Historically, Washington state has had an efficient health care market – that is, doctors haven't run as many tests or provided as many treatments as other states.
But because Medicare reimbursement rates are based on a fee-for-service basis, the reimbursement rate for Washington providers is lower than average. Only 15 states spend less per patient than Washington via Medicare, said Ciarin Clayton, a spokeswoman for Sen. Maria Cantwell.
Physicians said the Medicare reimbursement rate formula no longer reflects the state's health care market. When the formula was created years ago, Washington did not have a large indigent population and the elderly population was relatively small.
But Washington's demographics have changed.
"The complexity of Washington's health care environment has changed dramatically," said Ken Cole, Southwest Washington Medical Center's manager of public affairs and communications. "The disparity of reimbursement hampers efforts to grow and provide services."
And the cost of running a practice is rising faster than the reimbursement rates, said Mardee Lorenz, clinic administrator for Adventist Health, which has two clinics in Clark County.
Only 27 percent of primary care practices have solid financial margins, according to the April 2009 Medical Group Management Association publication, "Connection."
A hidden tax
The poor economy is causing hospitals and clinics to see a dramatic increase in uninsured, underinsured, Medicaid and uncompensated care, said Kevin Vernier, director of Contracting and Network Development Healthcare Resources NW, a service of Adventist Health.
"This is forcing hospitals to ask for more reimbursement from commercial payers in order to make up the difference," he said.
Cole called it "cross subsidy."
"It's a hidden tax," he said.
Medicare pays 87 percent of the cost of a procedure, while
Medicaid pays only 74 percent, Cole said, and more than
36 percent of SWMC's total charges are Medicare and
another 16.5 percent are
The hospital is trying to balance reimbursement shortfalls across different clinics. For example, the 20-year-old Healthy Step program, which serves Medicaid patients, will close on Aug. 3. Patients in the program will be moved to other existing SWMC clinics.
Providers need adequate reimbursement to stay ahead of the technology curve, Vernier said. Advances in technology result in better outcomes for patients, but this new technology isn't cheap.
"When payers are unwilling to adequately reimburse providers for costs, providers are forced to make some hard decisions," he said.
Providers have to decide whether to purchase new equipment, update facilities, hire more staff or expand services.
"We are constantly negotiating and renegotiating with individual payers," Cole said, to try and keep the hospital in a financially acceptable position.
Take it or leave it
While hospitals can absorb some of the reimbursement shortfall by negotiating higher rates with commercial payers, small practitioners don't have that luxury.
For example, chiropractors cannot negotiate the terms of the contract or the reimbursement amount, said Vancouver chiropractor Larry A. Bain, president of the Clark County Chiropractic Society.
"The contract offered by an insurer is a ‘take-it-or-leave-it' contract," Bain said, adding that he doesn't know of another profession that must take a contract without being able to negotiate who performs which services and for what cost.
General practitioners are reimbursed at a lower rate than specialists, said Lori Brown, a naturopathic physician who owns Natural Family Medicine of Cascade Park. As a result, some general practitioners are exploring home-based offices to reduce overhead.
Vernier said some practices are taking the opposite tactic and merging together to gain more financial leverage.
The overall effect of low reimbursement rates is that providers don't receive pay that covers the cost of performing services, and can't afford to pay additional staff to bill the insurance company, Bain said.
"It costs more to collect the limited payment than if the patient were to just pay cash on the day of service," he said.
Shortage of primary care providers
Low reimbursement rates for primary care physicians have adversely affected the number of primary care providers. Primary care includes pediatrics, internal medicine and family practitioners.
Only 2 percent of fourth-year medical students plan to pursue general internal medicine, according to the September 2008 Journal of the American Medical Association.
An American College of Physicians report stated that "primary care, the backbone of the nation's health care system, is at grave risk of collapse," while a June 3 statement from Cantwell said experts estimate there will be a shortage of 46,000 primary care physicians by 2025.
A 2008 study of 16 nearby zip codes shows the region needs 29 additional primary care physicians to support the community, Cole said.
"One hundred thousand people in Southwest Washington don't have adequate access to primary care services – that's a quarter of the population," he said.
Dean Barrus owns three physical therapy clinics in Clark County, and has been in the physical therapy business for 25 years. A third of Clark County health care providers won't treat Medicare patients and the others are booked, he said.
Because reimbursement rates for state welfare and Department of Social and Health Services patients are even lower than Medicare reimbursement rates, many offices severely limit the number of welfare and DHSH patients they'll see, Barrus said.
But Clark County will likely soon have more primary care providers available. Southwest Washington Medical Group is recruiting heavily for primary care physicians, Cole said. The medical group opened a new clinic on Main Street in Battle Ground early this year, and expects to add seven primary care physicians to that clinic this summer.
No quick fix
Vernier summed up health care providers' quandary this way: "Hospitals and physicians alike are trying to provide the highest quality care with the financial resources available, but this is challenging when the reimbursement is inadequate."
And it's going to get worse before it gets better, Cole said.
In an attempt to make the situation better, Cantwell introduced the Preserving Patient Access to Primary Care Act in early June that would, among other things, enact Medicare payment reforms to "support the value of primary care."
Scott Johnson, vice president for finance for Legacy Health System, was heartened that "decision-makers in state and federal government are beginning to understand the issues surrounding reimbursement rates better," he said.
"The government, private health insurers and patients, along with providers, all have a role in addressing the current issues and the solution."
SWMC Reimbursement Shortfalls
Type of Patient
Fiscal Year '07 Shortfall (millions)
Fiscal Year '08 Shortfall (millions)
Overall community benefit
(costs hospital absorbed):
2007: $69 million
2008: $76.3 million
Source: Southwest Washington Medical Center