The ripple effects of PPACA are vast

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1 PRACTICE F ALL 2010 REFORM-DRIVEN PATIENT DEMAND The ripple effects of PPACA are vast Ready for an extreme medical office makeover? Outsourcing can help improve your bottom line and results 8 ways to manage the complex world of CMS billing rules MANAGEMENT ADVISOR

2 REFORM-DRIVEN PATIENT DEMAND The ripple effects of PPACA are vast 2 part from the variety of regulatory A and reporting requirements imposed on physicians by the Patient Protection and Affordable Care Act (PPACA), the increased insurance coverage it grants will likely produce a surge in the number of people seeking medical care. Forward-looking practices will prepare themselves to meet the greater demand. The oncoming flow Under PPACA, expanded Medicaid eligibility will extend coverage to roughly 16 million more adults, according to the Centers for Medicare and Medicaid Services. Another 16 million will likely be added as a result of other reforms, such as the individual insurance mandate, young adult coverage under parents policies up to age 26 and prohibited coverage denials for pre-existing conditions. Moreover, reimbursement will be available for services that previously weren t covered, which could further drive demand. For example, the elimination of copays for annual wellness visits and deductibles for preventive services may encourage existing Medicare patients to ask for those services. The leading edge of this new wave of demand will be felt by primary care physicians, who are in the shortest supply in most parts of the country. They ll likely receive visits from previously un- or underinsured people who ve never sought medical care before, and who may be unfamiliar with the concept of copayments and deductibles. Without making certain adjustments to accommodate these new patients, your practice may experience longer waiting times for patient appointments. Making adjustments Although many reform effects on patient flow will be felt over a period from 2010 to 2015, it s important to begin adapting your practice s operations now. Here are some steps that will help you be better prepared: Identify populations in your market area and in your current patient pool who are un- or underinsured. Estimate the share of new patients your practice might attract from the local market and the volume of new services that might be demanded by existing patients. Develop a detailed strategy with action steps, deadlines and associated costs for taking advantage of increased demand. If possible, determine possible patient demographics, including age, income level, employment status and payor (commercial, Medicare, Medicaid). Patients in each of these groups will present different health care problems, require different medical services and receive different levels of payor reimbursement. Appraise the impact of potential changes in patient flow on your practice s finances. For instance, what would be the financial impact if charity care patients gain Medicaid coverage or if self-pay patients acquire commercial or Medicaid coverage? Consider whether you should accept more Medicaid patients. In 2013 and 2014, Medicaid payments to primary care physicians will increase to 100% of comparable Medicare rates. This may make it worthwhile for your practice to accept a larger number of them.

3 Assess current patient capacity and whether your practice is operating up to that capacity. Further assess its ability to deliver the services demanded by new patients. Compare projected payor reimbursement levels with your costs of delivering services, to make sure it can be done profitably. Decide if you need to expand facilities, add staff or recruit physicians to accommodate additional patients. Research strategies for increasing productivity without adding significant new resources for example, by expanding office hours, employing midlevel clinical providers and adopting new scheduling policies such as open access. Identify new services covered under the proposed standard benefits package and determine whether your practice could offer them with or without the investment of additional resources. Evaluate your current policies for collecting copayment and coinsurance amounts and rewrite them as needed so newly insured patients can understand them. In other words, make sure your practice is fully prepared to handle patients who may never have visited a modern physician practice facility before. Daunting but doable If the above seems like a daunting list of tasks, there s one other step that could reduce both the cost and the burden of planning and implementing these changes: You can aggressively explore joint ventures or partnerships with hospitals and other medical groups. The health care reform law encourages the formation of fully integrated collaborations of providers, otherwise known as accountable care organizations (ACOs). Talk with your CPA about how you can prepare for the future of delivering medical care while keeping your bottom line healthy. Time to rethink the entire practice mission? The U.S. health care system seems to be on the brink of a dramatic transformation that will reshape the roles of all involved parties particularly physician practices. Beyond preparing for new patients, you should examine how well positioned your practice is to operate profitably in the health care system of the future. The most fundamental question is whether your firm has enough physicians (and other clinicians) and the appropriate mix of services to handle the changes that may occur in your market. Then you ll need to decide what types of patients your practice wants to see and what payors it wants to deal with. The doctors may be more effective at and receive greater satisfaction from treating certain types of patients. And some payors reimburse more promptly and at higher levels than others. Finally, you need to assess whether your operational infrastructure (such as physical location, office size, staffing levels, policies and procedures, systems, and technology) is commensurate with what your practice wants to be and what it wants to achieve in the future. Another way of looking at this: Describe your practice as though it doesn t exist, and the member physicians are designing and starting it today. How would you set it up? 3

