American College of Physicians: Internal Medicine — Doctors for Adults ®

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HCFA to risk-adjust pay for Medicare HMOs

From the February 1999 ACP-ASIM Observer, copyright 1999 by the American College of Physicians-American Society of Internal Medicine.

Beginning next year, HCFA will pay Medicare HMOs based on the health of individual patients, a move that could affect physician reimbursement.

With risk-adjusted payments, health plans could receive more than $26,000 per year for members with diseases like AIDS. Payments for healthy members of Medicare HMOs could drop by as much as 20%.

As part of the trickle-down effect, physicians treating sicker patients could see increased reimbursements from health plans for Medicare members, according to the College. Physicians with healthier patients, on the other hand, might see their pay fall.

Some Medicare HMOs have already complained that lower rates for healthy patients could drive more health plans away from Medicare. Nearly 100 health plans have recently left Medicare, stranding patients and physicians. (See "Tough times as Medicare HMOs fold," this page.)

HCFA intends to phase in its new pay rates over five years. While the agency will initially risk-adjust payments using only inpatient data, it plans to include outpatient costs incurred by physicians in its risk-adjustment formula by 2004.

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