As Medicare Pay Shrinks, Some California Docs Hike Patient Fees

One California cardiology group has confronted steep Medicare cuts with a tactic that may irk patients who already face soaring health costs in that state: Beginning April 1, Pacific Heart Institute, in Santa Monica, will charge some patients annual fees ranging from $500 to $7,500, in addition to the regular fees paid by patients and insurers.

This steep fees provide an unusually vivid example of a phenomenon called “cost-shifting,” one of the many reasons economists say your health insurance costs so much.

The premise is that doctors and hospitals charge privately-insured patients higher rates to make up for the lower fees paid by Medicare and other public programs, as well as uncompensated care for uninsured people. One report refers to cost-shifting as a “Hidden Health Tax.”

The new annual fees were announced in a Feb. 25 letter to patients of the nine-doctor cardiology group. The fees will offset recent cuts to Medicare, the letter says, and will help cover things like “Direct doctor/patient e-mail communication” and “Notification of non-urgent laboratory and test results.”

Patients could choose the level of extra services they want by purchasing one of three annual plans. A $500-a-year plan would buy “priority appointments” and other basic services; for $1,800, patients get to e-mail doctors and schedule same-day visits, among other things; for $7,500, they would have doctor’s personal cellphone numbers and could get a doctor’s attention even on nights and weekends.

Without upping fees, the “unprecedented” Medicare cuts “are incompatible with maintaining a viable practice,” the letter says. “For instance in 2009 Medicare directly paid us $110.74 for a mid-level new patient evaluation, for which we typically schedule one hour; the current payment is $87.07. In March it is scheduled to be cut to $68.78.”

Physicians are not usually allowed to charge Medicare patients fees in addition to the set Medicare rate for covered services — such as “new patient evaluations” — but they may charge separate fees for things Medicare does not cover. The annual fees described in the letter are said to pay for “ancillary” services above and beyond what insurers and Medicare finance.

The doctors of Pacific Heart Institute aren’t the only cardiologists in panic mode right now. The American College of Cardiology sued the federal government in December to block 40-percent pay cuts for costly nuclear scans and other tests. Doctors also faced a 21-percent overall pay cut this year, but that cut has been delayed by Congress. “What they’ve done is basically killed the private practice of cardiology,” Jack Lewin, the college’s CEO, told USA Today when the suit was filed.

Neither Pacific Heart Institute nor the college returned phone calls. The letter from the Pacific doctors indicates that patients who don’t agree to pay annual fees will still be able to see doctors at the clinic, but will face certain restrictions. For instance, “[t]elephone availability will only be offered for medical necessity and emergencies,” but not checking on lab results. Medicare and many insurers do not pay for phone conversations.

“I wanted to go back to [Pacific Heart Institute], and now I don’t think I can,” said Jeff Goodman, a former patient who has recently regained insurance coverage that the clinic accepts. Goodman, who forwarded the letter to us, says he already pays $686 a month for his insurance plan because of preexisting conditions, and can’t afford Pacific Heart Institutes new annual fees on top of that.

“If I need to make an appointment simply to get a blood result so he can bill, that’s not good,” Goodman added. “It creates stress, something most heart patients don’t need.”

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