Mayo Clinic admits need to grow commercial payers to balance payer mix, subsidize underinsured

The Mayo Clinic has admitted its need to grow the number of patients who can pay the full cost of care through their commercial insurance to balance the losses from those on government insurance.

Mayo Clinic's CEO John Noseworthy reportedly told employees late last year to prioritize patients who had private insurance over those covered through Medicare and Medicaid, if the patients sought care at the same time for similar conditions.

Noseworthy's controversial comments, first made public in the Minneapolis Star Tribune, have been widely reported.

Noseworthy responded to the recent news stories.

"Patient medical need will always be the primary factor in determining and setting an appointment," he said. "In an internal discussion I used the word 'prioritized' and I regret this has caused concerns that Mayo Clinic will not serve patients with government insurance. Nothing could be further from the truth. In fact, about half of the total services we provide are for patients who have government insurance, and we're committed to serving those patients."

Balancing payer mix isn't unique to Mayo Clinic, the health system said in an earlier response.

"It affects much of the industry, but it's often not talked about," Mayo Clinic's response said. "That's why we feel it is important to talk transparently about these complex issues with our staff."

Noseworthy futher explained, "Changing demographics, aging of Americans and budgetary pressures at state and federal government pose challenges to the fiscal sustainability in healthcare today. While these discussions are uncomfortable, they are critical for us to be able to meet the needs of all of our patients."

[Also: Hospitals work to fine-tune payer mixes, but finding savings is no easy task]

The health system said that in scheduling appointments, it first looks to medical need, and then to whether care is available to a patient more locally.

To fund its research and education mission, Mayo needs to support its commercial insurance patient numbers to continue to subsidize the care of patients whose insurance does not cover the cost of their care, the health system said.

Mayo, as other providers, has seen a growth in the number of Medicaid patients it treats under the Affordable Care Act's Medicaid expansion program, a figure that has affected its bottom line as the government reimburses at a lower rate than commercial insurance.

Noseworthy reportedly told staff that a 3.7 percent rise in Medicaid patients was a tipping point for the organization.

"If we don't grow the commercially insured patients, we won't have income at the end of the year to pay our staff, pay the pensions, and so on," Noseworthy said.

"Mayo Clinic has always been committed to serving patients who need us the most, regardless of insurance coverage," said Mayo Clinic's response. "Across Mayo, beneficiaries of government programs, including Medicare and Medicaid, make up about 50 percent of the total services we provide. Medical need is the top factor in the decision making process for appointment scheduling. After medical need, we consider if the patient can access the care they need closer to home and often work with their local provider to provide the highest level of care locally."

Mayo reportedly provided $629.7 million in care to people in need in 2016, including $546.4 million in unpaid portions of Medicaid and other indigent care programs for people who were uninsured or underinsured.

[Also: Payer mix among major challenges for Massachusetts community hospitals, study finds]

Mayo paid an additional $1.8 billion for the unpaid portion of Medicare services.

Mayo Clinic's policy does not affect emergency room care. By federal law, patients who show up in the ER must be treated.

The Republican repeal and replacement to the Affordable Care Act, the American Health Care Act, does away with Medicaid expansion, but does not help health systems which are expected to face increased numbers in uncompensated care should the law pass.

[Also: Mayo Clinic, Arizona State make quality and cost part of medical school curriculum]

The health system's uncompensated care costs associated with Medicaid patients has reportedly increased from $321 million in 2012 to $548 million in 2016.

Twitter: @SusanJMorse