Health Care

April 26, 2014

Medicare reimburses millions to Kansas doctors, but margins are slim

Kansas providers received more than $774 million in reimbursements from Medicare in 2012 – and Wichita doctors received about $195 million of that, according to recently released federal data.

Kansas providers received more than $774 million in reimbursements from Medicare in 2012 – and Wichita doctors received about $195 million of that, according to recently released federal data.

Medicare – a $600 billion program for seniors and the disabled – paid about $64 billion to physicians nationwide in 2012.

The unprecedented data release had been blocked for years by the American Medical Association, which claimed the information would violate doctor privacy, even though Medicare is funded by taxpayers. Last year, a federal judge ruled the data could be made public.

The data is for Medicare Part B, which covers visits, tests and other treatments. Because of privacy issues, the data does not include procedures that a doctor performed on 11 or fewer patients.

Wichita doctors had the greatest number of claims in Kansas, followed by Topeka, Overland Park, Lenexa and Kansas City.

Specialties that had the highest reimbursements nationally and locally included oncologists and ophthalmologists.

Some physicians say the data can be misleading because it shows how much physicians were reimbursed but doesn’t show how much they actually made or the cost to them to buy drugs and pay overhead.

“A great percent of the (Medicare reimbursement total) is the cost of goods,” said C. Joseph Beck, retinal surgeon and principal owner of Central Plains Eye MDs, who was reimbursed about $2.2 million from Medicare in 2012. “The physician has no control over it whatsoever. Those prices are all set for us.”

Oncologists and ophthalmologists generally purchase expensive drugs from drug companies before administering them to patients. Eventually, the practices receive reimbursement from the patient’s insurer.

“When we buy it, we have to pay for it,” said oncologist Shaker Dakhil, president of Cancer Center of Kansas, who was one of the top Medicare reimbursement recipients in Kansas at about $4.7 million. “It can take several months to recoup it and we have to pay (7 percent) interest on it.”

Part of the reason physicians have to buy the drugs and then administer them is that drug companies won’t risk billing the patient for costly drugs, Beck said.

“Can you imagine what would happen to the drug companies’ profit margin if they had to bill individuals?” Beck said.

It’s also a matter of quality control.

“It’s called brownbagging,” Dakhil said. “We refuse to do that because we have no control over the quality and we’re responsible for the quality. It’s like you bringing the meat to Scotch and Sirloin.”

At Cancer Center of Kansas – whose 14 oncologists are among the top Medicare reimbursement recipients in the state – the average markup for non-generic drugs is 4 percent, Dakhil said. Generally, larger practices are able to get the drugs cheaper because they are buying larger quantities. The center has about 200 employees, he said.

When Medicare patients don’t have a supplement plan, the physician can lose money on treatments, Dakhil said.

For example, the cancer drug Yervoy for melanoma patients costs Cancer Center of Kansas $31,109 per treatment, Dakhil said. Patients on Yervoy require four treatments.

If a patient only has Medicare, the practice is reimbursed $25,754 per treatment for the drug, or a loss of more than 20 percent. If a patient has Medicare and a supplement plan, the practice receives $32,192 per treatment, or a profit of nearly 3.5 percent.

The losses on some patients are made up by other patients who have Medicare supplements or private insurance, Dakhil said. Cancer Center of Kansas has about 60 percent Medicare patients and 20 percent of those do not have a supplement, he said.

At any given time, Cancer Center of Kansas and its 16 offices statewide have $5 million of drugs on hand and Central Plains EyeMDs has around $100,000 of drugs in its refrigerators. Central Plains Eye has about 20 employees.

“There’s a lot of administrative stuff we have to go through to make sure we stay in the black,” Dakhil said.

Beck said that despite the large reimbursement dollars, many private practices struggle to stay open.

“In 2013, I was on the hook for $3.2 million in liquids, which is obscene,” Beck said. “With all the drugs we have to deal with, we average a 1 to 2 percent margin. It’s awful. … I’m literally responsible for millions in drug bills but there’s no safety net for us. I trained for 10 years after college to be a retinal surgeon, a job creator, and to do what we do is hard when our margins are razor thin.”

Medicare officials say they will likely release new claims data each year.

Contributing: Associated Press

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