In current environment, you must be vigilant about what patients owe and their ability to pay.
The skyrocketing cost of health care, health care reform, shared savings, hospital-employed physicians, and Medicare “going broke” have dominated recent headlines. For every physician, the economic downturn, insurance payment reform, and increased patient responsibility for payment have contributed to shrinking margins for years. Many practices have been able to maintain physician income by increasing work hours and/or extending the services they provide. Others have already seen a decline in income.
The current trends, if allowed to continue, will change the practice of medicine as we know it, even for employed physicians. In this article, we provide an overview of the current macroeconomics of health care, how they affect practicing urologists, and what steps you can take now to ensure you receive a fair share of the health care dollar.
Cost shifting has been a major concern for health insurance companies for many years. Hospitals have used cost shifting to remain viable but this is not as easy for physicians to do under the current payment rules. Private insurers pay only what they have contracted to pay, and Medicare pays only what it has determined each individual service is worth. When you provide a service for a patient and are not paid for it, that is lost income. The time has come for every patient to be covered by insurance or have the financial capability to pay for services. Fortunately, most physicians continue to provide “charity” care. However, we deserve to know the truth upfront, allowing us to make choices about such care.
Three realities have come and gone since I (Dr. Painter) started my practice: Large insurers like Blue Cross and Blue Shield and Medicare paid well enough that some care could be provided free or at a discount; patients were honest about what they could or could not pay; and the fee schedule was set a level that was fair.
Today, however, you can no longer afford to provide the same amount of care without pay. Private and government payers have cut your pay for each service considerably. Payers have increased both the number and complexity of payment rules to block payment for additional services and have increased their post-payment review programs. Physician fee schedules have been adjusted to the highest payer, requiring large adjustments to charges when payments are posted. Health insurance policies have been adjusted to require patients to pay a significantly higher contribution for services, forcing physician offices to become directly involved in patient collections, including for those with insurance.
Increase in dishonest patients
The number of patients who are not honest about their ability to pay has increased dramatically, a result of their economic condition and years of health care that were fully covered or required only a small co-payment. These patients have grown in number as well as sophistication, finding creative ways to avoid payment.
On the other side of the coin are honest patients who cannot afford treatment or insurance, cannot pay for services rendered, or do not seek needed care because they know they will be unable to pay. Unfortunately, the freeloader forces physicians to be skeptical of all patients who claim they cannot pay. In either case, the lack of insurance or the inability to pay for services interferes with the physician/patient relationship and needed treatment.
The macroeconomic argument for health care today is that regardless of who pays—the insurance company, the patient, or the health care provider (through charity work)—all services provided are “paid for.” The number of services required is projected to increase as the baby boomers age; however, concomitant growth in the U.S. economy is not anticipated. In other words, the future is projected to require more services, but the money in the system is projected to remain the same or decline.
Under the current system, hospitals have the ability to shift most of the cost of care for those services that are not paid for by insurance or by the patient to subsidized programs such as Medicare or Medicaid. Pharmaceutical companies are paid for their products by others and are not exposed to this risk. Patients may have access to health care insurance but may find the cost too expensive and choose to go without or self-insure. Those who have insurance are shouldering an increased cost burden of care received due to changes in benefits packages. Physicians are in the unenviable position of providing care and relying on their insurance contracts and the patient to receive payment for the services they provide.
Under our current system, the practice can focus on profit margins across the practice as a whole, using projected charity care and bad debt as a negative offset to profit margins received for care that is paid in full or in part. Marketing can be focused on plans and patients that are more likely to pay for services, leaving those less likely to pay for care to others. Fortunately for the poor, most physicians refuse to allow a patient in need to go untreated.
Actions to take now
Physicians must become more aware of all patients and the payments for which they are responsible. The office needs to employ the tools available to determine patient payments and should adjust fees to realistic and expected amounts. If current economic trends continue, the urology office may have to turn patients away or refuse to provide care in certain situation.
The office will need to lobby for tighter regulations with regard to coverage limitation disclosures and added protection from the freeloader. Ask your payers for help in determining which patients have coverage and the amounts patients are responsible for paying prior to providing the service by increasing your electronic access to patient benefits and deductibles. Attempt to require the payer by contract to provide more accurate assurance that the conditions of coverage and payment will not change after the service is provided.
Consequences of mandated coverage
If the system is changed to mandate coverage for all patients, the game changes. The expectation under a mandated coverage system is that every patient will have some type of insurance. With all patients covered, the amount the patient is required to pay and the amount due to the provider will likely be fixed by contract or the system as a whole. The macroeconomic perspective for this system reflects a low or non-existent risk of non-payment for individual services, which will eliminate the need for the provider to pay for services under charity care. Under this type of system, the amount paid for each service will likely be lower and consistent across the majority of payers. The consistency of payment may lower the administrative burden and ease the physician/patient interaction.
Under a mandated coverage system, the physician will need to focus on the margin at the service level. If the system guarantees payment for every service at a lower rate, the office must determine what services it can provide at a profit. Marketing can now be expanded to all patients without regard to income level, creating a greater potential market base. And the discussion with the patient about cost will likely once again become secondary. Physician-directed lobbying efforts will need to continue to focus on amount paid per service level and the types of services that will be paid.
Business planning under a mandated system could be a bit easier from a projection standpoint if rates are set. (This stability, of course, would require that rates for each year are not subject to the same ridiculous formula and legislative tinkering that Medicare currently uses to establish fees.)
Regardless of the system that is adopted, the challenges for the physician practice in today’s market are of significant concern. There are many related issues (beyond the scope of this article) presented by the additional burden of electronic health records, changing diagnosis codes, and increased focus on service limitations for medical necessity in each of these system environments.
While the news is not uplifting, the reality is that many businesses outside of health care face similar challenges and are surviving. It will take planning and quick reaction to survive, but if we have learned one thing over the years, it’s that urologists are smart and innovative. Solutions are out there.
