top legislative priority for the new year. The organization is proposing simply bringing the reimbursement rate for all professional services provided by physicians and physician assistants up to parity with Medicare, with an automatic inflationary increase to keep reimbursement at a more sustainable level.

Washington state ranks among the worst in the nation for Medicaid reimbursement for specialists. On average, the state pays 57% of the Medicare rate. Only two other states— Rhode Island and New Jersey—pay lower rates.

“Other states have made investments to make reimbursements competitive,” notes Chris Coates, CEO of TRA Medical Imaging in Tacoma. “If we were practicing medicine in the state of Idaho, right next door to us, you would see a remarkably different level of reimbursement.”

“In my career at the WSMA, I’ve never known Medicaid reimbursement to increase on the specialty side, and I’ve been here over 25 years,” says Hanscom. The Washington State Legislature raised the reimbursement rate to the Medicare level for most primary care and pediatric professional services in 2021. But for specialists, the situation is dire.

To take just one example, the Medicaid reimbursement rate for a kidney ultrasound read in 2012 was $21.78. By 2022, that figure had dropped to $20.39, a 6% drop.

However, the actual decrease was much greater. Simply to keep up with the cost of inflation, the 2012 figure in today’s dollars would be $27.76 because costs rose by more than 27% over the 10-year period. In terms of constant dollars, the actual drop in reimbursement is more than 25%.

“It’s a challenge,” says Jeffrey Frankel, MD, government affairs chair of the Washington State Urology Society. “They [lawmakers] don’t ask physicians how much it costs to see patients. They set the reimbursement based on their budget and not on the cost to physicians.”

In some ways, Medicaid has been a success story for Washington. With the passage of the Affordable Care Act, the state was an early adopter of Medicaid expansion. The result was an explosion of coverage for people who previously didn’t have or couldn’t afford it. The number of people on Medicaid in Washington state ballooned from 1.2 million in 2012 to 2.1 million in 2023, an increase of more than 90%.

Worsening the financial squeeze on practices

The boom in Medicaid patients, coupled with the low reimbursement rate, puts a huge financial squeeze on specialists’ practices. “Medicaid is taking up a much more significant portion of the population,” says Dr. Kim. “Initially it was about 10% of patients. Now it’s about 25%. That’s wild to me.”

For physicians, the financial pain caused by the low reimbursement rate conflicts with their vocation to help people.

“We’re really in this business to take care of patients, but eventually the economic reality hits,” says Dr. Frankel. “Physicians don’t want to talk about money. We want to be altruistic.”

Low Medicaid reimbursement has collided with other financial pressures on practices, accelerating troubling trends that were already in place. “When the state passed minimum wage increases and the [reimbursement] rates were frozen, you couldn’t continue to stay open,” says Dr. Frankel. “That’s why practices were being taken over by hospitals. It’s not like you can pass along your costs.”

The result was that some physicians actually saw their compensation decline as they cut their own pay to handle higher overhead and low reimbursement. “We’re on average earning less,” says Dr. Kim.

Anna McKeone, MD, an emergency physician with Olympia Emergency Services, says that she doesn’t blame the specialists for having to make the tough choice to limit Medicaid patients.

“I know multiple specialists who provide excellent care to our community,” she notes. “To expect them to work at a negative to take care of patients is absolutely unreasonable. It was an ethical struggle for them to close their practices to patients, but it was financially unfeasible. I feel bad for them because they want to help people, but they can’t sustain a business model with that level of reimbursement.”

Driving up costs by limiting access

Dr. McKeone sees firsthand the impact that reducing access has on Medicaid patients. In a confounding twist to the supposed savings from low reimbursement, patients seeking access often turn to the most expensive venue for care: the emergency department. For many patients suffering from symptoms and unable to get an appointment with a specialist or with no specialists near them accepting Medicaid, the ED is the only option they feel they have.

However, the ED is hardly a solution to the problem, notes Dr. McKeone. Cost is simply one issue. The other is continuity of care.

“The biggest thing when we see patients with Medicaid that need follow-up with specialists is that we have very limited resources for them due to reimbursement,” she says. “Lots of specialists have closed their doors to patients due to rising costs and inflation in general. It costs them more to see the patients than they are reimbursed, so as a business model, it’s not sustainable.”