4 Ready for an extreme medical office makeover? n office that presents an unappealing, A uncomfortable environment for both patients and employees can contribute to reduced productivity. So if your office hasn t been updated in a while, it may be time for an extreme medical office makeover. There are two broad areas of concern in the design of a practice facility: 1) appearance and 2) functionality. Appearance can aid healing For more than a decade, there s been a movement in hospital design to create environments that are more soothing, even healing, for patients. How can you make your office more comfortable for patients? Try to bring nature indoors by using natural materials, such as wood, stone, copper and plants. Bring natural light into the waiting room by installing large windows and skylights. If that s not possible, use track, recessed or pendant lights for a softer feel. Harsh lighting may increase a patient s anxiety. Replace old wallpaper with paint in well-chosen pastel colors rather than traditional sterile white. Remove or replace unhealthy plants, and regularly clean or reupholster old furniture. Apply different decor in various areas of the office to reflect the different activities performed there. Imagine a practice setting so appealing that patients look forward to visiting because they feel so good there. And try to see the office through the eyes of your patients. Ask them about the physical arrangement and office decor, and how it makes them feel. Imagine a practice setting so appealing that patients look forward to visiting because they feel so good there. It s not impossible. Functionality is key to quality care A poor office design can create functional problems such as poor traffic flow, cramped working areas, and chronic inaccessibility to supplies or equipment. But a good design can make the workplace more efficient and more satisfying for employees. A revealing exercise in streamlining traffic flow through your office is to count the number of steps each staff person including physicians must take to perform their most frequent tasks. Over an eight-hour period, those steps can add up. Look for ways to cut some steps. An excellent tool in understanding and improving practice efficiency is lean management. It s built around the principle of delivering maximum 4

5 customer-defined value with a minimum of work. This typically involves improving flow and reducing waste. One way is to repurpose underused space and get rid of underused equipment. For example, if doctors are focusing on patient care, private physician offices will be rarely used and should be considered for conversion to more productive purposes. Similarly, if ancillary equipment isn t earning sufficient revenues, the space and cost should be replaced with something providing more value. Accessibility to supplies is critical Another way to enhance office flow is to improve access to supplies and equipment. A good rule of thumb is that those that doctors regularly use should be located based on what s most efficient for them. Some practices satisfy this rule by establishing a single nurses/assistants station in a central location as a hub for all physicians. On the other hand, locate units of equipment used primarily by other staff members (such as copiers and scanners) throughout the office near heavy users. Finally, if your office currently assigns each physician a specific personal exam room, stop that practice. It s an unaffordable luxury. Create generic exam rooms that can be used by any physician. To enhance the utility and supply accessibility of exam rooms, each room should have an identical layout and stock of supplies. Go from bad to good Physician practices often don t have the opportunity to design a new space from scratch or to completely renovate an existing facility. And in many cases, it simply won t be a good financial move to purchase or build a new building. But you may be able to take over more space in your current building, or even knock out walls to help create a more functional office space. If the opportunity arises, take full advantage of it. Until then, remove items and functions that aren t absolutely necessary, and reduce the size of existing fixtures such as cabinets and desks. You can do your own extreme office makeover. Outsourcing can help improve your bottom line and results f your staff is running on empty because I there simply aren t enough hands in the office or hours in the day to get work done, you might want to consider outsourcing. It can help improve your results and your bottom line. But you need to think through the decision before sending work offsite. Do a cost-benefit analysis The decision to outsource requires a cost-benefit analysis. For some tasks, the direct cost of outsourcing is clearly less than that of performing the task in-house. But for other tasks, the direct cost of outsourcing may be close to or even exceed that of performing the activity in-house. The question then is whether outsourcing will improve results that positively affect the bottom line, reduce indirect costs or provide other valuable benefits. For example, an effective outside billing service or professional management firm may increase cash receipts and reduce your practice s accounts 5

