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Monday, Feb. 05, 2007 | A little-noticed, decade-old rule that guides how much physicians are reimbursed under the federal Medicare program is systematically short-changing San Diego doctors and is threatening future access to health care for area seniors, local physicians are warning.

In recent months, consultants hired by the San Diego County Board of Supervisors to evaluate the accessibility of care for low-income residents, and to project future demand, have pointed to Medicare’s geographical practice cost indices — known by the acronym GPCI, or “gypsy” — as one important cause for the fragility of the county’s medical safety net.

Adopted in 1997, the indices were designed take into account regional differences in the cost of things like rent and malpractice insurance in the fees paid to doctors who treat patients under the government-funded health program for seniors. But critics now say the indices, put in place during the early years of California’s real estate boom, are outdated and are hitting physicians in San Diego County particularly hard.

“What basically happened about 10 years ago is that San Diego was lumped together with a number of other ‘rural’ counties, to create a geographic area that makes not a lick of sense,” said Tom Gehring, the CEO and executive director of the San Diego County Medical Society. “Why is the formula that way? Because some bureaucrat in Washington decided that it would be that way.”

Created by Congress in 1965 as part of President Lyndon Johnson’s Great Society programs, Medicare is generally designed to provide health care to people over 65. Under the program, patients are allowed to choose their doctors, who are compensated under a pre-approved fee schedule set by the federal government. That schedule is adjusted for geographic variation in the costs of running a medical practice.

The county’s consultants estimate that doctors in San Diego County are currently reimbursed at the lowest rate of all urban counties in the state, a disparity that Gehring estimates has resulted in $33 million in underpayment for direct Medicare reimbursements of local doctors in the last year alone.

For example, a San Diego doctor who treats Medicare patients could see his reimbursements jump by as much as a fifth simply by moving his practice to Orange County.

For most doctors, seniors covered by Medicare represent less than 5 percent of their overall patient mix. However, Gehring warns that the problem is not limited to the physician payments under the Medicare program: Because private insurers usually peg their own payment schedules to the federal government’s, the GPCIs are discouraging doctors from setting up shop in San Diego, even as the county estimates it will need 1,600 new physicians in coming decades to meet the demand for medical care. If it remains unchanged, Gehring warned, doctors may start turning away seniors who need care.

“This is not about doctors getting greedy,” Gehring said. “What this is about is that doctors cannot afford to continue to see Medicare patients at these rates. This is really about patients.”

San Diego County is not alone. According to the state’s medical association, the last physician group in Santa Cruz — another county that lumped with rural areas under the formulas — closed its doors to new Medicare patients last June. Seniors looking for a doctor must now travel 25 miles to neighboring Santa Clara County — where Medicare reimbursements to physicians are 25 percent higher.

The disparity dates back to the federal government’s efforts to standardize and simplify the way it pays doctors for care. Until 1997, the Centers for Medicare & Medicaid Services, the federal agency that administers the program, used different formulas to compensate doctors by dividing them into more than 200 geographical units around the country. Because maintaining up-to-date data for the costs of providing medical care across so many regions proved to be a headache, CMS moved to consolidate the units into 89 geographical indices.

Under the new rules, more than half of all states received a single GPCI, while larger states like California, Texas and New York were carved up using a mathematical formula that looked at the cost of doing business in individual counties. To qualify for a separate index, that cost had to exceed the state average by at least 5 percent; though San Diego was among the pricier areas of the state, its costs were not high enough to qualify for its own index.

All counties grouped together in a single index are compensated at the same rate, the average of their calculated costs. While bundling urban San Diego with rural parts of the state drives up the reimbursements for the cheaper areas beyond what they would receive otherwise, it also means San Diego doctors are reimbursed at a lower rate than they would get under a county-specific index.

“When the simplification was put forward in the mid-1990s, the data for San Diego just didn’t seem to suggest that San Diego had incredibly high costs. And I think, over time, what has happened, and this has not only happened in San Diego, the costs have changed, while CMS, which manages the fee schedule, has been somewhat reluctant to change these areas,” said Stephen Zuckerman, a researcher at the Urban Institute, a Washington think tank. “They kind of view these areas as, not necessarily set in stone, but if they don’t have to change them, they won’t.”

As a result of the rules, for the past decade, physicians in the county have been compensated at the same rate as the state’s most low-cost — and most rural — areas. Because of its size, Gehring estimates San Diego represents the most under-reimbursed county in the country.

A spokeswoman for CMS said the agency officials were unavailable to speak about the GPCI formulas last week. In 1997, when the government first opened the rules to public comment, officials acknowledged that “some mid-sized metropolitan areas in large States such as California and Texas [would] not remain distinct … despite their considerably higher input prices than in the rural and small city areas of their States with which they would be combined into a single residual area.” On the whole, though, they concluded that the new rules helped more counties than they hurt.

Several years ago, critics who argued that the disparity in reimbursements discouraged doctors from practicing in the most rural counties convinced Congress to top-up the rates for areas with the lowest reimbursement rates, though that did little to help counties like San Diego.

In letters sent to Capitol Hill last year, lobbyists for the California Medical Association called on lawmakers to update the indices and allow counties with above-average cost to get their own. In San Diego, the effort has found broad support across groups of all political stripes, Gehring said.

But any plan that would give San Diego its own GPCI faces a particular challenge: Under federal rules, all changes have to be budget-neutral within a state, meaning that for every dollar San Diego County gains, someone else has to lose. And the most likely losers would be the state’s rural areas, which also face the most dire shortage of skilled medical specialists.

Politically, to secure buy in from the other affected regions, Congress would need to pump more money into the program.

“Lot’s of people know about the problem, but when all is said and done, somebody in Washington has to add more money,” Gehring said. “We want to be a stand-alone county, we want it to do be done in a way that does not punish the rural counties, but we need to fix it now. This is untenable in the long-run.”

The state’s medical association estimates it would cost between $115 million and $300 million to address the issue without lowering the current levels of reimbursement. Zuckerman, who is working on proposals for how the federal government could fix the GPCI distortions, does not expect that the money will be forthcoming.

The Medicare rules are just one example of how San Diego County’s lower costs, relative to other counties in the state, have negatively impacted its hospitals and doctors. The county’s safety-net study also points out that San Diego hospitals receive some of the lowest levels of funding under the joint state-federal Medi-Cal program in California.

Though Medi-Cal expenditures are negotiated through private contracts between the state and individual hospitals, they were originally loosely based on the average regional cost of medical care. San Diego was one of the earliest adopters of managed care, which helped keep its costs low, but also ensured that it started with the lowest Medi-Cal base, on which current contracts are based, said Steve Escoboza, the president and CEO of the Healthcare Association of San Diego and Imperial Counties.

The low reimbursements under the two government programs, observers of the local health care industry say, have helped contribute to the financial ills of San Diego hospitals, and jitters about their ability to continue to treat low-income and senior patients.

To keep the hospitals and physicians financially viable, both programs need to change, they say.

“That’s been what we’ve been advocating for: fair reimbursement,” Escoboza said. “It’s all very intertwined with the financial health of the hospitals.”

Please contact Vladimir Kogan directly with your thoughts, ideas, personal stories or tips. Or send a letter to the editor.

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