The upshot, says Dr. McKeone, is that patients in Olympia must travel 60 miles for care. “People need to be transferred to Seattle, and it overburdens an already overburdened system just because there’s a local clinic that can’t see them,” she says. “It makes the entire system that much more dysfunctional and drives up costs.”

Unfortunately, that burden is often too great for Medicaid patients. “Maybe they don’t have the luxury to take time off from work or they don’t have the means to get to these appointments,” says Hanscom. “Then when they figure out all those obstacles, they are told it’s a six-month wait to be seen. That’s not effective coverage.”

"We definitely need a sense of urgency around this situation. I don’t think the public has an appreciation of how tenuous some of the situation is in health care." —Douglas Seiler, MD

Indeed, Medicaid patients often have greater needs than patients covered by commercial insurance, which makes the low reimbursement rate even more challenging. “They are medically complex and socially complex patients,” says Dr. McKeone. “They often need mental health resources. There’s so little to provide, it’s disheartening.”

Exacerbating physician and staff shortages

One ripple effect of the low reimbursement rate is that it makes physician recruitment that much harder. “When we’re trying to hire a new emergency physician, our reimbursements are lower, so our compensation is lower, which makes it harder to recruit,” says Dr. McKeone.

“The state of Washington is becoming less attractive for independent physicians, and a big part of that is Medicaid reimbursement,” says Douglas Seiler, MD, a radiologist who is president of TRA. “The economics are stacked against us. It’s not really different for any other physician specialists.”

For radiologists in Washington, there is ample incentive to keep working—for another state. “We can do a lot of our work remotely,” says Dr. Seiler. “I can take a job with another group in another part of the country with vastly different reimbursement and not leave my house.”

It’s not just physician recruitment that is affected because of low reimbursement. Coates says that at the Carol Milgard Breast Center in Tacoma, which TRA manages, technologists as well as physicians are in short supply because systems that rely upon commercial payers can offer better wages.

“We’ve lost a lot of staff to Kaiser,” he says. “Now we’re booking the next available exams out into July. There are women who are going to have to wait a little longer [for screenings] who potentially have cancer.”

The urgent need for a fix

Given all the problems caused by the Medicaid reimbursement rate, asking legislators to fix the problem is critical. “We definitely need a sense of urgency around this situation,” says Dr. Seiler. “I don’t think the public has an appreciation of how tenuous some of the situation is in health care.”

The legislative proposal that the WSMA is making a priority would provide much-needed relief for specialists. “It’s not as if we’re asking for anything exceptional,” says Hanscom. “We are simply trying to cover some of the costs of providing care to those who have Medicaid coverage.”

“Our proposal is a more comprehensive approach,” says Hanscom. “We’ve clearly articulated the business case and now we’re gathering the patient stories to amplify the need to do something now. I believe we have people who are sympathetic with what we have to say. The legislators who voted to expand Medicaid want to honor their commitment.”

Still, even if legislators understand the need to fix the problem, doing so won’t be easy. For one thing, to address legislators’ financial concerns, WSMA’s proposal doesn’t rely upon the state’s general fund, the way past changes to Medicaid reimbursement have. Instead, the proposal introduces a new tax on covered lives in the state that will be levied on insurance carriers, primarily Medicaid managed care organizations but also commercial payers, that will likely meet resistance from the carrier community.

Hanscom acknowledges that the covered lives tax will draw opposition from health plans. However, she also notes that the plans are in many ways already bearing the cost of low Medicaid reimbursement.

“They are already in a way being taxed when you think about how practices and physicians are having to make up the difference through their commercial payer contracts,” she points out.

The change in reimbursement rates would make a big difference. “I can almost promise you that if Medicaid rates go to Medicare rates, we will open up our panel again to Medicaid and get Medicaid patients in,” says Dr. Kim.

In the meantime, Dr. Kim hopes that legislators understand that specialists have reached a breaking point.

“I want to make it clear to legislators that they are really hurting their constituents by paying well below sustainable rates for services,” he says. “They’re counting on community doctors to absorb the hit. We have this strong desire to help people, even if it hurts us financially, until we absolutely cannot do it anymore. That’s why I feel so terrible. I want to serve the community.”

John Gallagher is a freelancer specializing in health care.

This article was featured in the January/February 2024 issue of WSMA Reports, WSMA's print magazine.

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