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Strategies to Overcome MPFS 25% Reduction in Medical Billing

December 19, 2012

Strategies to Overcome MPFS 25% Reduction in Medical BillingThe Centers for Medicare and Medicaid Services (CMS) has released its updated physician fee schedule for 2013.  As anticipated, many physician practices will experience a reduction in applicable rates paid for medically necessary services.  The current sustainable growth formula employed by CMS calls for an across the board reduction of around 26.5% for all medical services.  This cut is not distributed equally across all medical specialties, and some specialties like dermatology, gastroenterology, and allergy fee schedules are relatively free of drastic reimbursement cuts compared to 2012. 

Over the course of 2012, CMS worked closely with the American Medical Association (AMA) and specialty societies to review the relative value units (RVUs) used to calculate suitable reimbursement rates by procedure. Approximately 30 dermatology codes were under review, with particular attention paid to the technical components of services. The reductions that will be put in place in 2013 are mainly based on changes in the weighted values of RVUs.  

While the reimbursement cuts for dermatology services are not as severe as those affecting other medical specialties like Neurology and Cardiology, they will still impact the financial bottom line for practices that serve a large patient population covered by Medicare.  For instance, CPT code 17260 was reimbursed for $94.62 on the 2012 fee schedule.  In 2013, that rate will be reduced to $70.25.  An office visit of low complexity (99213) will go from being reimbursed at $70.46 to $53.25. 

Specialty medical billing companies experience can help with the current CMS reimbursement climate. Private practices will need to manage their resources carefully to maximize legal reimbursement. One key component of maximizing reimbursement is complete and thorough documentation in the medical record in order to substantiate coding methodology.  Medically necessary procedures need to be coded according to the strict definitions contained in CPT.  When documentation is incomplete, appropriate codes cannot be billed to receive proper fees for services provided.  

Obviously, no one can simply inflate the number of lesions removed, or the complexity of a wound repair — the physician can conduct more thorough and justified evaluation and management (E/M) of their patients. The components of E/M services are readily spelled out by the AMA and CMS.  By following these guidelines strictly, dermatologists will find that the codes they use for routine patient encounters may reflect a higher level of complexity than they expect under documentation guidelines they currently use.  A complete review of systems and history, and a complete physical exam provides the foundation for outpatient office visit coding that result in higher reimbursement.

Additionally, depending on patient mix, a dermatology practice may need to extend office hours or increase the number of available appointments in the practice schedule in order to see more patients.  Increased patient volume may be a suitable strategy to make up for shortcomings in projected reimbursement rates.  Practices with a high proportion of Medicare patients do not want to turn away patients based on their participation in the Medicare system, but in order to maintain sustainable profit margins more patients may need to be served on a weekly basis.

Depending on the local market circumstances, dermatology practices may consider marketing their services to potential patients covered by commercial healthcare plans.  Commercial third-party payers generally update their fee schedules annually, and their rates are also based on the relative value resource based system (RVRBS), but commercial payers typically pay more than the given Medicare rate.  Because commercial payers generally have smaller beneficiary bases than the Medicare system, these payers offer higher fees to compete for business from physicians.  

A review of available fee schedules will identify those payers who offer the most profit to a dermatology practice.  Armed with this information, practices can target those patients for marketing and change their payer mix to bring more money through the door without increasing physician and ancillary staff workload.


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