Los Angeles, N.Y. MDs Face Big Cuts in Medicare Fees : Health: Congress devises a formula to pay big city doctors less, rural doctors more. The pattern may become standard for all U.S. medicine.

Doctors in Los Angeles and New York face big cuts in the fees they receive for Medicare patients, with surgeons expected to lose as much as 25% under a new fee system approved by Congress earlier this week.

“This is the biggest change in physician payments since doctors stopped accepting pigs and chickens” said Rep. Pete Stark (D-Oakland), a key author of the new plan.

Currently, big city doctors are reimbursed at a much higher rate than their rural counterparts. To reduce the gap, the plan substantially cuts fees for physicians in urban areas and large states, and greatly boosts fees for physicians practicing in rural regions and small states.

Payments also will be cut drastically for such treatments as hip replacements, coronary artery bypass operations and cataract surgeries.

The system will apply only to payments by the federal government under the Medicare program. However, private insurance companies usually adopt Medicare innovations and the new system could become the standard pattern for all American medicine.

The new approach offers savings in out-of-pocket costs for people whose doctors now charge more than the Medicare fee schedule. Doctors currently are permitted to bill patients for the balance not covered by Medicare. Starting in 1991, however, doctors will not be permitted to charge more than 25% above the Medicare fee. The margin drops to 15% two years later.

Doctors who violate the rules could be banned from participating in the Medicare program.

The complex new payment system will be imposed during a five-year period beginning in 1992. The government is trying to change the way doctors deal with Medicare patients, putting more emphasis on preventive medicine and less on surgery.

“Typically surgery has been overvalued and diagnostic and primary care have taken it in the ear,” said American Medical Assn. spokesman Ross Reuben.

Government fee scales would be devised for 7,000 different categories, ranging from a basic office visit to the most complex surgery. The fees will have geographic adjustments, reflecting the varying costs of a medical practice, such as rent and salaries for nurses and other personnel.

Although the cost of medical practice is higher in Manhattan than Minneapolis, federal officials are convinced that the current price differentials are much too large. For example, a hip replacement in New York City costs $4,436, compared with $2,283 in Minneapolis. Under the new system, Medicare fees will fall in New York, and rise in Minnesota.

The government is slicing up the payment pie in a different way, giving the medical profession the same total sum of money, but rearranging the slices. Surgeons, for example, will get smaller pieces, while internists receive larger ones.

Geographically, too, there are winners and losers. Doctors in the Los Angeles and New York areas will suffer a cut of 14% in their Medicare fees, compared with the amounts they receive for the same work under the current rules. Surgeons are the biggest losers, suffering a 25% cut.

Doctors in small metropolitan areas will receive a 3% increase, while rural doctors as a group will get increases of 12% to 14%.