Planned cuts in payments to Tennessee physicians participating in TennCare could create a "nightmare" in terms of access for patients, providers in Chattanooga warn.

"When you start cutting payments back in a system that already has relatively low payments, it's going to have physicians thinking long and hard about whether they can participate," said Dr. Mack Worthington, a Chattanooga physician and past president of the Tennessee Medical Association.

Local pediatric surgeon Dr. Pete Kelley said about 65 percent of his patients are covered under TennCare, and cuts to his payments would force him to limit the number of patients he sees who are insured by the state's managed Medicaid program.

"If you decrease reimbursements and lose more physicians and then pour millions more patients into the system (through an expansion of Medicaid), it's going to be a nightmare," he said.

State lawmakers approved the cuts to the 2009-2010 budget this spring in response to budget shortfalls. But by using federal stimulus money, the reductions were delayed until the upcoming 2010-2011 budget that takes effect July 1.

Safety net hospitals such as Erlanger hospital in Chattanooga will be hit particularly hard through previously approved losses in funding to provide access to medical care for the indigent and a proposed cap on inpatient admissions, said Craig Becker, president of the Tennessee Hospital Association.

"This goes beyond hospitals being able to suck it up," he said. "It will certainly drive those hospitals that can get out of the TennCare program away from it and certainly really hurt some ... of our high-TennCare hospitals that are the safety net hospitals."

TennCare officials acknowledge that planned cuts in state payments to participating doctors and hospitals will put new "strains" on provider networks created by insurers to ensure adequate care across the state.

"I do believe it will strain the network to some extent," TennCare Director Darin Gordon told Gov. Phil Bredesen and state Finance Commissioner Dave Goetz this week. "That's something we'll have to work our way through."

But officials say it likely will be inevitable, given what Gov. Phil Bredesen himself warned could be a $1.5 billion gap in next year's budget.

If the cuts are made, some loss of doctors and hospitals is inevitable, Mr. Gordon said.

"Do I expect everyone that's in the provider network today to be there? No, I do not," he said.

Gov. Bredesen noted that current TennCare reimbursements to providers are above the national average.

Last January, the Tennessee Medical Association asked its members how they would react to compensation cuts from TennCare. Twenty percent of doctors told TMA they would terminate their participation in both TennCare managed care organizations, said Gary Zelizer, the association's director of government relations. About 31 percent said they would reduce the number of TennCare patients they see, he said.

INSURER'S RESPONSE

TennCare managed care companies would get hit first with reimbursement rate cuts, and those losses likely would be passed on to contracted providers.

In East Tennessee, enrollees use either Volunteer State Health Plan, a wholly owned subsidiary of BlueCross BlueShield of Tennessee, or AmeriChoice, a division of United Healthcare, to access their benefits.

BlueCross spokeswoman Mary Thompson said the insurer knows the recession is taking its toll on the state budget.

"Volunteer State Health Plan understands the budgetary issues faced by the state and has always tried to stretch TennCare funding to ensure efficient and effective operations," she said. "However, an initial review of these latest cuts indicates that (Volunteer State Health Plan) would need to pass along a reduction in funding to its TennCare network providers."

PLANNED CUTS

The General Assembly earlier this year approved the following TennCare cost-cutting measures for the current 2009-2010 budget year.

* Reducing TennCare provider reimbursements by 7 percent, from roughly 85 percent of Medicare charges to 78 percent

* Eliminating essential and critical access hospital payments, saving $110 million