Health Policy Blog

At Mayo Clinic, we take pride in delivering efficient, high quality care to each individual patient.  As an organization that has focused on the patient’s needs for over 100 years, the decisions that Mayo made last week to op-out of Medicare participation in a small Arizona family practice clinic and to discontinue Medicaid participation in Nebraska and Montana were very difficult for us. 

Medicare at Arizona Family Practice
Mayo Clinic in Arizona loses a substantial amount of money every year due to the reimbursement schedule under Medicare, a loss we cannot continue to sustain. The discrepancy between what Medicare pays and our cost of providing service is particularly acute for our primary care practices.  Due to these ongoing financial challenges for our primary care practices under the current Medicare system, the five physicians at Arizona’s Mayo Clinic Family Medicine – Arrowhead will opt out of participating in Medicare, meaning that Medicare will no longer reimburse for the services they provide.  This change, effective Jan. 1, will only impact primary care office visits at this site. Specialty care, laboratory services, imaging studies and ancillary services at Mayo Clinic will still be covered by Medicare.

Nebraska, Montana Medicaid Disenrollment
Also effective Jan. 1, Mayo Clinic will discontinue participation with Nebraska and Montana Medicaid due to the fact that these states are not part of our primary service area, along with significant administrative requirements, and low reimbursement levels.  It is unusual for any medical center to participate with Medicaid programs in states outside of their primary service area.  Based upon a review of Mayo Clinic patient records over the past two years, fewer than 50 existing patients will be affected by this decision, and Mayo is committed to working with Nebraska and Montana officials to ensure that these patients do not fall through the cracks during this time of change.

Signs that Reforms Must Pay for Value in Health Care
Even though Mayo has limited the impact of these decisions to affect as few patients as possible, it is disappointing for us to have to make business decisions such as these.  Nevertheless, decades of underfunding and paying for volume rather than value in government insurance programs have left us with few other options.  Recently the Medicare Trustees reported that Medicare will go bankrupt by 2017, and that Medicare will have to cut benefits or payment rates by 19 percent to balance its budget. 

Providers who do fewer unnecessary tests and services are paid the least, and they are the doctors and hospitals which will go out of business first if we don’t change the payment system.   For example, here at Mayo Clinic, the cost of providing services to Medicare patients exceeded the total amount paid on behalf of Medicare patients by $840 million in 2008. 

Unfortunately, Mayo is not alone.  There are hundreds of smaller clinics, family doctors, and hospitals across the country grappling with the same hard decisions.

This is why Mayo Clinic strongly supports health insurance reform and health care delivery reform.    Because the Medicare reimbursement system rewards piecework – performing diagnostic tests and procedures – health care delivery is laden with these expensive, fragmented pieces of care.  Health care delivery reform on behalf of the patients’ best interests means changing the payment system to reward value—defined as better outcomes, better safety, better service and lower cost—rather than simply rewarding the provision of more tests, visits and procedures.  Better outcomes or value result in fewer tests and decreased overall costs.

Some suggest that a system that would reward high quality, lower cost care would adversely affect high cost areas that treat poorer and sicker patients.  In fact, in February 2008, Peter Orszag, as director of the Congressional Budget Office, reported that three previous studies of patient health status found that patient acuity and income levels explained less than one-third of the regional differences in Medicare spending. 

As a not-for-profit organization, Mayo is committed to our mission of patient centered care. One of our four Health Policy Center Cornerstones is to work to ensure insurance coverage for all Americans.  Unless payment models are changed to reward value, expanding Medicaid and Medicare government-run, price-controlled, public plans will be financially disastrous to individual physicians, medical group practices, and hospitals, which will ultimately hurt even more patients who seek care.