$3.2B Lawsuit Targets Medicare Underpayments

Cheryl Clark, February 24, 2011

Medicare's antiquated system knowingly hurts patient care by underpaying doctors in 200 counties in 32 states, according to a $3.2 billion lawsuit filed by seven California counties and physicians, who want to force the agency to fix the system.

The court fight, which began in 2007, involves the plaintiffs' contention that the federal fee schedule underpays physicians in certain counties by classifying those regions as rural, lower-cost counties, when they are in fact very expensive places to provide care, often in areas that are now very urbanized.

According to a statement from the physicians' lawyer, Dario De Ghetaldi, the inequitable formula, called the GPCI or geographic practice cost index, results in physicians and other healthcare providers being paid between "12% and 24% less than their colleagues in neighboring, demographically similar counties for providing exactly the same services."

That's because the practice cost index uses a formula that assumes those areas have costs of doing business  – such malpractice insurance, supplies and costs of labor – that are similar to lower expenses seen in rural areas.

"This is truly a national problem," De Ghetaldi said in a statement. Because so many physicians no longer want to accept Medicare patients, underpaid counties now have a critical and worsening shortage of healthcare providers willing to accept Medicare beneficiaries.

"These inequities are causing a reduction in access to much needed medical care for hundreds of thousands of Medicare beneficiaries in many areas of the country, severely impacting the quality of health care to which our disabled and elderly populations are entitled."

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