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Medicare Reimbursement and Independent Practices

July 9, 2015

Medicare_and_Medical_center_2-1When designing the revisions to Medicare reimbursement regulations as set forth in the Affordable Care Act (ACA, or ‘Obamacare’), including the tracking and reporting guidelines, it becomes quickly apparent to small independent providers that the system is now skewed to favor hospitals and other larger care organizations.

  • The often-considerable expense of implementation of electronic health record (EHR) systems is more easily borne by hospitals and larger entities, which have better access to the latest improvements in information technology (IT), including software, to stay abreast of changes and remain Medicare-compliant.
  • Primary care providers, with their normally lower reimbursement rates, are often prime targets for hospital buy-outs.
  • Acquired practices are then frequently consolidated into outpatient departments, which allow the hospital to be reimbursed more for services than would be paid for those provided by a freestanding independent office.
  • According to the co-founder of Association of Independent Doctors (AID), the number of independent practices dropped down to 36 percent, from 57 percent in 2013. If this trend continues, medical care will continue to be impacted – with higher payouts required from Medicare and higher bills for patients.
  • Freestanding specialists are adversely affected by the loss of independent primary care doctors as reductions in referrals and ancillary services income impacts revenues.

Consolidation’s effects on Medicare’s payments

  • When an independent physician provides a procedure or other service, Medicare pays one payment. However, when the same service is provided within an outpatient or ambulatory surgical center, Medicare must make payments to both the physician/ provider as well as to the facility.
  • In 2013 the Medicare Payment Advisory Commission (MedPAC) reported that fees for EKGs, office visits, and related cardiac tests at hospital-owned facilities were much higher than those charged by freestanding locations. The study estimated that reducing rates for outpatient cardiac facilities would result in dropping beneficiary cost sharing and related spending by more than $500 million annually.
  • Reduced financial transparency and increased fees in the form of facility fees when seeing a hospital-acquired practice. For example, one patient found that of the $8190 for an outpatient cyst removal, facility fees alone amounted to just over $6500, a fact that she was not made aware of prior to the surgery.

Hospitals claim that part of the reason for these facility fees is to help cover overhead not incurred by independent, free-standing providers. The American Hospital Association (AHA) maintains that the cost of stricter licensing and other accreditation and regulatory expenses justify the higher fees and related charges.

Consolidation’s effects on Medicare patients

  • As with Medicare, the patient also pays twice: first, the remainder of a bill (after Medicare’s payments) to the physician as well as outpatient or other facility charges.
  • Reduction of free-standing primary-care providers means that there will be reduced choice of available specialists, as referrals will need to be within the care system network to be reimbursed – again, adding to the cost.
  • If the physician buy-out trend continues, remaining independent physician offices may be forced to drop patients using Medicare altogether, shifting elderly care entirely to hospitals and costing both Medicare and patients even more.

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The Takeaway

Independently-owned practices are being challenged to manage expenses while providing quality care and staying abreast of regulatory and other management requirements. Smaller, independent practices with many Medicare patients may find that another good option to stay competitive is to work with a professional medical billing services company to handle the complexities of the Medicare reimbursement system. An experienced consultant at M-Scribe Technologies, LLC can analyze your practice’s needs and develop solutions to keep your independent practice compliant and competitive.


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