A change that could save Medicare billions would have a major impact on physicians' revenue

It’s an idea that could save Medicare billions of dollars a year, but it would have a major impact on physicians' revenue—cutting payments to surgeons and increasing those to primary care doctors. 

The idea is to reduce bundled payments for surgical procedures, which include post-operative visits that in many cases never happen, according to a new study in the New England Journal of Medicine.

The study, funded by the Centers for Medicare & Medicaid Services (CMS), found Medicare would have saved about $2.6 billion in 2018 by decreasing surgical payments to reflect postoperative care that surgeons are actually providing and accounting for those post-operative visits the government pays for as part of procedure bundles that aren’t taking place.

If CMS were to adopt the change, “cuts could have a major effect on surgeon revenue,” wrote the study authors from RAND Corporation, Actuarial Research, and Harvard Medical School.

However, while surgeons could see lower revenues, primary care providers and other non-surgical specialties could see an increase in revenues if CMS were to increase payments for other services such as office visits.

The analysis shows Medicare appears to be overpaying surgeons for many medical procedures and suggests CMS should look at more objectively measuring the amount of postoperative care surgeons provide to patients. Under the current system, payments are based on surgeon surveys.

It’s now up to CMS officials to decide how to move forward given the new study data.

It’s not the first time CMS has proposed the idea. It considered the idea in 2015, but it was met with resistance from surgical physician groups. Congress in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) explicitly prohibited CMS from moving forward with the idea until it further studied the issue.

Modeling done by the researchers suggests that if Medicare payments were adjusted to remove the money allocated for the undelivered postoperative care, it would reduce reimbursements for the procedures in question by 28% in 2018. So, for instance, total Medicare payments for all services to many procedure-focused specialties, such as cardiac surgery and surgical oncology, would have decreased by 15% to 20%.

The researchers found that while Medicare pays for a postoperative visit following nearly all minor surgical procedures, in just 4% of cases a follow-up visit occurred. In major surgical procedures, only 39% of postoperative visits paid for by Medicare were provided by surgeons.

“There is a growing body of evidence that suggests that Medicare pays surgeons for postoperative care they mostly do not provide,” the study’s lead author Andrew W. Mulcahy, Ph.D., a senior policy researcher at RAND, a nonprofit research organization, said in an announcement. “Medicare should adjust payments to reflect the care actually provided.”

While the change could hurt revenues for surgeons, it could increase payments to primary care providers. That’s because Medicare caps how much it spends on physicians and related care each year. So any overpayments to surgeons for procedures result in lower payment rates for other services such as office visits.

Lower payments for surgical procedures would result in a net increase in payments to primary care providers, according to the study models.

For most surgical procedures, Medicare and most private insurers provide physicians a single bundled payment that covers both the procedure and related postoperative care over a period of up to 90 days. About 25% of Medicare payments for procedures are for bundled postoperative care.

The authors say the issue is complex. “The stakes are high for CMS’s decision,” they write. While payment cuts would hurt surgeon revenue, “the current system results in inflated payments for surgical procedures relative to evaluation and management visits and other nonsurgical services that are the mainstay for many physician specialties.”

The difference in income between procedural specialties such as surgeons and nonprocedural specialties such as primary care has many ripple effects, the study authors said. It influences the specialty choices of medical students and the number of students choosing careers in primary care, they noted.

“Ultimately, patients bear the cost of distortions in payment rates, which result in reduced access to underpaid services and an inflated cost-sharing burden for overpaid services,” Mulcahy said.