Cardiology Did Well in 2000, But CV Surgery Lost Ground

Physician Compensation Report, May, 2002

The year 2000 was a robust one for most cardiology groups, as two important median measures of production, patients per physician and total medical revenue per physician, rose more than 10% from 1999 levels, according to MGMA's recently published Cost Survey for Cardiovascular/Thoracic Surgery and Cardiology Practices: 2001 Report Based on 2000 Data.

But 2000 was a difficult time for most cardiovascular/ thoracic surgery groups. It was the second year of a four-year phase-in of the Resource Based Relative Value Scale, which has resulted in major reductions in RVU procedure values--especially for high-dollar, high-volume procedures such as certain open heart surgeries, says Martin O'Neill, administrator of Illinois Cardiac Surgery Associates in Peoria.

Along with a slow migration of patients from CV surgery to interventional cardiologists, these RVU cuts have curtailed revenue in this area of surgery in recent years. The reduction in 2000 was 2% of median total medical revenue per physician, MGMA says.

Shortage of Cardiologists

"No doubt," says Steven Gornik, administrator of 27-cardiologist Austin (Texas) Heart PA, "there's a cardiologist shortage." Gornik says practice managers in the field whom he knows believe there are "six open positions for every cardiologist coming out of fellowship."

Because of the shortage and the burgeoning need for cardiologists as the population ages, recruiting offers are higher. Given the size of Austin Heart, Gornik recruits every year, and says he is paying about 10% more than a year ago to new physicians. He hears from other practice managers that increases have ranged between 5% and 10% in the past year.

As for the dollar amount of offers, Gornik says it varies very widely with location and characteristics of the practice, from as low as $130,000 for people just out of fellowship going to popular locations in California, to as high as $300,000 or more to go to unpopular rural areas. He declines to disclose Austin Heart's recruiting pay offers.

At the same time, the group's partners' earnings are down more than 5% this year because of the revenue/ cost squeeze affecting most practices (see article, p. 1), he says. To generate more income in 2000-01, and to offset income reductions this year, Austin Heart and other cardiology practices have implemented at least three strategies:

(1) Hire more cardiology physician assistants, echocardiographers and nuclear medicine techs. The prevalence of this strategy has led to a shortage and rising salaries for these jobs as well, Gornik says.

(2) Buy many kinds of diagnostic equipment for medical offices, so that patients need not be referred elsewhere and the group can bill for the practice component of such procedures.

(3) Work harder. The median patient-to-physician ratio of 1,663 reported in the MGMA Cost Survey would be adequate for many primary care physicians. The median work RVUs per physician in the Cost Survey is 8,412 in 2000, up 7.4% in the two years since 1998. The 75th percentile in 2000 is 10,836 .

The American College of Cardiology (ACC) in Bethesda, Md., is beginning a formal study on whether there is a shortage of physicians and physician extenders in cardiology. A co-chair of the study task force is Bruce Fye, M.D., ACC president-elect and professor of cardiology at the Mayo Clinic. Fye was quoted in the Louisville Business Journal in February as saying there is such a shortage. ACC hopes to have preliminary findings in March 2003.

Jeffrey Gorke, executive director of 10-cardiologist Western Piedmont Heart Centers in Hickory, N.C., says that in addition to the Medicare RVU dollar value cut, cardiology has suffered RVU procedure value cuts. Gorke estimates that his practice has suffered a reduction of 9% to 10% in Medicare pay rates from 2001 to 2002, taking into account both kinds of RVU cuts and applying them to the practice's actual procedure mix.

Even before this year, Medicare paid lower rates than did commercial insurers, Gorke says. At Western Piedmont, 40%-45% of the patients are on Medicare, but only 30%-35% of the revenues come from the program.

Plenty of CV Surgeons on Market

At Illinois Cardiac Surgery Associates, the primary reason for declines in revenues and physician incomes over the last several years is the reduction in Medicare RVU procedure values, O'Neill says. While the 10-surgeon practice has had small drops in caseload because of expanding cardiology techniques, Medicare's price cuts have been a much larger factor. He notes that as cardiological techniques have improved, CV surgery patients have gotten older. Of his group's patients, the percentage covered by Medicare is up to 52%.

"You can't name a specialty that's been hit as hard [by RVU procedure value cuts] as CV surgery in the last four years," O'Neill says. The reimbursement for one CPT code, 33519, for open heart surgery involving one artery and two veins, plummeted 27.27% just from 2001 to 2002, applying both the RVU dollar and procedure value reductions. He ran the group's entire Medicare 2001 business volume through a computer with the 2002 fee schedule, and determined there was a 12.2% cut, or almost one out of eight dollars.