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Proposed PPS Encounter Rate Elevation… Better Update Your CHC’s Charge Schedule

November 26, 2013

By now hopefully most of you know about the proposed Medicare PPS rate hike set to kick in as your Medicare cost reports are filed starting October 2014. To be clear this is a proposed rate hike and comments were due Monday November 18, 2013.  I wrote several weeks ago a blog mostly praising the elevation of the CHC Medicare encounter ceiling to $155.90. This increase is up from $128 and $110.90 dependent, respectively, on a CHC’s urban vs. rural proximity.  Having had the good fortune to sit briefly on a panel at NACHC’s Financial Operations and Management and Information Technology (FOM/IT) last week in Vegas, I am now better informed as to why a number of CHCs were concerned that this perceived rate hike was not, in fact, a good thing.

While there is some concern about Geographic Adjustment Factors (GAF, well really GPCI but lets not bicker over acronyms) which would result in your ceiling being less than the full $155.90, the real sticking point is this:  If your per visit charge is less than the $155.90, you receive 80% of those charges vs. 80% of $155.90.  Hmmm. Folks were downright perplexed and wondering what they could do to prepare for this significant shift in policy. One audience participant said if his CHC were a private practice, he’d just raise charges to be certain they were above this $155.90 rate. In response, a NACHC representative reasonably reminded 330 Grantees of their obligation to assure that rates were commensurate with the prevailing local market AND in general, that they followed HRSA guidance around charge setting (including sliding fee… the newest of HRSA’s guidance still a pending proposed statute). So… what does this mean?

In short, if you check the local market to see what they charge for an office visit (e.g., 99213), annual (e.g., 99397), urine dip (e.g., 81002), or any myriad of other service offerings, your CHC prices have to be within a reasonable range… not too much higher or lower.  You know, I’d be willing to bet a hefty sum that your local market prices far exceed your CHC’s most elevated rate structure. Private practice docs know and have played the game for years; i.e., set your prices above the highest paying payers or receive less than your fair share.  Rationale: a commercial (and governmental fee-for-service (FFS)) payer pays their fee schedule or your charges… whichever is less. In fact, we at PMG would argue that many (if not most) CHCs still lose money when billing in the FFS world simply because their charges are below what commercial payers are willing to pay.

Don’t believe me, ask your finance team… Or if you are the finance team, ask yourself… when was the last time your CHC updated their charge schedule? Do you update (increase) your charges annually? If yes, do you use the Consumer Price Index (CPI, a.k.a., inflation) or the Medical Economic Index (MEI) or some other key indicator? What do you do to verify whether your FFS payers are paying you at or near what you charge? Again, big money I’d win if I played odds against the notion that CHCs raise their charges annually with a scientifically based formula or monitor whether their charges are high enough. From nearly twenty years working with CHCs, this is the answer we hear most often: Most CHCs are worried about the negative impact that raising prices will have on self-pay patients. Honestly, that is just nuts.

Bottom line, if a patient does not want or is unable to pay your CHC, what you charge them is irrelevant. Think charging them $50 instead of $100 makes them more compelled to fork over money they don’t have?  Right, I didn’t think so either. So, what is the barrier that keeps your CHC from setting charges more optimally? Frankly, I think charge setting is simply not a priority.  Ever.

First, CHCs make so much money from Medicaid and Medicare… 50-60% for most… that what a CHC charges seems almost irrelevant. For most CHCs, both of these payers have historically paid an encounter rate amount even if charges were below that rate; e.g., whether the CHC’s total charge for the visit was $30 or $230, Medicaid would pay the encounter rate. So, on that $30 or $230 charge, if the encounter rate was $145, $145 is what Medicaid paid.  Medicare has historically adjudicated claims identically except they paid 80% of their rate. (Yes, slightly less for behavioral health but as of 2014 that co-insurance too is 80%!!) Suddenly, Medicare is changing the rules of the game. Think Medicaid is far behind?!?  Remember CMS should really be named CM2S since the name is the Centers for Medicare AND Medicaid Services. Not too far fetched to think a program struggling to make ends meet (think all governmental payers) would follow a pattern guaranteed to mitigate their fiscal liabilities.

So, what’s a CHC to do with these proposed changes.? Regardless of their ultimate implementation, it behooves your CHC to take the following three steps.

First, determine how to really set charges. PMG recommends using the Medicare Professional Fee Schedule (PFS) as a base and elevating that number from 125% to 150% to get your charges above your highest paying commercial payer. When we work in certain markets (e.g., Alaska), we need to be at 200% of Medicare to get charges above commercial payers.  Your CHC should definitely check out local rates to make certain you are “in the ballpark” as far as pricing but rest assured, with VERY rare exception most CHCs will be just fine following these simple guidelines.

Second, get your providers  well educated around coding to assure they capture the full breadth and scope of rendered services more accurately.  By simply “coding what was performed” charges should be adequately elevated. Will correctly coded services always result in charges exceeding $155.90, no.  Most of the time? Absolutely, yes.

Finally, manage the payment posting process to monitor “underpayments.” In other words, your billing team should be monitoring payment percentages by major payer and evaluating EOBs for these same major payers to be certain your CHC is NEVER paid within 10% of what you charge.  This should occur monthly and be a standard report from the billing team back to your CHC’s CFO. If ever your CHC is paid within 10% of what you are charging, you are not charging enough money. The resulting action: Raise your CHC’s charges. All of them.

In the end, as with all change, opportunity abounds. While these PPS statute changes are “proposed” and not guaranteed, taking advantage of the opportunity to effect positive change is always desirable. Be assertive by setting charges that make sense, educating staff about optimal/accurate code capture, and implementing monitoring systems which will advise your financial team when charges are too low.

Or, just leave the money on the table. You probably don’t need more money anyway. Right?

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