How to survive Medicare payment cuts


Cuts are coming. Medicare's sustainable growth rate formula mandates your payments decrease, and there's no guarantee Congress will step in again with a "doc fix." If you take action now, you can avoid an unpleasant shock on New Year's Day 2013.

Key Points

Cuts are coming. At this time, you have no way of knowing how deep they will be. Your practice is more likely to survive them, however, if you create cash-flow projections for your practice.


Medicare's sustainable growth rate (SGR) formula-adopted by Congress in 1997 to keep Medicare spending from growing faster than the economy as a whole-called for a physician reimbursement decrease of 27.4% in January 2012. Congress once again intervened; in mid-February, after a 2-month extension of the existing reimbursement rates, the House of Representatives and the Senate voted to postpone the cuts to January 2013.


I recommend that most practices prepare for an overall practice revenue decrease of 10% and hope for less of a cut. A "plan ahead" strategy, rather than focusing on doom and gloom, stresses that although changes will be needed, scenarios exist in which practice owners will continue to make a respectable living.

In the past, when reimbursement was reduced and expenses increased, many physicians simply saw more patients. Now, most doctors are maxed out and cannot increase volume further. Instead, you'll need to take a close look at your practice's income and expenditures and develop a strategic plan to address changes in reimbursement.

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