The Hits Just Keep Coming!
In the fairy-tale world of the entertainment industry, each New Year brings a new round of movie and recording hits that provide opportunities for revenue growth. While this industry serves their purpose by creating laughter, tears, and joy, the real world is filled with longer workdays, leaner profit margins, and the continual search for operational efficiencies. In the today's world of Emergency Medicine, the New Year has brought more patients, administrative hassles, and the hits. Unfortunately, the hits I'm referring to are hits to your reimbursement that result in smaller budgets for Emergency Physician groups across the United States.
CMS and Congress so graciously decided to reduce physician pay for the calendar year 2002 by an average of 8%. The current reductions have been opposed, lobbied against, and condemned; however, the reality of lower reimbursement has hit home. While no physicians I have spoken with agree with the reductions, many have become more upset after we discuss the trickle-down effect. At first glance, the physicians thought they would be losing 8% on the 10-20% of patient volume that Medicare represents. However, the harsh reality occurs when these physicians review their Managed Care contracts and realize that the reimbursement of many other contracted payors is tied to the Medicare rate. I refer to this as the trickle-down effect.
Case Study
During a recent audit, I witnessed first hand the trickle-down effect current Medicare reductions are having on one emergency medicine practice. The same trickle-down effect could be happening to your practice. To fully understand, let's review a hypothetical emergency department situation.
Annual E.D. Volume: 30,000 Average Charge: $200 Average Collection: $78.50 Total Collections: $2,355,000 Payor Mix: Average Collection Medicare 6,000 (20%) $100 Medicaid 3,000 (10%) $25 Self Pay 7,500 (25%) $15 BC/BS 1,500 (5%) $120 Workers Comp. 1,500 (5%) $85 Commercial Ins. 1,500 (5%) $160 HMO 6,000 (20%) $110 PPO 3,000 (10%) $120
HMO contracts are reimbursed at 110% of current Medicare rates. PPO & BC/BS contracts are reimbursed at 120% of current Medicare rates.
Although the following assumptions are probably not totally realistic since each practice generally has some change from year to year, let's use them for the purposes of this case study. With the assumption that patient volume, acuity, socioeconomic mix, and fee schedule remain constant from 2001 to 2002, this emergency physician group stands to lose 8% of collections on 55% of their volume since their managed care contracts (HMO, PPO, BC/BS) were tied to current Medicare reimbursement rates. In real dollars, the 2002 net reduction in reimbursement for this emergency physician group is $4.80 per patient or $144,000! If you only focused your study on Medicare patients, this emergency physician group still loses $48,000. However, the real trickle-down effect resulted in an additional $96,000 in lost revenue. How much revenue has the 2002 Medicare reduction and corresponding potential trickle-down cost your group?
Short-Term Action Plan
In the short-term, I suggest that you immediately run the numbers to evaluate the potential financial impact to your group. Second, review the terms of your contracts with the various managed care plans. Third, contact your billing vendor to see if the Managed Care Plans have actually reduced their reimbursements to correspond with the Medicare reductions. Although many Managed Care contracts state that reimbursement will be a percentage of current Medicare rates, a good many Managed Care Plans either fail to institute the changes or make their adjustments several months down the road. Fourth, work with your billing vendor or business consultant to make certain that your physician group is properly documenting and billing all patient visits. Inadequate documentation is a leading cause of lost revenue. Additionally, your billing vendor or business consultant might have suggestions for legitimate billing opportunities that create revenue enhancement. Lastly, try to avoid signing managed care contracts where reimbursement that is tied to Medicare rates. Most of the information published by credible sources indicates that further reductions in Medicare rates are scheduled for the future and will likely be instituted. I would have to think that the executives of the Managed Care Plans are aware of this trend and will push for contracts to be tied to a percentage of Medicare reimbursement. I have noticed a real trend in this direction over the last few years.
Long-Term Action Plan
In my opinion, the long-term, Medicare reductions will force many primary care and specialist physicians out of the Medicare market. The end result will be greater volumes of Medicare patients without primary care or specialists to manage their health concerns, thus increased utilization of the Emergency Department for non-emergent situations. This situation should sound familiar because this models the evolution of the Medicaid program. In the interest of time, I won't even begin to address the numerous Medicaid issues as they relate to Emergency Medicine and the delivery of healthcare.
The long-term action plan for Emergency Physicians should include aggressive lobbying for your profession and the issues involving Emergency Medicine. Many of the other specialties such as Cardiology and Radiology have very impressive organizational and lobbying efforts for their issues. You need not look any further than the final ruling on billing for EKG & X-Ray interpretations. At the state and national level, several organizations that promote Emergency Medicine are actively lobbying for your cause. While these organizations do a wonderful job, the grass-roots effort is also very effective. Now is the time to become actively involved. Beyond joining and assisting one the local or national organizations, contact your state and local Congressional Representatives and Senators. These people need to be better educated on the issues that affect Emergency Medicine. The more these people are educated, the more likely they are to understand how EMTALA, HIPPA, and other issues financially impact emergency medicine. Remember that action rather than reaction is the best mechanism to institute change.
All Is Not Lost
While the changes in Emergency Medicine have been fast and furious over the last decade, all is not lost. The practice of Emergency Medicine continues to increase in importance as other specialties fail to deliver care to certain patient groups. As the gatekeepers, each of you has a tremendous opportunity to make a difference in the healthcare of America. As change is proposed and implemented, the efficiency and effectiveness of the business portion of your practice will become increasingly important. As stated in some of my previous articles, I strongly encourage each Emergency Physician to spend more time becoming involved in the business portion of your business. Don't get caught in the rut of merely wanting to work your shifts. The practice of Emergency Medicine has changed and will continue to change; therefore, it will become increasingly more difficult to maintain your current standard of living without committing yourself to understanding and participating in all aspects of your industry. The practice of Emergency Medicine is no different than the business world in the sense that we are tightening our belts and learning to operate more efficiently and effectively. As long as hospitals are open, there will be a need for quality emergency medical care. As you move forward, think of ways to parlay this increasing need for quality emergency medical care into advancement for the practice of emergency medicine.