Medicaid cuts could drive doctors from Valley

Facing a revenue shortfall of at least $15 billion, the Texas Senate passed a plan Thursday that makes about $11 billion in cuts compared to the current budget. Although the Senate cuts are less severe than a bare-bones House budget, Medicaid providers and public schools still take the brunt of reductions that could have major ramifications in Hidalgo County, where eight of the top 15 employers are hospital or public school systems.

State Sen. Juan "Chuy" Hinojosa, D-McAllen, the leading Democrat on the Senate Finance Committee, said there are no good budget options when confronted with a massive deficit — blamed partly on the economic downturn — and confronted with a large contingent of legislators demanding a cuts-only approach that doesn’t raise taxes or touch the state’s rainy-day fund.

But Hinojosa, who voted against the Senate budget, said the state is risking long-term damage to resolve a short-term fiscal crisis.

"We have an aging population and a lot of kids, who we have to provide services, so health care is the largest expenditure in our budget," Hinojosa said. "It will be cut, but we have to do it responsibly or risk serious implications for Texas’ health care infrastructure by forcing doctors to opt out of Medicaid."

Medicaid already only reimburses providers at a rate of about 60 cents on the dollar.

The House plans cuts Medicaid rates further with a 10 percent across-the-board cut for hospitals, private physicians, nursing homes and other providers. The Senate version instead took a piecemeal approach, reducing rates by service, with private physicians seeing a 3 percent reduction from last year’s rates for CHIP and Medicaid.

Given the state’s bleak fiscal outlook, Texas physicians realized the budget shortfall required Medicaid spending reductions but preferred a budget that made cuts with a scalpel instead of a sledgehammer, said Susan Bailey, a Fort Worth allergist who is president of the Texas Medical Association. But as the state looks forward to the 2013 legislative session, it must find a way to sufficiently reimburse Medicaid providers or lose them from the program altogether in places outside the Valley.

"Valley physicians have told me they don’t have the option of dropping Medicaid like many physicians in other parts of the state are doing because the payment rates are poor," Bailey said. "They just have to absorb the losses and do the best they can, but eventually, the economics don’t work."

With a tidal wave of newly eligible Texans expected to soon be placed on the state’s Medicaid rolls under federal healthcare reform, the state needs to ensure there are enough physicians to see them.

But years of progress in building the physician provider base through the implementation of tort reform, physician loan repayment programs and other strategies to increase physician capacity in underserved areas like the Valley could be undone by harsh cuts to Medicaid, said Tom Banning, CEO of the Texas Academy of Family Physicians. If there aren’t enough physicians who will take Medicaid in underserved areas like the Valley, those patients will receive expensive and inefficient care through the use of emergency rooms.

Meanwhile, Texas is cutting available slots for residency programs, further exacerbating a physician shortage in a state that ranks 42nd for physicians per capita. In 2013, a University of Texas analysis found, the state will graduate about 1,600 doctors from its medical schools even though it provides only 1,400 first-year residency slots.

Many Texas medical school graduates head to out-of-state residencies and rarely come back.

"When you couple cuts for Medicaid providers with the loss of state support for graduate education, you add to the state’s physician shortage at a time when we should be investing in and producing more doctors," Banning said. "It has the ability to set us back decades by limiting access to primary care when we know there’s going to be a tsunami of new Medicaid patients (from healthcare reform)."

Already spending a quarter of the state’s budget on Medicaid, Texas is locked in a vicious cycle that combines tremendous growth in Medicaid enrollment that requires building up the provider base through fair reimbursement rates but also makes it difficult to provide the care without cutting back on how much it pays.

To address Medicaid’s growing costs, legislators are looking for cost savings, most notably by rolling out managed care to the Valley to save an estimated $300 million.

Stephanie Goodman, a spokeswoman for the state Health and Human Services Commission, said the state is working to balance all its priorities with limited revenues but realizes its Medicaid rates are historically low, making it harder to recruit doctors to the program.

"It’s one thing to say we have 3.2 million Texans enrolled in Medicaid," she said. "If they can’t find a doctor who accepts Medicaid, we haven’t helped their healthcare situation."

While the state’s rate cuts may be bearable in some areas, they are potentially devastating to portions of the state with a higher percentage of Medicaid patients who don’t have a base of subsidizing commercial payers, said Doug Matney, the group vice president for South Texas Health System. Pediatricians and specialists in obstetrics — Medicaid assists most of the state’s children and pregnant mothers — would also be disproportionately affected.

"If rate cuts are drastic, it’s going to hurt the hospitals, but we’re institutions. We’re here for the long haul," Matney said. "Physicians will respond by either trying to see more Medicaid patients in the same time frame or by focusing purely on the privately funded patients."

And that leads Valley healthcare officials to question whether undiminished cuts to Medicaid reimbursements will make it harder to retain physicians here.

South Texas Health System is already hearing concerns about the Valley’s payer mix and proximity to Mexico’s drug-related violence from physicians it is recruiting. If it becomes harder to recruit physicians to the Valley, the region will rely on growing its own through residency programs like the McAllen family residency program sponsored by the healthcare system.

About 70 percent of the 200 primary care physicians trained through the program since it was founded have stayed to practice in the Valley, helping address a critical doctor shortage here that has markedly improved, said Jesus Naranjo, the residency program’s director. But like private clinics, the residency program isn’t immune to the realities of practicing here as it tries to cover its daily operations and overhead amid declining reimbursement rates and decreasing availability of state support.

The House budget, for example, eliminated funding for family residency programs through the Texas Higher Education Coordinating Board. If the House budget that also includes a 10 percent cut to Medicaid reimbursement rates is approved, training programs that already operate with narrow margins will have to scramble to respond, Naranjo said. The clinic could scale down and take fewer Medicaid patients — or turn away the 20 percent of its patients that are uninsured — but it might also have to reduce its six residency slots available each year.

"We live in a very narrow margin, and we have to scramble sometimes for money," Naranjo said. "Even though we need more primary care doctors, nobody knows where to tap the money to create them."

And into that uncertain world heads Ferrufino and his five fellow graduates. Two physicians from Ferrufino’s class plan to head to Florida later this summer to practice medicine. A third took a position at a federally funded health clinic in San Antonio. Ferrufino and two other classmates intend to remain in the Valley, where they took positions with a hospitalist group, in which they care for other primary care physicians’ patients when they are admitted to the hospital.

That’s a generational shift in medicine. Primary care physicians who used to make trips to and from the hospital to see their patients found they generate more revenue by staying in the office than they would on inpatient rounds. They instead turn to hospitalists like Ferrufino, who dreamed of operating his own family clinic when he first entered medicine.

He still harbors those dreams but decided he couldn’t afford to take such a big, initial step when he has outstanding medical school debt and a family to support. Still carrying a heavy load in the final months of his residency, Ferrufino said he hasn’t had time to worry about any long-term implications to healthcare from proposed budget cuts.

"It’s hard to say how things are going to be five years down the road," Ferrufino said recently as he prepared to start his morning rounds at the program’s clinic. "I will say, as a hospitalist, there’s no overhead to take care of, and in some ways it’s an easier way to start."