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Physician Payments to Increase under Medicare

The Centers for Medicare and Medicaid Services (CMS) has finalized a rule that will meaningfully increase reimbursement rates for the nearly 10,000 physicians in Puerto Rico under the Medicare program, starting on January 1, 2017. 

Physicians in Puerto Rico have long expressed concern that their reimbursement rates under Medicare do not accurately reflect the actual cost of practicing medicine on the island.

The College of Physicians and Surgeons of Puerto Rico estimates that two doctors leave the U.S. territory every day, seeking higher pay and better working conditions in the fifty states. Working physicians number 9,000, down 36 percent from a decade ago, a percentage decline four times greater than that for Puerto Rico’s overall population.

CMS reimburses doctors pursuant to a formula that consists of three components.  First, the “Physician Work” component reflects the relative time and effort associated with providing a particular Medicare service.  Second, the “Practice Expense” component reflects the cost of maintaining a medical practice, such as renting office space, buying supplies and equipment, and paying staff.  Finally, the “Malpractice” component reflects the cost to a doctor of purchasing malpractice insurance. 

CMS then applies a geographic pricing cost index, commonly called a GPCI, to each of the three components, which is intended to account for geographic variations in the cost of practicing medicine in different areas within the country.  Using U.S. Census Bureau data, CMS has calculated for Puerto Rico the lowest Physician Work GPCI, Practice Expense GPCI, and Malpractice GPCI of any jurisdiction in the United States.  As a practical matter, this means that Puerto Rico physicians are reimbursed less under Medicare than doctors in any other U.S. state or territory, including the neighboring U.S. Virgin Islands.  The Resident Commissioner has made detailed arguments for why the GPCI formula does not reflect the true cost of practicing medicine in Puerto Rico.

“After years of advocacy efforts undertaken by me, the Puerto Rico College of Physicians and Surgeons, the Medicaid and Medicare Advantage Products Association of Puerto Rico, the Puerto Rico Institute of Statistics, and other stakeholders, I am thrilled that CMS will now increase all three GPCIs for Puerto Rico physicians,” announced Puerto Rico Resident Commissioner Pedro Pierluisi.

“Although it is not possible to precisely estimate the dollar value of this proposal, the positive impact is likely to be extraordinarily significant, because island doctors will receive higher federal payments for every single medical service they provide to Medicare patients,” said Pierluisi.

On August 15th, after the proposed rule was issued by CMS, the Resident Commissioner wrote a letter to Sylvia Burwell, the Secretary of the U.S. Department of Health and Human Services (HHS), and Andrew Slavitt, the Acting Administrator of CMS, expressing his support for the proposed rule:

“I want to express my gratitude to HHS and CMS for proposing to increase the three geographic pricing cost indices, commonly called GPCIs, so that physicians in Puerto Rico who treat patients enrolled in fee-for-service Medicare are reimbursed in a manner that more closely aligns with the manner in which physicians in the other U.S. territories are reimbursed and that better reflects the actual cost of practicing medicine in Puerto Rico,” Pierluisi’s letter stated. 

“Puerto Rico is unique insofar as approximately 75 percent of all Medicare-eligible individuals in Puerto Rico receive health insurance through a Medicare Advantage plan, rather than through fee-for-service Medicare—a penetration rate that far exceeds that of any state or sister territory.  If the final rule retains the GPCI increase for Puerto Rico, this increase will eventually be reflected in the per-person monthly payment the federal government makes to MA plans on the island.  The problem is that there is a time lag involved.  If you conclude that there is absolutely no path to fully incorporate the change into the MA rate in 2017, which I hope is not the case, then I seek your written assurance that the change will be fully implemented in 2018,” the Resident Commissioner’s letter concluded.  


The final rule is available by clicking here.  

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