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How Practices Can Prepare for Value-based Reimbursement


New payment models can boost medical practice revenue. Here's how to take advantage.

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."

*Are you a numbers person? To see the 2012 Fee Schedule Survey data, click here.

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.

Doubling pressure

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."

Switching engines

The first way to keep up is by assessing your payer market to determine what value-based payment opportunities may head your way soon, says Anthony D'Eredita, senior vice president of physician management and consulting firm Southwind, a division of the Advisory Board Company. "Practices should be talking to their payers to understand how the payers' reimbursement methodologies may be changing and what financial incentives or changes in payment methodology the payers will be considering to reduce or eliminate unnecessary care and what incentives will they be putting in place to promote efficient care," he says.

From a national perspective, Mary Witt, senior vice president of national healthcare management and consulting services company at The Camden Group, says two value-based payment models are most common. Many payers are paying quality incentives to Patient-Centered Medical Homes, and/or they are helping practices transition to the new model. "The second place that I think you're beginning to see some movement is as hospitals and others begin to look at [accountable care organizations] and bundled payment opportunities," she says.

 In New Jersey, Eidus says value-based reimbursement is picking up "fairly dramatically" among payers. Horizon Healthcare Innovations, a Horizon Blue Cross Blue Shield of New Jersey company, for instance, provides a "care coordination" payment to help practices transition into medical homes. CMS has also selected New Jersey to participate in the Comprehensive Primary Care (CPC) initiative, in which Medicare will work with state payers, such as Medicaid, and commercial payers, such as AmeriHealth New Jersey and UnitedHealthcare, to provide primary-care doctors with monthly per patient care-management fees, in addition to fee-for-service payments. Similar to accountable care organizations, which Eidus says are also gaining traction in New Jersey, practices participating in the CPC initiative will also share in any cost savings incurred as a result of providing high-value care. "There's enough going on in the state that it's not inconceivable that many practices could have up to 90 percent of their patients with some type of alternative reimbursement outside of fee-for-service," he says.

Even if your payer market has not yet shown many signs of shifting to value-based pay, D'Eredita predicts that will change. "I think [the shift to value-based reimbursement] is going to be much more prominent in 2013 than it was in 2012," he says. "I think we've kind of got our toe in the water, but it's definitely a direction that's going to have a lot more traction."


In addition to assessing payers, evaluate your practice's readiness to participate in value-based pay. That means beginning to monitor how it is performing against the value-based incentive measures your payers currently have in place.

Self-monitoring, of course, gets tricky if your payers have not yet instituted value-based pay. In that case, monitor how you are performing based on what you deem it's likely your payers will start to measure when they begin offering value-based incentives.

Not sure where to start? Many payers are measuring how well practices manage and control the costs of caring for patient populations with chronic conditions, such as diabetes, says Bradley Reiner, a consultant based in Driftwood, Texas. Measuring rates of preventive health services, such as whether all pediatric patients receive their recommended immunizations, is another biggie, says Witt. "It's looking at those preventive-care requirements that more and more health plans are implementing and then paying quality incentives for."

Compliance with certain treatment protocols is also often monitored by payers. "We're starting to see more and more where reimbursement is going to be not just value-based or performance-based, but it's also going to be increasingly expected that physicians follow evidence-based guidelines or they will be nudged to follow those increasingly," says Piper.

It's also a good idea to start monitoring how your performance compares to other nearby practices, says Piper. While it may be difficult to track how well your neighbor is managing, say, its diabetic patients, he advises asking payers for any comparison-related information they can provide. Medicare, for instance, already sent "feedback" reports to many practices detailing the quality and cost performance of their physicians compared to physicians at other practices. "What you need to be able to do as a physician practice is to be increasingly aware of the performance of your own clinic compared to both absolute metrics and compared to the performance of others," says Piper.

Setting expectations

After you've determined what to measure, and your monitoring program is in place, the hard part begins: improving your performance. "You've got to start setting expectations for your practice … regardless of whether the payer does or not," says Piper.

That's because if you can prove that you are providing high-value care, it may lead to some value-based opportunities, says Reiner. "If you have an electronic medical record, for example, you can keep track of all those different chronic diseases and what you're trying to do to manage those conditions," he says. "If you can manage those effectively, you can prove that to the insurance plans, then I think they are willing to potentially work with you and develop some sort of incentive."

