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Top 5 financial challenges facing physicians in 2015
It shouldn’t be surprising that, in this constantly changing ecosystem, more practices are struggling to maintain financial homeostasis.
Medical Economics has compiled a list of the top challenges (and solutions) physicians may face in 2015. From that list, here are the five issues that focus on practice finances.
The complete Top 15 Challenges Facing Physicians in 2015
Challenge 1: Getting paid
The ACA's impact on physician reimbursement
Physicians find themselves under constant pressure to get paid for the work they do. Increasingly, those challenges will be tied to impact from the Affordable Care Act (ACA) and the how reimbursement models are shifting from the fee-for-service model to value-based payment models.
The challenges are likely to grow in 2015 for some of those who work with Medicare patients. Under the ACA, penalties for physicians who don’t participate in the Physician Quality Reporting System (PQRS) or aren’t deemed successful participants for the 2013 program year will face a 1.5 % penalty in Medicare payments in 2015 and 2% thereafter. In 2014, Medicare proposed that physicians not participating in PQRS in 2014 would face penalties in 2016.
Private insurers are also increasingly adopting value-based payment models. An October 2014 study by the Analysis Group showed that private insurers are quickly shifting to value-based payments and risk sharing. In 2011, 46% of respondents’ beneficiaries were involved in such payment programs. That figure rose to 62% in 2014 and was projected to increase to 75% by 2017.
Avoiding claim denials
While claim denials have been decreasing in the past few years, some experts believe the ACA will usher in an era of increased frequency of denied claims, so physicians are taking steps to avoid losing money from denials.
To avoid denied claims, practice owners find they need to immerse themselves in every minute detail to submit a “clean” claim. When Paul Sueno, MD, opened his practice, he discovered how quickly insurance companies would deny a submission based on even a small data entry error or a tiny discrepancy between his records and the insurer’s.
“These are simple things that seem so unbelievable-things like a hyphenated last name,” he says. “If the patient gives you an ID and says their last name is hyphenated and it’s not with the insurance company, that’s ground for denial. It’s an unbelievable amount of work that has to go in beforehand.”
Sueno’s practice now relies on a pre-billing checklist to prevent errors and has created a proprietary manual documenting the nuances of completing claims from every insurer its patients use. “Once a denial happens, your staff has to take up to 30 minutes to hours on end in a day to deal with that aspect,” Sueno says.
Despite his proactive approach, Sueno is now dealing with an appeal on a claim he filed about a month ago. “It’s time taken out of treating patients and trying to grow the practice,” he says.
In another case, the denial and appeals process became so frustrating that the patient asked Sueno if the treatment was worth it. “I had to call the medical staff at the insurance company to get a peer-to-peer authorization,” he says.
Leaving insurance behind
Some physicians have opted out of accepting insurance altogether to avoid the hassles and changes resulting from healthcare reform. Mary Ann Block, MD, a general practitioner in the Dallas-Fort Worth, Texas, area, accepted insurance during her first year in private practice but didn’t like having a third-party making decisions that affected her patients’ care. So 21 years ago, after returning from a one-year teaching stint, she decided not to accept insurance. She doesn’t work with Medicare and Medicaid patients, but says not all of her patients are wealthy. Patients often have insurance and submit claims on their own.
“People ask me why I don’t take insurance,” she says. “If I’m going to help you I need the freedom to spend time and do the testing that will help me find out what’s really wrong with you and not just give you a drug to cover up symptoms.”
Now, as she looks back at her decision, she has no regrets about a decision that has helped her avoid the insurance hassles with which many of her peers contend. “I’m as busy as I would want to be,” Block says. “In fact I’d like to find another doctor to come in with me. I need more help.”
Alexander J. Cummings, MD, a clinical assistant professor of surgery at the University of Illinois-Chicago and president-elect of his county medical society, spent two decades as an emergency department physician before opening an aesthetic and regenerative medicine practice in Peoria in 2014. While he does not accept insurance, some of his colleagues at the Peoria Medical Society face obstacles to getting paid. Some physicians he knows are living paycheck to paycheck.
“If the federal government was interested in bringing down the cost of health, it should have focused on regulations, bureaucracy, paperwork and tort reform,” he says. “That would help cut back healthcare costs where we can safely cut back.”
Challenge 2: Maintenance of certification
Why the MOC debate is just beginning
The controversy surrounding the American Board of Internal Medicine’s (ABIM) Maintenance of Certification (MOC) program is extensive, and it’s a challenge that will certainly follow physicians into 2015. ABIM has faced significant backlash from physicians and advocate groups over MOC’s cost and time requirements. For family physicians, the application fee alone can range from $1,300 to $1,500.
