Medicare's Proposes Major Cuts in Physician Reimbursement

Implications: The Centers for Medicare and Medicaid Services has proposed a 9.9% cut in payment to physicians for 2008. This is a very real possibility and results from a legislative requirement that the Agency is required to act upon. Congress has stepped in each year for the last five years to counteract reductions in payment since only an act of Congress can countermand this legislation. This reduction will have major impact on the sales of certain medical devices.

Analysis:

While the overall percentage reduction is the same for all procedures, the procedures that are at greatest financial risk are those that are commonly performed in either a surgeon’s office or in a surgeon-owned ambulatory surgery center (ASC) and incorporate the use of a costly implantable device or surgical instrument. In either setting, the costs of these items represent a direct expense to the surgeon.

Many ASCs and surgeons are already sensitive to the increasing costs of the devices and surgical instruments used in their procedures. Should the proposed reductions go into effect in January 2008, device companies can expect ASC and surgeon customers to seek additional price concessions from and resist the purchase of more costly next-generation products.