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Saravanan Kasthuri, medical director at Northwest Endovascular Surgery, and Jason McKitrick, executive director at the Office Based Facility Association, discuss their article “Medicare payment is failing rural health.” Saravanan and Jason analyze the critical economic forces dismantling independent medical practices and threatening patient access in underserved areas. They highlight the personal story of Mr. G to illustrate the human cost of broken reimbursement models while explaining how the outdated Physician Fee Schedule forces doctors to sell to hospitals or private equity firms. The conversation details how consolidation inflates costs without improving quality and proposes the implementation of a technical fee schedule as a vital policy solution. Listen to understand why preserving office-based care is essential for the survival of the rural health care system.

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Transcript

Kevin Pho: And welcome to the show. Subscribe at KevinMD.com/podcast. Today we welcome Saravanan Kasthuri. He is an interventional radiologist. We also welcome Jason McKitrick, a health care consultant and executive director at the Office Based Facility Association. The KevinMD article we are talking about today is “Medicare payment is failing rural health.” Welcome to the show, everybody.

Jason McKitrick: Thank you.

Saravanan Kasthuri: Thank you.

Kevin Pho: All right, I am going to ask you to briefly share a story, and then we will jump right into the KevinMD article. Saravanan, why don’t you go first?

Saravanan Kasthuri: I am an interventional radiologist. I have been in practice since 2001 after completing my fellowship. I have practiced in rural Washington for all these years, specifically in Eastern Washington. For about 10 years until 2013, I was in a local community hospital which was bought over by a big system around 2011.

There was a conflict between the reason why I became a physician and what I was expected to do after the takeover by a big system. I felt the need to keep my dignity and keep my moral compass straight regarding why I became a physician. One option was to start my own practice so that I do not need to be told what I should do, how I should do it, and how many patients I need to see at a time.

After a lot of thought and meeting a lot of people, I started an independent practice for about two years. I still went to the hospital to do the procedures but realized that it was becoming untenable for them. They did not want me to use their space if I was not their employee. I was being spaced out of the ability to continue to practice.

I decided, given the opportunity, to start an office-based setting. We were able to offer complex vascular and nonvascular interventions in an office-based setting, which we call an ambulatory surgical facility in Washington state. You can do a lot of complex procedures like stenting, balloon angioplasty, port placements, and dialysis access interventions. Many things could be done which typically used to be done in a hospital-based or an ASC setting.

That was in 2016. As time went on, the reimbursement for the office-based space got very tight. For the same procedure that I used to do in 2016, for example, vertebroplasty augmentation for people with severe back pain who become dependent, the reimbursement used to be about $7,800. Now it is about $4,800.

Between 2016 and 2026, the reimbursement has come down by 40 to 45 percent. My cost of care, like the staff I need to compete with the hospital-based services, has gone up. I have been paying close to 70 percent more for our staff. We had to pay even more for ICU nurses than what I used to pay in 2016.

The cost of care to deliver care has been going up. The vendors have been asking for more money for the same supplies. It has been really a struggle as the reimbursement has been going down. That was the story that I have been facing in a rural setting.

The other thing is the ability of the patients to afford care. When I started, the Medicaid percentage was about 1.2 percent in my practice in 2015. Now it is about 27 percent. The ability of the patients to pay for those things is coming down, the amount of reimbursements is going down, and the cost to deliver care is intense. We had to make intense changes and struggle to make things even to stay in practice.

Kevin Pho: Jason, why don’t you briefly share a story and then maybe give us some context and some first impressions that you had when you first heard Saravanan’s story?

Jason McKitrick: I would be grateful for that. We represent the Office Based Facility Association. I am a principal at Liberty Partners Group and have been really focused on office-based care. I think there is a little bit of a misconception about what office-based care is. Office-based care is often private practice, freestanding, non-facility, or place of service 11. These are all terms for it.

They are often independent physicians, small businesses, and rural providers like Dr. Kasthuri. The kinds of care that you can provide across specialties include not just primary care and internal medicine, but interventional cardiology, radiology, proton therapy, radiation oncology, urology, and vascular surgery.

It is a really important site of service. Physicians know the three main sites of service are the hospital, the ASC, and the office. In the office-based setting, you can do a lot. As medical technology has advanced over the last several decades, more and more services can be done in an office-based setting. It is the lowest cost site of service, and that is a great thing for patients.

The problem, and this gets a lot to what Dr. Kasthuri was saying, is related to the Medicare physician fee schedule. When that was set up in 1992, it was really focused on just the professional fees that a physician would provide in any site of service. As medical technology advanced and you could take a $4 million linear accelerator or a $4,000 stent out of the hospital and provide that care to a patient in the office, the money did not go with it.

That is central to the problem because the physician fee schedule has been subsidizing the hospital outpatient fee schedule for several decades. That has diluted the physician fee schedule for all physicians, primary care and specialists alike, but in particular for office-based proceduralists.

At this point, as you mentioned in your article that was posted December 5 on KevinMD, there are today more than 300 office-based services where the reimbursement is literally less than the direct costs it takes to provide those services. The direct costs include supplies and equipment.

This is why private practice independent physicians have been going out of business. It is why the Physicians Advocacy Institute has talked about this collapse in independent providers, particularly in rural settings. We are grateful that the physician fee schedule regulation for 2026 is the first year in the last five or six years where office-based reimbursement has actually gone up overall. That is great.