The ABIM and other MOC proponents say that the program is necessary to ensure that physicians maintain their medical knowledge. However, some primary care physicians argue that the test material often is not applicable to typical occurrences within their specialty.
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“It is essentially a sub-specialist created test that quizzes generalists by repeatedly asking them to make decisions after reviewing cardiac catheter data or viewing renal biopsies. These are responsibilities and decisions that simply do not exist in the real medical world of the primary care physician,” David C. Sobel, MD, FACP, wrote in a letter to Medical Economics. “It not only makes the entire experience useless but in reality for an office-based generalist invalidates any conclusions regarding physician competence or quality of care.”
The ABIM released changes to the accreditation process at the beginning of 2014, and nearly 20,000 physicians signed a petition calling for those changes to be rescinded.
“Board certification is intended to serve both the public and our diplomates. Physicians rightly have expectations for a credential that recognizes their ongoing efforts to keep up in the specialty, but they also want it to be relevant and reflect what they do in practice,” said Richard J. Baron, MD, ABIM president and chief executive officer. “We are listening to the feedback we have received from the community about changes to our program, but at the same time the public is seeking a way to know that their doctor is ‘keeping up in their field’. Maintaining one’s certification is one means by which that need can be fulfilled.”
Another point of contention is that the ABIM publishes physician certification statuses on its website as either “meeting” or “not meeting” MOC requirements. The ABIM said it would revisit this policy.
“The [ABIM] agreed that the current language used for reporting whether or not ABIM Board Certified physicians are meeting requirements in ABIM’s new [MOC] program is causing legitimate confusion because many physicians hold some certificates which are grandfathered, or “lifetime” certificates. These physicians are encouraged but not required to participate in MOC for those certifications,” the ABIM announced.
In June, the American Medical Association’s House of Delegates voted to assess the feasibility of conducting an impact study on MOC’s impact on the medical professional and patient outcomes.
The American College of Physicians’ (ACP) Board of Regents issued this MOC policy statement in October:
“ACP does not support using participation in MOC as an absolute prerequisite for state licensure, hospital credentialing, or insurer credentialing. Instead, decisions about licensure and credentialing should be based on the physician’s performance in his or her practice setting and a broader set of criteria for assessing competence, professionalism, commitment to continuous professional development, and quality of care provided.”
To help physicians understand the program’s requirements and prepare for their examinations, the ACP has developed an interactive tool called the ACP MOC Navigator, which is available on the ACP website.
Challenge 3: Collecting co-pays and deductibles
ACA exchange plans place financial stress on physicians
Collecting on co-pays and deductibles has always been a challenge for physicians, but new plans created under the Affordable Care Act (ACA) have the potential to add to that burden in 2015.
Patients who sign up for plans under the ACA have a 90-day window within which to pay premiums. The American Medical Association (AMA) and other physician advocate groups warn that physicians can get stuck with bills from enrollees who take advantage of medical services during that time but then fail to pay premiums.
MORE COVERAGE: Top 6 practice management challenges physicians face in 2015
About eight million Americans purchased new health insurance plans through state exchanges or the federal marketplace site, Healthcare
.gov, during the ACA’s first enrollment period, which ended March 31, 2014, according to The Commonwealth Fund. About 67% of those enrollees had paid their premiums by April 15, 2014, according to responses from insurance companies gathered by the U.S. House of Representatives Energy and Commerce committee.
Many ACA plans have higher deductibles and co-pays than existing commercial plans. As a result, those plans could increase the provider collection burden as more patients purchase and use them.
The AMA, which opposes the 90-day grace period provision, has developed resources to help physicians avoid getting stuck with unpaid bills.
It offers a step-by-step guide to the ACA grace period as well as a grace period collections policy checklist, model financial agreement language for patients receiving Advance Premium Tax Credits, and a sample letter for patients about the grace period. The AMA also encourages providers to verify insurance eligibility before a patient’s visit and to document the information.
Physicians also should collect co-payments at the time of service and widen the window for payment options to include online and mobile payment processing, and to schedule automated and recurring payment plans that collect from credit/debit cards or directly from bank accounts.
The talk about cost needs to happen as early as possible in the patient-contact process, at pre-registration and maybe before they set foot in the office, says Nate Davis, MBA, product manager with ZirMed, a healthcare information technology and management company in Louisville, Kentucky.
“There needs to be internal training and education with staff about how to communicate upfront payments. Plus, there are plenty of payment plans possible that will work with patients with high-deductible plans,” says Davis.
