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Mayo Clinic Faulted for Limiting Medicare Patients
Critics Say Move Shows That Facility Is Not a Model for Health-Care Reform

By Alec MacGillis
Washington Post Staff Writer
Tuesday, October 13, 2009

The renowned Mayo Clinic is no longer accepting some Medicare and Medicaid patients, raising new questions about whether it is too selective to serve as a model for health-care reform.

The White House has repeatedly held up for praise Mayo and other medical centers, many of which are in the Upper Midwest, that perform well in Dartmouth College rankings showing wide disparities in how much hospitals spend on Medicare patients.

The model centers have capitalized on their status to insert into health-care legislation provisions that would result in higher Medicare payments for hospitals that do well on the Dartmouth rankings while punishing those elsewhere -- mostly, big cities and the South -- that spend the most per Medicare patient.

But some skeptics -- health-care analysts as well as politicians and medical officials in states that would be hurt by Mayo's proposals -- argue that low Medicare spending by Mayo and others is driven by the lack of diversity and poverty in their patient population. They say Mayo's low-cost image is belied by the high rates it charges insurers and private payers.

Mayo announced late last week that its flagship facility in Rochester, Minn., will no longer accept Medicaid patients from Nebraska and Montana. The clinic draws patients from across the Midwest and West, but it will now accept Medicaid recipients only from Minnesota and the four states that border it. As it is, 5 percent of Mayo's patients in Rochester are on Medicaid, well below the average for other big teaching hospitals, and below the 29 percent rate at the other hospital in town.

Mayo officials said Monday it would look for other hospitals to take care of the 50 patients from Montana and Nebraska who have come to the hospital at least twice in the past two years. If there are none, the patients might qualify for charity care at Mayo.

Separately, the Mayo branch in Arizona -- the third leg of the Mayo stool, with the Rochester clinic and one in Florida -- put out word a few days ago that under a two-year pilot program, it would no longer accept Medicare for patients seeking primary care at its Glendale facility. That facility, with 3,000 regular Medicare patients, will continue to see them for advanced care -- Mayo's specialty -- but those seeking primary care will need to pay an annual $250 fee, plus fees of $175 to $400 per visit.

Mayo officials said Monday that the two moves were "business decisions" that had grown out of longstanding concerns about what it sees as underpayment by Medicare and Medicaid. The officials said they were not meant to influence the national reform debate, in which Mayo has also been advocating against the creation of a government-run insurance option. But they said the moves were indicative of the need for the Medicare payment reforms it has been pushing in Washington.

"These decisions aren't based on timing with what's going on with the legislation," said Mayo spokeswoman Shelly Plutowski. "It simply is the reality of the health-care business, and how are we going to be able to continue our mission when these payments are so far below what it costs to provide the care."

Skeptics see the moves differently. As it is, they say, Mayo has been drawing a rarefied clientele by charging a premium to Medicare patients coming to Rochester from outside Minnesota. This month's moves, they say, will result in a yet more affluent clientele, and given that Medicare costs correlate with poverty, Mayo's spending data will look only better compared with others.

"If your institutions are located in the Bronx or South Central L.A. or other parts of the country with dense poverty, it's hard to compare those patients . . . with places like Mayo," said Atul Grover of the Association of American Medical Colleges. "It's not like they can just stop seeing Medicaid patients, because they live right in their area, and are not coming from hundreds of miles away. They're located right in areas with dense poverty."

Mayo spokeswoman Jane Jacobs rejected this, saying that poverty rates can explain only a fraction of the Medicare spending disparities. "To use your patient demographics as an excuse for not getting better is outrageous," she said.

The skeptics also question Mayo's argument that it needs to cut back on Medicare and Medicaid patients because those payments are so far below its costs. While Mayo is adept at limiting unnecessary procedures, they note, the costs of the procedures it does provide are high. By extracting such high rates from insurers and private payers, it can pay for top talent and facilities, thus raising its budget and its per-procedure costs.

By contrast, a recent report by the commission that advises Congress on Medicare found that hospitals relying most on Medicare and Medicaid, without a big private-payer base, report per-procedure costs in line with Medicare rates -- suggesting that those hospitals can make do with Medicare payment levels.

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