Be Prepared for Change in Reimbursement Models

While fee-for-service reimbursement has been a fairly straightforward business model - the more procedures a physician does, the more money he makes - it is not without its drawbacks. Practices are frustrated and confused when they hear about the annual threat to Medicare reimbursement rates. Both private and public payers are increasingly demanding reporting of quality metrics. And physicians have often been accused of driving up costs by prescribing unnecessary care.

Now, practices are being told that they need to join accountable care organizations (ACOs); merging with hospitals or other physician groups. So what do these changes mean for the future of private practice?

There are many different ideas that have been talked about for reimbursement changes in the future. These include a return to capitation (payment per member, per month - whether or not practices provide service); bundled payment (when services by several providers are paid to one source); and episodic payment (based upon the patient diagnosis - similar to surgery payments but applicable to all disease types).

So how will your practice morph into a new reimbursement/practice model and still ensure that it is paid adequately for services?

First, it is important not to panic. Changes in reimbursement will not occur in 2013 to any great extent. More importantly at this time it is necessary to consider the impact of meaningful use, Stage 1 and Stage 2, PQRS, and e-prescribe incentive payments which will have penalties for noncompliance through reductions in payments from Medicare.

Next, there are many steps that can be taken now to prepare for the future, whichever option is accepted:

• Understand what each reimbursement model means for your practice. Attend educational sessions, read, and learn from any source possible.

• Accept the fact that reimbursement amounts from any fee-for-service source will decrease; many practices have experienced this already and it most likely will get worse.

• Instead of concentrating totally on your revenue cycle, develop a way to understand what it costs your practice to provide services - from a basic office visit to a specialized procedure. This will become very important as options change from fee for service to total payments for a series of services.

• Look into the development of treatment plans for your most common diseases, e.g., diabetes care means quarterly HgbA1C and annual eye and foot exams. Ask yourself "What does it cost our practice to provide this care, and how much reimbursement is necessary to provide this service and maintain our patient population to the standard of care?" This episodic payment option may not cover all associated costs as currently defined.

• Develop a patient satisfaction survey program, which includes not only gathering the data but doing something with it. Medicare and payers may assist in sharing information they have gained from patients over the years.

• Communicate with your payers on what you are doing and how well you are doing it. Transparency and information sharing will assist in preparing for the future.

The key message here is that things will change for your practice. It will require some forward thinking on your part, not panicking today, but becoming aware of and preparing for the future, whatever that may bring.

Owen Dahl, FACHE, CHBC, is a nationally recognized medical practice management consultant and author of “Think Business! Medical Practice Quality, Efficiency, Profits,” “The Medical Practice Disaster Planning Workbook,” and coauthor of “Lean Six Sigma for the Medical Practice: Improving Profitability by Improving Processes.” He can be reached at odahl@owendahlconsulting.com or 281-367-3364.