Mayo's Medicare Move

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A limited pilot program in Arizona asks patients to pay out of pocket.

Like many healthcare organizations, the Mayo Clinic loses money treating Medicare patients. In fact, according to Bloomberg News Service, Mayo reported a loss of more than $840 million treating Medicare patients in 2008. But unlike many healthcare organizations, Mayo can afford to quit Medicare—at least at one small physician office in Arizona. So beginning in January, Mayo stopped accepting Medicare patients at one of its primary care clinics—Mayo Clinic Family Medicine-Arrowhead—current patients included.

The pilot program has been widely misunderstood by the general public and mass media, says Michael Yardley, the chair of public affairs for Mayo Clinic in Arizona.

"The most important thing is to understand how small the scope of this pilot is," he says. "It only involves five primary care physicians out of over 400 in Arizona. And it only affects office visits."

Mayo is asking Medicare patients at Arrowhead to pay out of pocket for office visits that range from $200 to $450 in price, Yardley says.

"We have been clear that it's disappointing to move in this direction because we know how it impacts our patients," he says. "The fact we had to do this speaks to the seriousness of the issue."

The problem with Medicare reimbursements that don't cover the cost of the care is particularly acute in primary care, says Yardley, who bemoans the fact that many have seized on the decision at Arrowhead and extrapolated its impact to the entire Mayo Clinic organization. The fact is, he says, the choice had to be made between closing this particular practice or "trying something different that would enable us to financially sustain this practice."

Most providers are now faced with low reimbursement as their biggest challenge, he says, adding that Mayo made a decision to be open with patients and the public about the decision, a move that has brought criticism.

"We aren't the only ones doing it, but we're the only ones talking openly about it," he says.

Fifty-eight percent of Arrowhead's practice is taking care of Medicare beneficiaries, so the problem was stark.

"That's enormous. If you do the math and get 60 cents on the dollar in reimbursement, that's incredibly difficult to maintain," he says. "We are proud to serve them, but we would just like to be reimbursed fairly. We're nonprofit, but we still have to have a business model that lets us sustain the practice."

Yardley says patient volumes are down since the decision took effect, but says it's too early to tell whether they will remain depressed. In fact, only about 20% so far of the practice's Medicare patients have decided to pay out of pocket for visits.

"What we have seen is a lot of very disappointed patients, and that's been difficult," he says, but the practice has hired a customer service representative to help patients with the transition. Mayo will analyze the performance of Arrowhead for two years to fully understand the impact of its decision in this pilot program.

Philip Betbeze

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