What Healthcare Reform Means to Physicians

The election is over, the Supreme Court has ruled, and healthcare reform is here to stay. While the bulk of the reform legislation dealt with insurance coverage, dramatic changes in how care is reimbursed are coming your way. In the weeks and months to come, I hope to address how these changes will impact physicians and what can be done to either benefit from or mitigate those impacts.

Passed in 2010, the Affordable Care Act (ACA) had two basic thrusts: 1.) to provide health insurance for those who couldn’t afford it or were unable to obtain it through their employers; and 2.) to reduce the overall cost of care, specifically Medicare. This second objective led to accountable care organizations (ACOs) and other experimental payment models under Medicare, but private insurers have also jumped on the bandwagon. It’s this portion of the legislation that will impact physicians the most.

What can physicians expect in the months and years ahead?

• Replacing “volume” with “value.” More will no longer be better. This is a major shift from the fee-for-service incentives that have been in place forever. Payers would like to move away from payments based on a per-visit or per-service basis and adopt a form of reimbursement that puts the provider at risk for delivering quality care in the most cost effective manner possible.

• Tracking and rewarding quality. Physicians have been reporting on quality measures for years through Medicare’s Physicians’ Quality Reporting System (PQRS). Until now, they’ve been paid for simply reporting data. Future payments will be based on meeting various quality metrics.

• Hospital employment of physicians will continue to expand. A 2011 survey of hospital executives found that more than 70 percent intend to expand their physician employment to position themselves for whatever initiatives result from the reform law and commercial payer initiatives.

• The focus of power will shift from hospitals to physicians as a result of the recognition of the physician’s role in coordinating care and making critical treatment decisions. The question is: “How can physicians capitalize on this shift and regain control over the entire care process?” This will require physicians to revisit networks of independent practices that will be very different from the messenger model IPAs of the 1980s. These organizations were designed solely to get high payments from insurance plans and quickly drew the attention of federal regulators.

• Both government and commercial payers will provide incentives for reducing care costs. Whether they’re called “shared savings” or “accountable care,” they will reward providers (hospitals and/or physicians) that bend the cost curve downward with a percentage of the savings. The Federal Trade Commission and the Department of Justice have been clear in how these programs must be structured to avoid anti-trust, anti-kickback, or other legal problems.

• Ultimately, there will be no savings to share as the lower cost of care becomes the norm and future reimbursement is based on those levels. Early adopters of the value philosophy are the ones who will benefit from the transition.

• Payers will set fixed amounts for high cost procedures that include physician, hospital, and ancillary services. This will be similar to diagnosis-related groups or DRGs. Providers will need to decide how those payments are divided.

As one speaker at a national ACO seminar recently observed, “The train has left the station, we’re just not sure where it’s going.” The shift to value is happening. Only the final form it will take is still in question. Those who wait to see where the journey will end risk being left out as both hospital- and physician-led organizations try to lock up control of large groups of patients and payers create more limited provider panels.

In the weeks ahead, I’ll explore each of these issues in more detail and offer some thoughts on how physicians can best position themselves to benefit from the changing incentives in care reimbursement. I welcome your questions and comments.

Greg Mertz, MBA, FACMPE,is managing director for Physician Strategies Group, LLC., where he specializes in improving the efficiency and bottom lines at both independent and hospital-owned physician practices. E-mail him here.