Outlook 2003: Decreasing Reimbursement
I want to take this time to wish everyone a Happy New Year. Now that the hustle and bustle of the holiday season has come and gone for another year, let's get focused on the reimbursement outlook for 2003. In the first article of each year, I have to pause for a moment because I feel as though I am beginning to sound like a broken record. The Grench who stole the Christmas of 2002 appears to have brought Emergency Medicine the same undesired gift as in 2001, potentially lower reimbursement. I often wonder how many more financial setbacks our industry can absorb before the safety net of the Healthcare System breaks down? To quote Morgan Freeman from one of my favorite movies, The Shawshank Redemption, “You can either get busy living or get busy dying”.
As most of you know, CMS has planned a 4.4% Medicare reimbursement reduction for 2003. While the implementation of this reduction was delayed until March 1, 2003 due to political wrangling, the ramifications could be large for many practices. Last week, we received our fee schedule from our local Medicare Carrier, Blue Cross and Blue Shield of Arkansas. The result for E.D. evaluation and management codes was a 4.5% reimbursement reduction. With the Medicare reduction of 2003, you should also look to see some fairly predictable trickle-down effects.
Trickle-Down Effects
In reviewing the potential trickle-down effects, let's first look at the positive. As Medicare continues to decrease reimbursement, many other specialist providers in private practice are opting out of Medicare. This means that our Emergency Departments will probably see increased patient volume from acutely ill patients with multiple illnesses. The end result will be more long patient workups and the potential of increased patient turnaround times. Knowing that this trickle-down effect will likely evolve, the real challenge in managing your practice is the absorption of additional volume in a cost-effective manner. If you are fortunate enough to have a practice with extra capacity, you can welcome the volume increases without much strategy. However, most Emergency Departments are operating on the minimum staffing to survive, thus additional staffing may be warranted. When evaluating your staffing options, keep an open mind to the use of mid-level providers to operate your fast-track units or evaluate low acuity patients. Mid-level practitioners are a good economical option since their average hourly wage ranges from $35-60 per hour. The one financial setback with mid-level practitioners is the 15% reduction in Medicare payments for their services; however, they are still generally a good financial choice. As the utilization of mid-level practitioners expands in Emergency Medicine, we must keep an eye on reimbursement by other payors such as Medicaid, HMO's, and PPO's. Some of these plans have already lowered reimbursement on mid-level providers by 15-25%; however, the cost differential usually outweighs the decrease in their reimbursement on the lower acuity patients.
Trickle-down effect number two is associated with managed care. Many of the Emergency Physician contracts I have reviewed provide for reimbursement that is a based on a percentage of Medicare. If your contracts are based on a percentage of the most current Medicare rates, you potentially will see a decrease in managed care plan reimbursement. I recommend that you try to avoid contracts that are a percentage of the current year Medicare reimbursement rates due to the uncertainty of future Medicare reimbursement. Try to negotiate rates based on other factors such as percentage of billed charges, flat-rate for each patient, or predetermined rates for each CPT that will tied to Medicare rates.
Lastly, many states are experiencing a severe budget crisis. Due to the large sum of dollars allocated, the Medicaid programs in many states are the unfortunate targets for budget reductions. Although many of these programs are poorly managed and filled with waste, Medicaid cuts usually result in reduced reimbursement to providers and/or reduction in the number of people eligible for Medicaid benefits. As the safety net for the healthcare system, Emergency Physicians tend to treat a disproportionate share of the Medicaid population. Keep an eye on the budget cuts in your home state. Further Medicaid cuts via reduced eligibility or reimbursement will impact your practice.
Maintaining your reimbursement is now and will forever be a constant battle. It is critical to thoroughly evaluate their practice on an annual basis. Evaluate your physician productivity, documentation, staffing models, compensation model, billing and coding vendor, managed care plan agreements, and lobbying efforts. In the next issue we will look further at the results of lobbying efforts.
As I was concluding this article, I received an email update from Part B News stating that Ways & Means Chairman Bill Thomas ((R-CA.) has sponsored legislation that could potentially halt the proposed Medicare cuts of 2003. Keep your ear to the ground.