Doctors across California and in two other Western states are owed millions of dollars in backlogged Medicare reimbursements, leading some physicians to turn away elderly patients and pushing others to the brink of bankruptcy.
In the most extreme cases, doctors have not been paid since February. Others are owed hundreds of thousands of dollars. Doctors who serve high numbers of Medicare patients say they are defaulting on rent, laying off staff and begging drug suppliers not to stop shipments. One cardiologist said she's even resorted to doing the office laundry to cut costs.
Medicare owes Dr. Tim Ganey and his Bay Area practice of oncologists $750,000 in outstanding claims. He sought grace periods from vendors for his drug payments, but now he's running out of time. He won't be able to order more chemotherapy treatments unless he pays his bill.
"The things that we're dealing with, they're not elective things," Ganey said. "They're pertinent to people either fighting their cancer or being cured of their cancer."
He now faces two options: take out more personal loans to buy the drugs himself or start admitting patients to a hospital.
The holdup is twofold. By May, doctors were supposed to be using a new universal identification number assigned by the Centers for Medicare and Medicaid Services. Without the new number, which is like a Social Security number, doctors can't get reimbursed.
Then, as scores of doctors still waited for those numbers, in September the federal agency switched to a new claim processor for its 90,000 California providers. The move to Palmetto GBA in South Carolina, part of a national effort to reform Medicare contractors, compounded the billing issues and left even doctors who had their universal identification numbers waiting months for reimbursement.
In some cases, the problem is as simple as a change of address not being processed. Dr. Daniel Marcus moved from Suite 404 to 414 in his Marina del Rey office and as a result has not been paid since May.
"This is just a complete disaster," said Dr. Dev Gnanadev, medical director and chairman of the Department of Surgery at Arrowhead Regional Medical Center in Colton and president of the California Medical Assn. "I know people who have turned down their office to minimal size. Some are even considering closing temporarily. If you don't get paid, then you're in deep trouble."
Rep. Henry Waxman (D-Beverly Hills), whose office was contacted by at least two dozen doctors, called the transition to the new contractor "marred by missteps."
"I have been hearing from numerous doctors who have been waiting for months for hundreds of thousands of dollars in reimbursements," he said in a statement. "The delay in payments threatens to compromise patient care and provider solvency."
Palmetto has also been the subject of complaints from doctors in Nevada, which switched to the processing firm in August. The state has the fastest-growing Medicare population in the nation.
"If we're still dealing with this in January or February, Medicare patients are going to have serious access problems," said Larry Mathies, executive director of the Nevada State Medical Assn.
So far, Medicare patients have been largely insulated from the reimbursement fight, though they may have difficulty making new appointments. Some doctors, particularly those with specialties that get minimal Medicare reimbursements, say this could be the tipping point that makes them abandon their participation in Medicare altogether.
Dr. Gordon Wong, a solo family practitioner in Alhambra who moved from St. Louis in September, said he has not been approved as a Medicare provider even though he submitted his application in May. It took him more than a month of daily phone calls to Palmetto just to get a live person on the phone. When a customer service representative finally answered, she told him to call back because the computers were down.
"There are patients waiting to be seen, and I can't see them," Wong said. "Without completing my enrollments, I can't take Medicare patients."
Mike Barlow, a Palmetto vice president who oversees California, Nevada and Hawaii, said company officials are aware of the issues and have acted to address them. The company has hired and trained more people to field calls. Teams are in place to fast-track the most severe cases. This week, some Palmetto staffers were on site in Reno and Las Vegas trying to process complaints in person.
"We are accelerating to the extent that is humanly possible," Barlow said.
Palmetto has taken the brunt of the doctors' ire. The cover of Southern California Physician magazine that hit mailboxes this week features a huge picture of a cockroach, also called a Palmetto bug, with the word "INFESTATION!" stripped across the front. The article opens with one doctor telling Barlow, "I wish I had a tomato," as he stood before an angry crowd at a California Medical Assn. meeting last month.
Critics of the switch say the federal Medicare agency is also to blame for undertaking two major transitions within months of each other. In an effort to cut costs, the agency picked a contractor that was not equipped or prepared to handle California's Medicare providers, they contend.
But federal officials defend the choice. Torris Smith, an associate regional administrator for the agency, said Palmetto has more than 40 years of experience as a Medicare contractor and was selected after a "full and open competition."
"There are always going to be general transition issues," Smith said.
Officials of both Palmetto and the federal agency said they expect the backlog of applications like Wong's will be eased by Dec. 31.
Claims, meanwhile, are being paid, they said.
"I think we're seeing change now," Smith said. "We're making some progress."
Medicare's regional office is also trying to assist doctors with serious problems, he said, and Palmetto will advance emergency payments.
But change isn't coming soon enough for doctors and their staffs, who have wasted hours on hold with no relief.
The California Medical Assn. has fielded calls from more than 1,000 doctors seeking help with delayed reimbursements. Palmetto officials said they receive about 4,500 calls per day -- that's down from the 45,000 calls on the first day when they had been expecting only 2,500. Through September, callers were met with a busy signal 90% of the time, Barlow said.
With added phone lines, only 10% of the callers should be getting busy signals now, Barlow said.
Dr. Sally Davis of Walnut Creek-based Cardiology Associates, who is doing the office laundry along with her two partners, said, "It's unbelievably embarrassing that we've reached that point."
Dirty linens, though, is the least of her problems.
Roughly 80% to 85% of her patients are on Medicare, and the practice is owed more than $700,000.
"We said we would ride this out through December, then we'd have to decide what to do next," Davis said. "We're likely to have to break the practice apart. . . . You can't grow a practice in the community when you're not getting paid."