How’s that for a cheery opening? In all seriousness, though, it’s not far from the truth. Just a few days ago, President Obama signed a bill that will delay any Medicare cuts from the SGR until 2012, giving physicians across the country a one year reprieve. I think we could all hear the collective sigh of relief that was released once physicians learned of the delay. So the big question now is what does this mean for physicians and what should they be doing in 2011?
First, you need to understand that no problem was solved by this act. Yes, Medicare is still insolvent and is still an unfunded mandate. The only thing that happened was that we put off the problem for another year. In essence, the government paid a loan with a credit card. The debt and the interest didn’t go away; it is just accumulating somewhere else and will need to be paid eventually. In addition to this, we have states across the country looking at Medicaid budgets and needing to cut expenses in that area. We have hospitals buying up practices to get ready for Medicare ACO’s, which is an idea that no one (including CMS) really knows much about or how it will work. Finally we have that little piece of legislation that got signed this time last year. Remember health care reform? Well, that gem just hit a snag when a judge in Virginia recently ruled one of the major components of the law, the individual mandate, to be unconstitutional. We await a ruling out of a court in Florida, and then will look for the various appeals until finally this legislation finds its way to the U.S. Supreme Court which will be the final step in its legal review. To say that physicians are facing uncertain times is quite the understatement.
Given all of this, my advice to physicians is to use this next year very wisely. We have one year to get our house in order, so to speak. It’s a little bit like what happens here in North Carolina during hurricane season when we start seeing that big storm looming out in the sea. We aren’t sure if we will get hit or how bad it will be, but we prepare anyway. Board up the windows; make sure you have batteries, food and water, and get ready to weather the storm. Physicians should be doing much the same over the next year.
The three biggest things practices should be doing in 2011 include: revenue, efficiency, and planning.
Revenue: Use this year to not only secure whatever revenue you can from your insurance contracts, but also to make sure the insurance companies can’t hit you with any arbitrary reductions. Make sure your contracts are not based on “current year Medicare” but rather a fixed year. Make sure the fee schedules are fixed and not based on a payer defined schedule. Make sure you understand what they can and can’t do to affect your revenue. Can a payer just decide to reduce payment for PA’s or other policy changes? Finally, make sure your billing and collecting department is doing everything to collect what you are owed. Keep a close eye on your bad debt, patient responsibility and denial rates. It’s important to note that in the future, we won’t have the luxury of writing things off because we can’t collect them.
Efficiency: It’s time for physician practices, both large and small, to do what every other business in a difficult economy has to do and that is become as efficient as possible. Efficiency doesn’t necessarily mean cutting staff, but rather, taking a very serious look at your expenses and overhead and making sure there is no waste. Even things like trying to renegotiate your office lease can help lower costs and increase efficiency. This is critical because the future in health care is not going to have the margin of error that is required for inefficient practices to survive.
Planning: I know I have talked about this in the past, but I will say it again. One of the biggest things, in my opinion, that has hurt physician practices is the lack of planning in the two to five year horizon. Most practices I work with don’t have a well-defined plan that outlines what they would do if something like the Medicare SGR cuts happened. Many practices don’t know what their financials or doctors’ salaries would look like if those cuts took place. Now that we have our reprieve for 2011, it’s a good time to start developing the planning models and financial tools to do this. Once you have developed the models and tools, it’s time to sit down and plan for the future. Is a growth strategy right for your practice, or should you get smaller? Should you sell to a hospital or merge with a competitor? What would you do if Medicare or your largest payer decided to cut your reimbursement by 10%, 20%, or even 30%? All of these things should be developed and decided before the end of 2011 so you are ready for 2012 and beyond.
It is my belief that the practices who use the next year wisely and plan for the possibilities that will most likely come in 2012 are the ones who are going to thrive and survive. Those who don’t are going to have a very rough time adapting to the inevitable changes that are coming in health care.
To end on a positive note, I would like to once again say thank you and happy holidays to all of our clients. It has been and remains my distinct pleasure and honor to work with all of you. The best thing about the work that we do here at Fulcrum is that every day we get to help dedicated, quality physicians. In some small way, we hope that we are helping you so that you can help your patients.
From the entire Fulcrum family, we thank you for the privilege of working with your practice.
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