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Healthcare Reimbursement Changes: Prepare for Future Challenges

November 13, 2013

Reimbursement Changes Are Essential for Sustainable Health Insurance

According to Donald Bryant, the near future will bring changes in healthcare reimbursement. A 2012 Wharton study on rapidly changing healthcare indicated that more than 50% of US healthcare spending is harmful or wasted. According to Dr. Glenn D. Steele, MD, PhD, it’s essential for us to reduce health care costs. In 2012 alone 18% of the GDP was spent on health care and it’s expected to double again. This runaway rate of increase in unsustainable. It’s already evident that when individuals try to obtain policies independently, the policies insurers are providing are not affordable. The NY Times recently reported that US median income is 6% below what it was in 2007 just before the recession started. With the median household income at $52,100, it’s unlikely that the typical household of 1-3 can afford to pay $15,745 (2012) as reported in CNN Money. These numbers add up to median family insurance premium costs of more than 30% of gross median household income.

The rule of thumb for rent and mortgage was always 25% of gross income. With the health care gorilla in the room, how much do we need to move over? It’s clear that the fee-for-service model is unsustainable for both insurers and insured.

A Relevant Bill in Congress

The purpose of H.R. 574: Medicare Physician Payment Innovation Act of 2013 is to amend part B of title XVIII of the Social Security Act to revise Medicare physician payment by removing the sustainable growth rate system and by providing incentives for innovative payments in order to improve quality and efficiency. This bill failed to pass last year.

Factors Affecting Reimbursement reports on market changes that will affect reimbursement:

1. ICD-10

Once MS-DRG and APC groupers Medicare uses for payment are updated to ICD-10, all payers must use a model employing a combination of ICD-9 and ICD-10 codes. Healthcare organizations will need to find a way to integrate records with both ICD-9 and ICD-10 for reimbursement.

2. Medicare comparisons
Individual providers use Medicare rates as an industry benchmark. Contract negotiators demand to know how their rates compare to Medicare. As a result reimbursement models are being asked to display last year’s rates, proposed rates and the Medicare rates at the same time for easy comparison.

3. Significant shift to fixed rates
Numerous payer and provider contracts are based on charge discounts. This payment solution has been provided to pacify resistant hospitals. With contracts moving from percentage to fixed rate systems, reimbursement models must calculate what the provider would have received under APC, DRG or other fixed payment terms.

4. New payment methodologies
Medicare supports numerous payment systems, including ASC, APC, MS-DRG, IP Rehab, Dialysis and Long-Term care. Commercial payers are required to model all of these methodologies. Even if they are not all used they are valuable for benchmarking. They will also be useful in contract negotiation.

5. PQRS Factors

Audiology Online reports that this year will determine the 2015 reimbursement rate based on PQRS factors. Professional groups are responsible for developing the reporting standards that will be used as well as specifying clinical improvement in reporting standards. Additional payments based upon efficiency of care will be available if some element of fee-for-service is still available. Quality measures have yet to be defined.

We note that today with many government mandates and issues of payment feasibility, it’s a time of turbulence for healthcare reform and reimbursement. The situation must resolve itself for of those who rely upon it.


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