I love this time of year. The busy holiday season has passed and soon the winter air will give way to warm spring afternoons. The only bad part about this time of year is the annual discussion about the Medicare SGR cuts. Each year for the past several years it seems like the same old story. The Sustainable Growth Rate projects massive cuts in Medicare payments to physicians. Physicians rally around the cry: "Fix the SGR!" Politicians do what they do best, which is grab some air time and make wonderful speeches blaming everyone else for this problem while doing nothing to actually solve it. The parties to be in Washington play Russian roulette with the January deadline and then, in the end, they kick the SGR can further down the road for another 6-12 months and things go back to normal again.
Now don't get me wrong; every year I hope against hope that someone in Washington will actually solve this silly problem once and for all. However, like any good realist, I am not betting any of my money that a solution will actually happen. I expect the same drama to play out once again this year.
What's really silly, in my opinion, is that most everyone knows the SGR is no longer a viable formula. It's the modern health care equivalent of saying the world is flat. Consider the following two pieces of information.
1) At Fulcrum Strategies, we looked at each of our clients to determine what the average impact of a 27% reduction in Medicare rates would have on physicians' salaries. Our clients range from primary care to medical and surgical specialties. Some are very large groups and others are small to medium sized groups. Grouping all of their data together produces a good cross section of the physician population in this country. Based on this data, the average physician would see a salary reduction of over $70,000 per year if the 27.4% SGR cut took effect in January of 2012. Can you imagine the backlash that would happen if the government picked any other profession and said they were going to increase their taxes by $70,000 per year per person? How much traction do you think the American Attorney Surtax Bill would get if it raised taxes on attorneys by $70,000 per year? What's the difference between taxing a profession and just reducing their revenue?
2) Another example of how silly the SGR has become is the rate of payment for an office visit. Under the new Medicare schedule, a new patient office visit would be paid at about $110. If we assume that a doctor can see about 1 new patient per hour, when you add in the time for charting etc., and if we assume that the average overhead is 50% for most practices, that means that Medicare thinks doctors should work for about $50 per hour. Right now the pharmacist at your local chain drug store makes more than $50 per hour and doesn't have the stress or risk of being a business owner. Is this what we really want? Do we really want the pharmacist who is filling the prescription to make more than the doctor who is actually writing the prescription?
So we all agree that the SGR will not be allowed to be implemented. We also agree that given the problems with the budget, it's not so easy to just remove the SGR and replace it with an annual cost of living adjustment. So what is Washington likely to do? Well, one hint may be the recent discussions at the Medical Payment Advisory Committee (MedPAC). In September, MedPAC considered a plan to replace the SGR with a 10 year fix. The fix would freeze payments to primary care physicians at 2011 levels for the next 10 years. Specialists would take a 5.9% cut for each of the next three years and then a freeze for the next 7 years. While this sounds much better than a 27% cut right now, it still spells the demise of Medicare in my opinion. Let's project this plan out 10 years and compare it to a very reasonable and conservative estimate of inflation. If we assume only a 2% inflation rate in physician costs for the next 10 years, then a 99213 office visit which is paid at $68.97 in 2011 should be reimbursed at $84.07 in the year 2021. Under the MedPAC suggested plan, this office visit code would still be paid at $68.97 for primary care physicians and $57.47 for specialists. This means that primary care physicians would have lost ground to inflation to the tune of 22% over 10 years, and specialists would have lost 46% to inflation. No business can survive when it falls that far behind to inflationary pressures. So ask yourself, how many physicians can and will continue to see Medicare members under those circumstances? One of our specialty clients asked what the impact would be if the 6% cut for the next three years that is recommended by MedPAC was implemented. Well, for that particular client, it would mean a physician compensation reduction of $15,000 per year for the next three years on Medicare alone. That is before practice cost inflation eats up even more of their revenue.
So what do we do with this wonderful picture of the future? Well, you could just shut off your computer and gaze out your window at the nice winter weather. If that doesn't help, then I would suggest building a plan to focus on what you can do to make up for this very real potential of a Medicare reimbursement reduction. Make your plan simple and focused. Make it something that you can use to achieve real results. I recommend starting with three major objectives:
1- REDUCE YOUR COSTS: Begin identifying where you can reduce costs. For example, can you renegotiate your lease for your office space and reduce your rent in exchange for adding a year or two to the lease? Can you refinance your debt and reduce your interest expense? Can you operate some part of your practice more efficiently? Identifying ways to reduce costs can help to prepare for the future.
2 - RENEGOTIATE YOUR CONTRACTS: Don't let a year go by without pushing for a raise from your commercial payers. Your employees demand a raise every year and so should you. If you need help with your contracts, please contact us (please visit our website, www.fsdoc.com, for our contact information). Our negotiators have more than 80 years of combined experience on the payer side. We are happy to review your group's data to determine if we can help.
3 - FIND NEW SOURCES OF REVENUE: Are there things you are outsourcing that could be done internally? Is there a profitable service you could offer to your patients? This type of diversification strategy can help offset reductions in other areas. Finding new and related sources of revenue can tremendously improve your practice's bottom line.
