New Medicare Reimbursement Changes Will Force Doctors to Learn a New Skill: Business

It’s getting harder to be a mid-sized physician practice.

Three themes were apparent at this week’s annual meeting of the Medical Group Management Association in San Francisco. One, doctors need to keep patients happy. Two, major regulatory changes are on the horizon that will affect how they get paid. And three, more group practices are losing their independence.

The Centers for Medicare & Medicaid Services this year made one of the most sweeping overhauls to physician reimbursement in recent memory. The federal agency made a clear statement that it wants to do away with the focus on “billable” procedures (a payment model commonly known as “fee for service”) and instead move to a fixed payment model where doctors receive a set fee for taking care of a group of patients.

If doctors spend less than that amount—and meet certain quality metrics—then they’ll share in the savings with the government. If they don’t meet those goals, they’re on the hook for a percentage of their revenue.

In order to be successful, doctors will need to make certain changes to how they practice. They’ll need to find ways to motivate patients to hold down their own healthcare costs. They’ll need access to data to track which patients are behind on preventative care and who’s at risk for a hospital admission. And they’ll need to find ways to cut costs where they can to make up for the massive investment in technology that’s required.

Although the government is leading the charge, most commercial insurance companies are following suit.

“Really what physicians want is autonomy. They believe if they just engage in the patient care they’ll get back that autonomy. But only by learning the business do you get back that autonomy.”

Mid-sized physician practices—those that have between 10 and 75 doctors—are under the greatest pressure, said Dr. Halee Fischer-Wright, president of the MGMA, in an interview with LinkedIn. They aren’t large enough to benefit from economies of scale but they’re too big to qualify for any special exemptions under the new legislation.

They’re also the ones most likely to consider merging with or being acquired by another practice, she said.

At #MGMA16, there were a number of sessions on how to prepare for an acquisition. There were also sessions on how to maintain independence.

Insurance company Humana was onsite promoting its new management services organization, Transcend, as a way for doctors to maintain their autonomy. The business unit offers tools to doctors like data analytics, software to identify high-risk (and therefore high-cost) patients, and nurse care managers to keep patients on track.

“As we move to value-based care, it’s become a very data-driven industry,” said Mike Funk, vice president at Humana’s Provider Development Center of Excellence, in an interview with LinkedIn. “You really have to start thinking about your payer as your partner.”

Collaborating with other doctors in a looser, non-ownership arrangement is another option, said Keith Chew, senior vice president of strategic positioning & consulting services at Integrated Medical Partners, which helps doctors build these agreements. The less-formal partnerships offer some of the benefits of a large group practice—greater negotiating power, access to analytics, shared call schedules and specialist coverage—without merging financial statements.

“Within a collaboration, every independent practice is just that—independent,” Chew said. “Nothing changes within your practice except the way you focus your resources.”

Medical practices are still making money. A well-run medical practice can have operating margins in the range of 3 to 5 percent, Fischer-Wright said.

“There’s a lot of money flowing into healthcare,” she said. “Hospitals are making more money than they ever have.”

But many practices aren’t running as well as they could be. An MGMA survey released at the meeting revealed that as many as 25 percent of practices are not making a budget—a figure that Fischer-Wright suspects is underreported and likely closer to one-third of practices.

It’s unclear why physicians aren’t budgeting, but it’s bad business. “The thing you hear physicians say is I just want to practice medicine,” Fischer-Wright said. “Really what physicians want is autonomy. They believe if they just engage in the patient care they’ll get back that autonomy. But only by learning the business do you get back that autonomy.”