We are working with Congress to really try to get permanent reform. As I will reference your article from December 5, this would entail pulling out those high-cost supplies and equipment from the physician fee schedule. We want to take them out and reimburse those the way that you reimburse for those same services for hospitals and ASCs, which have their own technical fee schedules. We want to get the physician fee schedule back to just reimbursing for the work that physicians do. That is what we are really about.

Kevin Pho: So I am hearing that it is very difficult and increasingly so for physicians to practice independently. We have talked about this on my podcast. I know the number of physicians practicing independently is dwindling. Just to give us some context, Jason, approximately what percentage of physicians are currently practicing independently today? Just give us a ballpark figure.

Jason McKitrick: I think there are two great sources of information on this. One is the Physicians Advocacy Institute that I just referenced. Another one is the American Medical Association, which has been tracking this since about 2012. When they first started tracking this, about 60 percent of physicians referred to themselves as private practice. That has dropped by about 18 percent since 2012.

I think that is a clear trend. The correlation between that drop in private practice and the increase in physicians that are employed by hospitals is the inverse. A lot of these private practice physicians are consolidating and getting bought up by hospitals. That is not good for anybody. It is not good for access, and it is not good for Medicare spending. We are really trying to do what we can to reverse that and to stabilize office-based care, including the kind of services that Dr. Kasthuri provides in rural Washington.

Kevin Pho: Saravanan, you actually went against the trend. Rather than going to a larger conglomerate health care system, you actually broke off from one and went to an independent practice despite the financial headwinds that Jason talked about. Tell us the impact that decision has made on some of your patients. I know you talked about one of those patients in the KevinMD article, but tell us the difference that made to some of those patients in rural Washington.

Saravanan Kasthuri: As I said, I started this practice and separated off the system to keep my dignity. The most satisfying thing is the high-quality care that I am able to provide and also the type of people I am able to work with. They are motivated with a similar philosophy. They do not want to be told about how and when these things should be done or how they should not spend their time with their patients. Whether they are technologists or nurses, they appreciate being in the outpatient space. It is a level playing field within the practice.

When a patient wants something done, we are able to see them within three to five days. From the time somebody requests a procedure, we get the procedure done within a week. Oftentimes, people come to me because they have been to the system where it takes about two to three weeks to even get an appointment. Access to care is one of the main things.

The second thing is the cost of care. Doing the same procedure, patients are going to pay only 20 percent out of pocket. On average, we reimburse about 50 to 55 percent of what the same procedure costs in the hospital space, sometimes even less. It is about half the co-pay for the patient. This means less cost for the patients and better care because they could see us quickly. You simply have to go to any of the independent physician services websites or Google reviews to see how happy the patients are.

We are able to have a human heart to feel the pain of the patient and see how we can help them. Like I mentioned in the article, one of the patients from a few weeks ago was a patient with gangrene and intense pain. He worked on a farm and was one of the 67 employees who was given up housing in that place. He had been working there for about 24 years. His farm was on the verge of bankruptcy. It was an independent family-owned farm, and then he had diabetic gangrene in the foot.

He happened to go to the hospital system, and they told him it would take three weeks before they could even see him and have the ultrasound done. If it was something abnormal, they would see him then. They heard about our practice and came to us. We were able to see him, do the ultrasound, explain the procedure, and schedule it. We were able to do it within four days.

As he was driving down that morning, his car broke down. We got the call around 8:15 a.m. We changed our schedule, called the later patients to come in, and took care of him. Even though we were scheduled to start at 9:00 a.m., we started his procedure around 11:30 a.m. We got him done, and his leg was saved with no amputation. It was all done within a week.

This is just one example that I talked about, but we have multiple dozens of such patients. People with severe compression fractures are not able to get care from appropriate services in the big health care system for about a month or six weeks. Right now, if you want a cardiology consult for a family member, they say it will take seven months before they can be seen. We are able to see them in a short time for half the cost, on a one-to-one basis, taking care of their needs and putting a human face and heart to why we are in medicine.

Kevin Pho: We are talking to Jason McKitrick, health care consultant, and Saravanan Kasthuri, interventional radiologist. The KevinMD article that we are talking about is “Medicare payment is failing rural health.” Now I am going to end by asking each of you just to share some take-home messages with the KevinMD audience. Jason, why don’t you go first?

Jason McKitrick: My take-home message is that we are finally getting the attention of policymakers in D.C. about the value of office-based care and why it is important to stabilize it. I would really encourage folks to get involved. Feel free to contact me at the Office Based Facility Association if you are an office-based physician and want to really fix this problem. We have the solutions, and we need folks to get involved and speak up like Dr. Kasthuri.

Kevin Pho: Saravanan, we will end with you. Your take-home messages.

Saravanan Kasthuri: The outpatient services that we are able to provide for rural patients are so important. We provide not only high-quality and compassionate care but also cost-effective care for those patients in a very timely fashion. If you want to preserve these things, you need to make sure there is at least a level playing field. We must correct the current asymmetry in terms of reimbursement despite the better care they happen to receive. When these practices consolidate and close down, it is not just the physicians who get affected, but it is the patients who are really affected.

Kevin Pho: Saravanan and Jason, thank you so much for sharing your perspective and insight. Thanks for coming on the show.

Saravanan Kasthuri: Thank you.

Jason McKitrick: Thank you. It has been a pleasure. Thank you.