My best piece of advice for any physician group, large or small, is to focus on these three key objectives and try to get something done in each area. When you accomplish a task choose your next target and keep moving forward. Setting goals in each of these areas and focusing on achieving those goals will help your practice prepare for what is likely to happen. As always, if you need help in any of these areas, Fulcrum Strategies is here to help. Let us know how we can assist your practice in preparing for 2012 and beyond.
Now don't get me wrong; every year I hope against hope that someone in Washington will actually solve this silly problem once and for all. However, like any good realist, I am not betting any of my money that a solution will actually happen. I expect the same drama to play out once again this year.
What's really silly, in my opinion, is that most everyone knows the SGR is no longer a viable formula. It's the modern health care equivalent of saying the world is flat. Consider the following two pieces of information.
1) At Fulcrum Strategies, we looked at each of our clients to determine what the average impact of a 27% reduction in Medicare rates would have on physicians' salaries. Our clients range from primary care to medical and surgical specialties. Some are very large groups and others are small to medium sized groups. Grouping all of their data together produces a good cross section of the physician population in this country. Based on this data, the average physician would see a salary reduction of over $70,000 per year if the 27.4% SGR cut took effect in January of 2012. Can you imagine the backlash that would happen if the government picked any other profession and said they were going to increase their taxes by $70,000 per year per person? How much traction do you think the American Attorney Surtax Bill would get if it raised taxes on attorneys by $70,000 per year? What's the difference between taxing a profession and just reducing their revenue?
2) Another example of how silly the SGR has become is the rate of payment for an office visit. Under the new Medicare schedule, a new patient office visit would be paid at about $110. If we assume that a doctor can see about 1 new patient per hour, when you add in the time for charting etc., and if we assume that the average overhead is 50% for most practices, that means that Medicare thinks doctors should work for about $50 per hour. Right now the pharmacist at your local chain drug store makes more than $50 per hour and doesn't have the stress or risk of being a business owner. Is this what we really want? Do we really want the pharmacist who is filling the prescription to make more than the doctor who is actually writing the prescription?
So we all agree that the SGR will not be allowed to be implemented. We also agree that given the problems with the budget, it's not so easy to just remove the SGR and replace it with an annual cost of living adjustment. So what is Washington likely to do? Well, one hint may be the recent discussions at the Medical Payment Advisory Committee (MedPAC). In September, MedPAC considered a plan to replace the SGR with a 10 year fix. The fix would freeze payments to primary care physicians at 2011 levels for the next 10 years. Specialists would take a 5.9% cut for each of the next three years and then a freeze for the next 7 years. While this sounds much better than a 27% cut right now, it still spells the demise of Medicare in my opinion. Let's project this plan out 10 years and compare it to a very reasonable and conservative estimate of inflation. If we assume only a 2% inflation rate in physician costs for the next 10 years, then a 99213 office visit which is paid at $68.97 in 2011 should be reimbursed at $84.07 in the year 2021. Under the MedPAC suggested plan, this office visit code would still be paid at $68.97 for primary care physicians and $57.47 for specialists. This means that primary care physicians would have lost ground to inflation to the tune of 22% over 10 years, and specialists would have lost 46% to inflation. No business can survive when it falls that far behind to inflationary pressures. So ask yourself, how many physicians can and will continue to see Medicare members under those circumstances? One of our specialty clients asked what the impact would be if the 6% cut for the next three years that is recommended by MedPAC was implemented. Well, for that particular client, it would mean a physician compensation reduction of $15,000 per year for the next three years on Medicare alone. That is before practice cost inflation eats up even more of their revenue.
So what do we do with this wonderful picture of the future? Well, you could just shut off your computer and gaze out your window at the nice winter weather. If that doesn't help, then I would suggest building a plan to focus on what you can do to make up for this very real potential of a Medicare reimbursement reduction. Make your plan simple and focused. Make it something that you can use to achieve real results. I recommend starting with three major objectives:
1- REDUCE YOUR COSTS: Begin identifying where you can reduce costs. For example, can you renegotiate your lease for your office space and reduce your rent in exchange for adding a year or two to the lease? Can you refinance your debt and reduce your interest expense? Can you operate some part of your practice more efficiently? Identifying ways to reduce costs can help to prepare for the future.
2 - RENEGOTIATE YOUR CONTRACTS: Don't let a year go by without pushing for a raise from your commercial payers. Your employees demand a raise every year and so should you. If you need help with your contracts, please contact us (please visit our website, www.fsdoc.com, for our contact information). Our negotiators have more than 80 years of combined experience on the payer side. We are happy to review your group's data to determine if we can help.
3 - FIND NEW SOURCES OF REVENUE: Are there things you are outsourcing that could be done internally? Is there a profitable service you could offer to your patients? This type of diversification strategy can help offset reductions in other areas. Finding new and related sources of revenue can tremendously improve your practice's bottom line.
My best piece of advice for any physician group, large or small, is to focus on these three key objectives and try to get something done in each area. When you accomplish a task choose your next target and keep moving forward. Setting goals in each of these areas and focusing on achieving those goals will help your practice prepare for what is likely to happen. As always, if you need help in any of these areas, Fulcrum Strategies is here to help. Let us know how we can assist your practice in preparing for 2012 and beyond.
No comments:
Post a Comment