Over the past few weeks, I have been speaking a great deal about health care reform and what the next few years are going to look like for doctors. Because I worked in managed care for 18 years, I have been inundated with questions from people who want to know how the payers are likely to react to health care reform. Every time I speak on this topic I am reminded of my favorite scene from the movie, Butch Cassidy and the Sundance Kid. In this scene, Robert Redford and Paul Newman are trapped on a cliff. A large group of men are shooting at them, and there appears to be no way out other than to jump off the cliff into the river far below. Newman’s character wants to jump, but Redford’s character argues that they should stay and shoot it out. After some discussion, Redford admits that he doesn’t want to jump because he can’t swim. Newman looks at Redford and says, “You can’t swim? You can’t swim? The fall is going to kill us!” So how does this memorable scene relate to health care reform? Well, whenever someone asks me about an aspect of health care reform, I always feel as if they are placing their focus completely on the wrong problem. Don’t get me wrong, health care reform is still a big issue, and it most certainly will have a significant impact on physicians over the next few years, but in my opinion, health care reform isn’t the problem we should be most worried about. It’s Medicare.
In my opinion, the “fall” so to speak is Medicare and the simple fact that we haven’t done anything substantial to dramatically fix the cost problem. When it comes to Medicare, we have what the politicians call “an unfunded mandate.” By most accounts, Medicare is predicted to go bankrupt sometime between the years 2015 and 2017. In his last testimony before Congress, Alan Greenspan warned that Medicare and Social Security presented the largest danger to the U.S. economy and urged Congress to address these two programs quickly -- before it is too late. So why hasn’t anything been done? Because let’s face it; unfortunately, it’s difficult to get elected or re-elected if you are in favor of doing anything that looks like you are cutting Medicare or Social Security benefits.
The recent health care reform legislation finances the expansion of coverage through a reported $500 billion in savings from Medicare. Part of that is directly from the reduction in payments for Medicare Advantage plans and the rest comes from various programs that supposed to reduce Medicare expenses but are not well defined.
There are only two possible scenarios for the future of Medicare under health care reform. The best case scenario is that the government assessments are correct and health care reform will find $500 billion in savings on the Medicare program. This would extend the life of the Medicare program and at the very least, delay the program’s demise. But while this may seem like a pretty good scenario, we must keep in mind that an expense or cost control by Medicare means a revenue reduction for someone in the provider community. So, if Medicare truly does reduce its expenses or cost structure, this must equate to a reduction in revenue to hospitals and physicians. What makes matters worse is that Medicare is likely to increase administrative expenses in the process. Just think about how much money hospitals and physicians are spending right now on coding and other programs to get ready for an RAC audit. Now add to that the increased costs you will face when Medicare adopts new cost savings programs like Pre-Certification for MRI’s and CT’s.
The second scenario, which in my opinion is more likely, is that Medicare will not reduce its costs as it was projected to. In this scenario, we get closer and closer to the financial breakdown of Medicare in 2015 or 2016 until something has to be done. The politicians will be faced with the decision of cutting Medicare benefits, increasing the age for qualification from 65 to 66 or 67 or reducing the fee schedules that are paid to doctors and hospitals. Which one do you think they will choose? They may even get tricky and try to disguise the payment reduction by coming up with some new payment mechanism. For example, they could decide to “bundle” the payments for an episode of care. If the payments for open heart surgery for the hospital, surgeon, cardiologist, and anesthesiologist all combined are $20,000, they could develop some new bundled payment methodology and reduce the payment to $15,000. Wait, that sounds familiar, doesn’t it? Yes, it sounds exactly like something I have heard of before. Oh yeah, it sounds just like the current discussions at Medicare regarding patient centered medical home and bundled payments.
The bottom line is this: nothing in the health care reform fixes the cost problem or the Medicare funding issues. Sooner or later, we are eventually going to have to make some very tough choices and decisions regarding Medicare, and our politicians in Washington don’t have a really good track record of being able to do that.
In the meantime, there are some important things you should be doing to ensure that your practice is able to survive the future of health care reform and Medicare. The advice I give to my clients is to run your practice more efficiently than you have ever done before. Make sure your revenue cycle is managed extremely well. Look for any way to drive out expenses and to increase revenues. Evaluate your managed care contracts and strategies, and develop a strategic plan that has contingencies for the possibilities that lie ahead. Doing all of this now and doing it well may make the difference between surviving the next few years...or not.
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