Here are some surefire ways to get payers' attentions:

Step up monitoring. Institute processes to ensure you continually identify patients who need services related to your measures. "That means things like being ... able to go through the patient record, whether it's written or [an EHR], and identifying those things that a patient may need so that when you're seeing a patient, you are automatically aware of the kinds of tests or services that need to be provided to the patient, so that you are proactively doing that," says Witt.

Improve care coordination. As payers begin offering incentives to practices that take on a more team-based, coordinated-care approach, consider hiring nurse practitioners, physician assistants, and/or care coordinators (nurses or other healthcare professionals specially trained to help patients navigate the healthcare system). In some cases, payers may help fund these new staff members. In Eidus' case, Horizon Health Innovations is temporarily providing two care coordinators as the group builds out its medical home.

Increase patient outreach and engagement. Focus on encouraging patients to come to the office regularly for preventive services, fill their prescriptions, adhere to referrals, etc., says Witt. "We should be proactively reaching out to patients to make sure that they get the preventive care and the monitoring that they need to have of any chronic diseases ..."

Cultivate new relationships. Partner up with other practices, as Eidus did, to share resources and cut costs. " ... By aggregating into a group practice we can share resources, we can share care coordinators, we now have a full-time psychiatric-nurse practitioner that rotates among the three practices, [and] we have a practice coach that helps to make sure that we are developing the best clinical practices and modeling that across the three sites," says Eidus.

Make your case. As soon as you begin to see improvement at your practice, don't hesitate to inquire about value-based payment opportunities. "What you're doing as a provider to the insurer, and ultimately to the government, is that you're in effect making a clinical and economic business case that says 'Look, you need to pay me more money because I do a better job and over time you will save money. I do a better job in relative terms, and I do a better job in absolute terms compared to the norms that are being expected of me,'" says Piper.

Four ways to make the most of fee-for-service

As fee-for-service reimbursement continues to fall, so does the likelihood you will have luck negotiating for higher rates from payers. "Even large practices aren't necessarily getting big increases in reimbursement rates," says Mary Witt, senior vice president of national healthcare management and consulting services company The Camden Group. As a result, for most practices it's smarter to make the most of the fee schedules given to you than to try to negotiate higher reimbursement rates. Here are some tips:

1. Brush up on coding and documentation. "I think, first off, practices aren't always paying as much attention as they need to ... their billing operations," says Anthony D'Eredita, senior vice president of physician management and consulting firm Southwind, a division of the Advisory Board Company. "They have to optimize their revenue cycle management." Practices also need to step up coding compliance, he says, noting that the Office of Inspector General is "emphasizing real attention to coding and compliance" this year. "Practices have to focus on generating a clean claim and gathering all of the necessary information that goes into that and ensuring that the claim is submitted cleanly the first time around," says D'Eredita.

2. Closely monitor payers. Pay attention to your payers to ensure you are getting paid right, says Jeff Wescott, who oversees the healthcare business consulting division at McKesson. Many practices just don't make the effort to analyze their reimbursement against their peers, he says, as well as to examine specific payers' rates on common codes and degree of hassle factor associated with getting paid at all.

3. Don't overlook helpful resources. Many practice management systems have a built-in feature allowing users to upload their fee schedules. "As payments are being posted, [such systems] will compare whether or not the payment is appropriate based on what you've entered as the expected payment," says Witt, noting that many practices fail to take advantage of this feature.

4. Make the most of preventive services. Step up patient reminders, says Witt, noting that missed preventive services are "missed opportunities right now under a fee-for-service environment."

*Are you a numbers person? To see the 2012 Fee Schedule Survey data, click here.

In Summary

Preparing for value-based reimbursement is challenging. Here are some tips:

• Assess your payer market to determine what opportunities are available;

• Determine quality and/or cost-related performance measures to begin monitoring and measuring (those related to preventive services, chronic disease management, and evidence-based guidelines are a good start);

• Set expectations and initiate improvement efforts;

• Approach payers about value-based reimbursement opportunities.

Aubrey Westgate is an associate editor at Physicians Practice. She can be reached at

This article originally appeared in the February 2013 issue of Physicians Practice.

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