The affects of multi-year physician reimbursement reductions on urologists is growing more insidious with no end in site. Medicare, the dominant payer in physician reimbursements, is the primary culprit. As the country’s largest payer, Medicare’s price controls become benchmarks for other insurance payers who are quick to join in reducing physician payments. Medicare reimbursements to physicians have been price controlled since 1992. In the not to distant past, practice operating margins were more lucrative, affording urologists the luxury of inflation adjusted incomes. Few would argue that era has ended. Absorbing annual freezes in Medicare reimbursements while overhead expenses (costs of providing care and services) continue escalating. This results in net declines for most offices. Many physicians are now facing serious financial problems. As we all know from Economics 101, physicians cannot provide care and services at a loss and make up the difference in volume.
The American Medical Association has lobbied to fix the physician fee schedule formula for updates to at least keep up with inflation. However, the results of the lobbying to date have been to maintain existing Medicare physician reimbursements levels. For urologists, no increase is a negative and equates to approximately the same reimbursement levels seen in 2001. Without Congressional intervention, physicians face a scheduled 10 % reduction in Medicare payments effective January, 2008 with additional reductions through the year 2016. Successfully meeting the challenges of tomorrow’s urology practice will, for many, require significant change. The average physician’s office has responded to the recent Medicare fee schedule freezes with increased production. Physician income levels have been declining for some time and the benefits of increasing volume will stabilize without new opportunities. New service lines and profitable revenues are required to offset declining incomes.
Medical costs for users (physicians are also purchasers of health care coverage) continue rising along with soaring employer benefit costs and a growing reluctance to maintain funding. For many urologists, the prospect of accepting smaller income levels to maintain current practice cost structure is not attractive, and few will agree to work the same or more for less income. At a minimum, succeeding in this environment requires urologists to pay closer attention to business fundamentals in their practice.
The good news moving forward is that there will be no shortage of patients relative to the number of urologists. With the exception of some rural areas and some new physicians, most urology practices have plenty of patients today. These numbers, coupled with the increasing elderly population, bode for the long term future of urology.
The limitation of time is an issue that will not change. Therefore, the ability to increase patient services will require more than simply increasing the number of hours worked and compressing patient visits, because they will eventually reach a limit.
This leaves several potential business solutions:
1) Increase the number of services that still contain profit. The profit per service depends upon the cost to reimbursement ratio. Time in office, supplies, administrative costs, provider costs and hard equipment costs vs. the current reimbursement will need to be analyzed to determine the best practice mix. Of course demographics of the population served and competition in the marketplace will affect the probability of service mix control.
2) Cut cost of service provision. Cost cutting while maintaining quality is difficult but essential to all businesses. As a practice looks at cost control, one must consider both the short and long term impacts. In today’s market, technology continues to decrease in cost while salaries to staff continues to increase. Therefore, it may be beneficial to an office to increase short term costs with investment in automation to reduce the long term costs and increase production capacity. This undertaking is never comfortable and will likely result in a culture change for the practice. Strong leadership and careful planning are both essential for maintaining functionality during cost cutting transitions.
3) Add ancillary clinical personnel. If available, clinical staff can increase production with lower costs by the provision of more services to more people and using personnel that cost less. Physician assistants and nurse practitioners add benefits but cost more than other clinical personnel. The right mix for each practice will have to be measured carefully.
4) Collection policies and procedures must be enforceable and understood. The market is moving more of the payment responsibility to the patient. Insurance company rules are becoming increasing complex. Both of these issues will require the practice to develop systems and personnel expertise to maximize cash inflow for the practice. Offices are implementing pre-service collections, aggressive appeals, and strict post service payment protocols for the patient. The success of the practice will depend upon collecting for services provided.
5) Develop and maintain coding and compliance protocols. Accurate coding is required for maximum revenue generation. With “Pay for Performance” and increased payer rules, coding will continue to be a deciding factor in success. Compliance translates to Standard Operating Procedures and analysis with functioning audits to determine if services are provided without charge or without appropriate charge reporting.
All of these actions require careful upfront planning and ongoing execution. The first step to a more profitable practice is the development of workable business plan. Remember that perfect is the enemy of the good. A business plan is always a living document that will require ongoing attention and adjustment. Your practice is a provider of health care, but it is also a business.
Business Case Analysis I: Working Smarter (Medicare Rates FL 2007)
New Patient: 99203: $83.48
99204: $128.40
+ $43.92
Established Patient: 99213: $54.33
99214: $82.43
+$28.10
Patient Consult: 99243: $112.52
99244: $165.09
+ $52.57
On the surface, the increases appears minimal, but the results in volume are far different. Most urologists are doing the work but may not be coding accurately.<br />
Increase E&M level 3 to 4
Increase 100 pts 200pts 300pts
New PT $43.92 $4,392 $8,784 $13,176
Established PT $28.10 $2,810 $5,620 $8,430
PT Consult $52.57 $5,257 $10,514 $15,771
For many urologists, the basic concepts of good business are not new. However, when viewed analytically, issues can be quite dramatic. Considering the magnitude of change confronting physicians, adhering to basic business practices should be step
