If you’ve ever had to give terrible news to a patient, then you’ll know how we feel about reporting the results of our annual survey on how much physicians are getting paid for their services.

There’s no easy way to do this. So we’re just going to give it to you straight:

According to our sixth annual national survey of fee schedules, average physician reimbursement from commercial payers and Medicare collapsed in 2006, with payment levels averaging 17 percent below that of 2002 and a staggering 36 percent below that of 2004.

Moreover, we’re not at all certain that reimbursement rates have hit bottom. Consolidation in the insurance industry is reducing competition among payers for physicians’ services, allowing them to pay you less. The dwindling number of payers reduces your leverage; it’s harder to drop bad contracts when there are fewer payers with whom to do business.

“In the past 24 months, payers have really stonewalled negotiation more than I’ve seen over the past eight to 10 years,” says consultant Gregory Mertz with The Horizon Group in Virginia Beach, Va.

But there are still some measures you can take to limit the damage to your practice. Let’s have a look at the numbers — and talk about some solutions.



Allowables from commercial payers for E&M visits dropped 10 percent nationally from 2005 to 2006.

It’s even worse for specific parts of the country. In the Northeast, payments sank — hold your breath — 27 percent in just one year, almost as bad as the 20 percent cut in the Pacific region. When Physicians Practice began publishing fee schedule data in 2002, commercial reimbursement loosely tracked changes in Medicare rates. Now it’s off the map. In 2005, we could hardly believe how dramatic the cutbacks were. But payers were generous in 2005 when compared with their behavior in 2006. This is the worst-looking data we’ve ever seen.



The incredibly shrinking payment

For example, the average payment for a 99213 — a mid-range, established office visit — is now only $50.80. You’ll get merely $94.11 on average even if you’re treating an elderly patient with multiple chronic health conditions and coding at the highest level, 99215.

Those dollar amounts are shocking enough, but it’s the cumulative rate drops that are sending practices over the edge.

Take New England (again) as a horrific example. In 2002, physicians in America’s Northeast were receiving approximately $56 for a 99213 visit. In 2006, they got $46.23. That’s a difference of $9.77. If you bill a 99213 visit 1,500 times a year, that’s a loss of $14,655 in annual revenue from just one code. Add similar drops in 14 other E&M codes, not to mention the multitude of procedural codes, and you can see things are ugly.

Here’s another 2006 shocker: Nationally, Medicare is now a better payer than commercial payers. Yup, you read it right. Better think twice about cutting back on those Medicare patients. They may be your best bet for decent pay.