The fear among physicians, Davis adds, is that patients will spend more time talking about money than healthcare, and doctors just don’t want to be the ones to have the conversation.
“Remind your patients to keep all of their paperwork and receipts from all of their doctor’s appointments and from the pharmacy as well,” Reed Tinsley, CPA, a healthcare consultant in Houston, Texas, told Medical Economics.
“They may need them for their insurer. Remind them they should carry their card at all times. If they don’t have a card, they can contact their plan to get a card,” he adds.
While claim denials have the potential to disrupt payments and strain physician practices, AMA research shows that claims denials have been dropping in recent years, down 47% in 2013 after a sharp increase in 2012 among most commercial health insurers. Some industry analysts speculate that claim denials may increase in the future because of ACA influence, but that trend has yet to materialize.
Physicians also face payer challenges from government agencies, including Medicaid. Medicaid often takes the longest to pay claims, and the federal/state program also has the highest claims denial rate. Medicaid has historically performed worse than commercial health plans and Medicare on key metrics such as days in accounts receivable, denial rates, and electronic remittance advice transparency.
With large numbers of newly-insured Medicaid patients entering the market, physicians must be careful to safeguard themselves against Medicaid claim denials, notes the report.
Denials due to ICD-10 coding errors are also a concern for 2015. Laura Palmer, a senior industry analyst with the Medical Group Management Association, predicts a spike in claims denials after ICD-10 is implemented on Oct. 1, 2015.
“I would expect to see a multitude of denied charges for coding and billing errors when the industry changes to ICD-10,” she says. “When diagnosis codes change to more specific coding, there may be mismatches with medical necessity and provider payment guidelines. Payers have not changed or may not have released their payment determinations for the new codes.”
The Centers for Medicare and Medicaid Services has warned that denial rates could increase 100% to 200% in the early stages of ICD-10 implementation unless practices get proper training.
Challenge 4: Rising operational costs
Why practice costs keep climbing
There is no denying the cost of running a practice is going up. Climbing overhead has hurt profits. Perhaps it shouldn’t be surprising that, in this constantly changing ecosystem, more practices are struggling to maintain financial homeostasis. More than 84% of physicians surveyed by Medical Economics said their practices are doing the same or worse financially than a year ago, according to the 2014 Medical Economics Physician Practice Survey.
Dealing with rising costs was also the top daily challenge for medical practice executives in an August 2013 survey by the Medical Group Management Association (MGMA). Research by the group showed that the cost of running a practice had increased twice as fast as the consumer price index during the previous 11 years.
Staff and technology costs
Complaints about mounting overhead come as no surprise to Los Angeles, California-based healthcare attorney Mark Weiss, who represents both hospital-based and office-based physicians’ practices. He often helps owners sell their medical practices.
“In general terms, my clients are seeing increasing operating costs,” says Weiss. “The office practice doctors are seeing increasing rent, increasing rates for malpractice insurance and for directors and officers liability coverage, and higher health insurance costs in connection with their own staff.”
Personnel costs, which have increased in recent years, are likely to keep rising. Competition with hospitals for employees has driven up wages, according to MGMA. “It is not so much with physician staff but with non-physician staff, with nurses, that they are seeing higher compensation expectations,” says Weiss. Statistics back this up. The Clinical Advisor, a trade publication, found that the average salary among nurse practitioners was $94.881 for 2014. In 2011, by comparison, average nurse practitioners’ salaries ranged from $75,556 to $90,114.
Florence Comite, MD, the sole physician in a 16-employee endocrinology practice in New York, New York, is feeling the pinch of higher overhead in her practice. “The cost of employees has gone up. The cost of coverage for healthcare has gone up,” she says.
Steeper regulatory challenges have also added to physicians’ overhead:
Challenge 1: Because of requirements of the Affordable Care Act, 49% of physicians reported seeing profits at their practice dip, according to the Practice Profitability Index.
Challenge 2: ICD-10, the new, more complex medical coding system, is resulting in more software and training costs to practices. In a September 2014 survey conducted on behalf of The Physicians Foundation by physician research and consulting firm Merritt Hawkins, 50.1% of respondents said ICD-10 would cause severe administrative problems for their practices, and 38.3% said it would expose physicians to liabilities and penalties.