6 receivable. The cash your practice generates from more effective billing and follow-up may easily exceed the incremental direct cost increase of an outside billing service. In other situations, such factors as tax consequences, savings in capital expenditures, or other financial trade-offs may make a difference. For instance, the cost of an outside billing service may be expensed on a practice s income statement, but the cost of a computerized billing system acquisition is generally a capital expense the practice must depreciate over an extended period. Understand when it s feasible Regardless of the task you re considering outsourcing, these three factors determine the initial feasibility: 1. Practice size and the level of internal expertise needed to effectively perform the task, 2. Physicians interest and commitment to participating in management decisions and oversight of the task, and 3. Availability of expert external sources to perform the task at a competitive rate. Consider each of these factors in relation to your practice. Take advantage of the benefits Outsourcing offers three primary benefits: 1) improved results from a company specializing in a particular activity, 2) potential for reduced costs, and 3) elimination of responsibilities and hassles for physicians and administrators. Two tasks that can usually be outsourced so smoothly that it s virtually seamless are payroll and billing. Most medical practices currently outsource these functions and agree that doing so is cost effective. Many other functions can be outsourced, depending on the specialty of the practice. For example, hospital-based specialists, such as radiologists and pathologists, frequently outsource office and administrative functions to other organizations. Hospital-based groups often need only limited staff, which makes outsourcing attractive because it eliminates personnel administration responsibilities. More important, outsourcing office functions can eliminate retirement plan contributions for employees that, in a practice composed mostly of physicians, can be expensive under today s requirements of parity in contribution rates between physicians and employees. But outsourcing doesn t have to be limited to administrative tasks. Specialty group practices performing diagnostic and therapeutic services may outsource not only the administrative responsibility and equipment maintenance, but also the technical personnel or the entire technical component of those services to a niche company that specializes in them. For example, a cardiology group may outsource its cardiac stress tests. This type of outsourcing provides expansion opportunities, often without the risk, capital expense and lead time required to develop in-house capabilities. Take the load off your staff Outsourcing can be a great way to ease the load on your staff while also tapping into increased expertise, greater efficiency and improved results. But don t go into it blindly. You ll need to work with an attorney to draft the contract or service agreement, and your CPA can guide you through the process to ensure you get the most for your money. 6

7 Practice NOTES 8 ways to manage the complex world of CMS billing rules oing business with the CMS puts D physician practices in close touch with an extraordinary level of administrative complexity convoluted rules and regulations; spreadsheets marked by arcane labels and multiple revisions; and additions, addendums and supplements issued throughout the year. Additionally, medical practices must use hundreds of CPT codes in the billing process. And the following reimbursement equation must be applied to every relevant code to determine the amount of money the practice will receive for services it provides to Medicare patients: [(work RVU work GPCI) + (transitioned PE RVU PE GPCI) + (MP RVU MP GPCI)] conversion factor Although this reimbursement methodology is likely to be around for years to come, there are several simple, practical ways to minimize the frustration that s part of dealing with the CMS. Here are eight: 1. Establish electronic claim submission and electronic remittance with Medicare and Medicaid (if available in your state) to minimize billing costs. 2. When the CMS publishes its annual physician fee schedule, calculate revenue projections for your practice and factor them into your operating budget. 3. Ensure that you re using the correct CMS Excel files and current information. 4. Make sure your coding experts have the latest information on national coverage determination (CD), local CD and payor CD rules. 5. Include coding tools and resources in your EHR system so that they point physicians to the correct documentation and coding. 6. Build pre-adjudication edits into your practice management software to ensure compliance with each payor s coding rules. 7. Delegate responsibility to a staff member to stay up to date on CMS changes for billing laws, regulations, guidelines and directives. 8. If you re struggling with your in-house billing capability, either outsource the billing function (see Outsourcing can help improve your bottom line and results on page 5) or share a high-level billing system with another practice. Last, but not least, make sure you regularly check the CMS online information center for physicians (cms.hhs.gov/center/ physician.asp) to stay on top of its regulations and files, and the changes to them. This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and, accordingly, assume no liability whatsoever in connection with its use RXfa10 7