Family physician Robert Eidus anticipates change — and meets it head on. His practice was the first in New Jersey to be NCQA-recognized as a Patient-Centered Medical Home (PCMH), and last year he merged his solo practice with two nearby practices to form a 14-physician, three-location medical group. He did this, in part, to better position himself for the changing reimbursement environment.
"Although each of us was doing well as individual small practices, we felt that our business model, which was 'hamster care,' was not sustainable — that eventually we would burn out," says Eidus, who is also board chair of the New Jersey Academy of Family Physicians. "You can't keep driving that engine faster and faster on purely a volume-based basis. It creates too much chaos. ... We realized that we needed to get into a different model."
The results of our 2012 Fee Schedule Survey indicate that Eidus and his colleagues are smart to be proactive about finding new revenue sources and economies of scale. Relying on traditional fee-for-service reimbursement alone is just not going to cut it much longer. Federal and commercial reimbursement rates are about the same as in 2011, if not lower. At the same time, overhead continues to increase. "I think that the biggest thing for practices to be aware of is that it doesn't do anyone much good to dig your heels in the sand and say that you're not going to adapt or change," says Eidus. "What you're doing is getting your feet stuck in cement — in a business model that is probably not sustainable."
Today, all three practice sites that make up Eidus's group work together to coordinate care and reduce costs. The results: improved patient care and practice finances, says Eidus. In addition to traditional fee-for-service payments, as a medical home the group receives incentives from some of its payers.
While alternative payment models that reward practices for providing high-quality, low-cost care, like the ones Eidus and his colleagues are participating in, present big opportunities for practices, taking advantage of them is not easy. Here's how experts say practices can prepare to get on board.
Even if your reimbursement is solely fee-for-service — and you're perfectly happy to keep it that way — it's time to make some changes. Pursuing value-based payments and incentives could potentially boost your reimbursement as fee-for-service declines. "If you are able to get the payer to say 'Look, If you can provide better care at less cost, I will pay you more money than I have been paying you,' or 'I will give you a share of those savings,' it's an opportunity to revise how you practice and how you use the staff and so forth," says Kip Piper, a healthcare consultant in Washington. Still he cautions, "That kind of switching out, it's like going on the interstate and having to switch out the engine of your car while still driving down the road — it's very hard to adapt."
Those that do manage to adapt, however, will also be better equipped to thrive later — or at least survive. That's because practices may soon see lower reimbursement if they fail to provide "high value," (or high-quality, low-cost), care. For instance, Medicare's value-based payment modifier will kick in for physicians in groups of 100 or more in 2015. That means physicians in these large groups may receive a positive or negative payment adjustment in 2015 depending on their quality reporting and performance. Specifically, these groups must participate in one of three PQRS group reporting methods in 2013 to avoid a 1 percent payment reduction in 2015. Groups may also choose to participate in "quality tiering" under the value modifier, which could result in a payment boost or cut, depending on the group's quality and cost performance. In 2017, that modifier will kick in for most physicians based on their quality performance in 2015. "The whole dynamic has gotten to be much more complex, but fundamentally, economically, day-to-day the [fee-for-service] rates aren't keeping up with costs, so you've got reimbursement in real terms going down and expectations or accountability going up," says Piper. "That's happening at the same time, and increasingly, for small and medium practices, that's really hard to keep up with."