Challenge 3: Most physicians (85%) have transitioned to electronic health records to comply with meaningful use, according to The Physicians Foundation survey, compared with 69% in 2012. This isn’t cheap. Published statistics from the Michigan Center for Effective IT Adoption says the average five-year total cost of an in-office system is $48,000. For a cloud-based system, it’s $58,000.These costs are in addition to the bite into productivity that many physicians cite. In a recent survey by Medical Economics and market research firm MPI Group, nearly 70% of physicians said the transition to EHRs was not worth it and they would not purchase their systems again because of poor functionality and higher costs.
The Health Insurance Portability and Accountability Act (HIPAA), designed to safeguard patients’ privacy, poses increasing challenges-and costs-for practices as more records are digitalized. Weiss represents several large practices that need to draft HIPAA business associate agreements with vendors-which means additional and higher legal bills.
“It’s a much bigger job for their lawyers and own compliance people than it ever was before,” Weiss says. “It’s a whole level of compliance expenses. These aren’t investments-they are really expenses.”
And more old-fashioned paperwork for physicians, too. “We are bombarded with requests for record release,” says Comite, whose team spends considerable time copying, collating and checking these files. “This is a cost you could impose on a patient, but you don’t want to.”
Make overhead costs work for you
When faced with this assortment of escalating costs, a common reaction is to slash overhead expenses, but there is only so far a practice can cut and still achieve the aims of quality patient care.
There are strategies that physicians and practice managers can use to put overhead expenses to work generating revenue, including better use of non-physician providers, expanding hours to increase productivity by providing greater convenience to patients, and leveraging technology to reduce inefficiencies and time waste.
“So if you’re looking to save the world or save a practice by cutting costs, pretty soon you’re cutting muscle, and then you’re reducing productivity,” says Marc D. Halley, MBA, president and chief executive officer of Halley Consulting Group. “Where you win or lose the game in a medical practice is on the revenue side of the balance sheet.”
Challenge 5: Pay for performance
The shift to value-based payment continues
The drive to shift the nation’s healthcare system away from fee-for-service and towards rewarding quality and outcomes will pick up steam in 2015, posing challenges for primary care physicians.
The latest phase of the push to reward quality will be the imposition of payment adjustments-financial penalties-for not reporting Physician Quality Reporting System (PQRS) data to the Centers for Medicare and Medicaid Services (CMS). Beginning next year, practices that had not reported PQRS data in 2013 will be docked 1.5% in their Medicare reimbursements. That amount rises to 2% in 2016.
In addition, under CMS’ Value-based Modifier Program, Medicare reimbursements for group practices consisting of 100 or more eligible professionals (EPs) by 2013 will decrease by an additional 1%. The adjustments will extend to practices with EPs of 10 or more, then to all EPs, in 2016 and 2017, respectively.
Meanwhile, public and private payers alike continue to look for, and experiment with, alternatives to fee-for service medicine-largely in the form of shared savings programs. Under such a program, providers band together to form an accountable care organization (ACO) and contract with a payer to provide care to a designated patient population during a set time period while meeting agreed-upon quality and cost benchmarks.
The problem for independent practitioners is that participating in, and benefitting from, alternatives to the standard fee-for-service payment model generally requires spending money upfront. Being part of an ACO, for example, often requires adding staff, such as case managers and care coordinators.
“In order to be part of an ACO you’ve got to have the wherewithal…and know what this is all about in the first place,” says David Zetter, PHR, CHBC, principal of Zetter HealthCare Management Consultants. “And most smaller practices these days are struggling just to keep their doors open.”
It’s also unclear whether being part of an ACO is the right move, especially since the performance of many of the ACOs in various government initiatives has been lackluster. For example, the Pioneer ACO program’s results from its first two years show that while some of the participating ACOs have saved money, others have actually increased their costs. Meanwhile, participants in the program continue to drop out. One recent dropout called the Pioneer program “financially detrimental.”
Benefitting from a pay-for-performance model also requires the ability to collect patient data so that the provider can monitor outcomes, notes Reed Tinsley, CPA, a Houston-based practice consultant. “There is always more money behind knowing the clinical outcomes and data,” he says. “A lot of doctors are saving payers money and not getting a piece of the pie.”
Some health policy analysts believe that the first step in moving away from fee-for-service will come in the form of hybrid, or blended, payment methods that combine fee-for-service with some type of pay for performance method. And while hybrid approaches sound good in theory, they have yet to show that they can help doctors transition to a reimbursement system based only on quality.
“The resistance is because most of these models are really not designed to provide the capabilities for physicians to actually succeed,” says Harold Miller, president and chief executive officer of the Center for Healthcare Quality and Payment Reform. “It has to be the right amount of money, delivered in the right way, with the right information, and the right accountability standards.
