Independent Physicians Struggle to Get Paid Equally

The 2016 Physicians Practice Fee Schedule Survey reveals how much more employed docs get paid than independent physicians for certain CPT codes.

Every month, there is a good chance that a practice brings in new patients. Once the visit is completed, the billing code is entered to the insurance company: 99201.

How much this practice is paid for this service is entirely dependent on the type of practice it is. If it belongs to a large healthcare system, with multiple hospitals and practices, it will average around $74 per instance of 99201. If it is an independent practice? It's only going to be, on average, $58.40 per instance.

This disparity - and this specific example - is detailed in the 2016 Physicians Practice Fee Schedule Survey, which surveys physicians on the amount they are reimbursed from insurers for common services. It's not just new patient visits that show the gap between what payers reimburse independent and employed practices, it's established visits too. When it comes to CPT code 99211 for established visits, independent practices on average receive $43.10 per instance and employed practices receive $58.70 per instance.

"It's not [a surprise] … the hospitals typically have negotiated contracts with the insurance companies. There is no hospital that's on a standard contract. There is no standardization in the hospital world. Each system really negotiates with insurance companies. If you're an independent physician, you are basically signing onto these contracts at street rates," says Susanne Madden, president and CEO of the Verden Group, a consulting firm. "Whatever the offered fee schedule is, you usually accept and sign. As a small practice, you don't have a lot of negotiating power and leverage."

Brennan Cantrell, commercial health insurance strategist at the American Academy of Family Physicians (AAFP), saw this discrepancy firsthand. He says he used to work for an independent practice that was bought by a hospital system. "When we were bought … our reimbursement went up 10 percent across the board," Cantrell says. "Even more for some codes."

Quite simply, size matters. Amy Mullins, a family physician by trade and AAFP's medical director of quality improvement, says that in some markets insurers have to choose between one or two big hospitals. The hospitals in these markets have all the leverage because the insurers have to play ball. Otherwise, if they weren't contracted with those hospitals, their members wouldn't have a hospital to go to and would likely switch to another insurance company, she says. The small, independent practices don't exactly have that kind of pull.

Education is the Key

The good news is it's not completely hopeless for independent practices, experts say. There are certain strategies they can employ to level the playing field. Patti Cloud-Moulds, owner of Turnaround Medical AR Recovery, a consulting firm, says a simple way independent physicians can get more bang for their buck is to just be more conscientious of how they code.

"Understand your fee schedule, take a look at your codes, what's available; did you do XYZ and you only coded for Y and Z? You have to think about that. Even if you don't think you'll get reimbursed [for a certain code], if you did it, code it," says Cloud-Moulds.

Barbie Hays, AAFP's coding and compliance strategist, says physicians should know how to "run their codes." In other words, they should know what codes they are utilizing the most. "That's where technology comes into play, using your EHR or billing system to get a good representation of the codes being utilized," she says. Using this data, notes Hays, will help physicians negotiate with payers.

Hays notes that physicians should know that 135 percent of the Medicare Fee Schedule is the "sweet spot." While independent practices might not be able to get that rate for most codes, showing the payer which codes are used the most can help them get more than what's being offered. That's because this data shows payers what quality services the practice is performing most frequently and which ones  makes it stand out among others in the area.

Mullins adds that physicians need to realize it's OK to ask for more than what the payer offers. "We go to medical school, [and] we don't get educated [in this area]. We get educated on how to treat patients, not how to run a business. I think a lot of our physicians will go out and open their own clinic, start signing contracts, and they'll have no idea what they are signing," she says.

IPAs and Other Strategies

Another potential strategy for independent physicians to level the playing field with reimbursement is joining an independent physician association (IPA). IPAs can bring a practice strength in numbers, without having to sacrifice its independence, experts say.

Madden is an advocate, saying that practices who aren't in an area with an IPA should start one. Not only is the arrangement advantageous for practices, she says, but for payers too. "As a payer, it's easier to contract with one group rather than 1,500 individual physicians," Madden notes. She notes that for most IPAs, reimbursement rates are tied to quality metrics, which is good for the practice, payer, and patient population.

However, there are a few caveats to an IPA. Depending on what region of the country you live in, the rules may be different. For instance, in Vermont, one payer dominates the market and the IPA has no advantage because it can't collectively bargain. As a result, independent practices in the state are paid in some cases 200 percent to 300 percent less than employed physicians, according to Seven Days. Hays at AAFP also notes that physicians could get unfavorable rates if they join an IPA that doesn't represent their specialty.

Another potential strategy for independent physicians is hiring an outside billing firm. If this happens, it's pertinent that the physician stay involved in the process and not just hand off all operations, says Cloud-Moulds. Many times, she cautions, a third-party billing company won't follow up on denials because they don't have the time.

AAFP's Hays advocates for the use of a consulting firm, saying it's a more cost effective strategy than bringing someone on staff or having a full-time outside billing firm. "It's a one-time fee that maybe you do every year or once every two years for different payers. Your payers aren't going to negotiate a new contract every year, so it wouldn’t be a huge investment long term," she says.

Strength from Value

Another potential leg up for independent practices, strangely enough, is the switch to quality-based reimbursement and for Medicare specifically, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA and other value-based reimbursement initiatives can provide great incentives for independent practices to earn more.

"You can be a little guy and have top quality," Madden says. "There are new contracts that will pay you for performance. But if you are not a higher performer, you're not doing well, and you're not able to have quality in your practice, you'll absolutely be left behind." While many say MACRA will hurt small, independent practices, she says it's a "great framework" for them to "climb that ladder" and demonstrate quality and earn more.

In terms of MACRA, the 2016 Physicians Practice Fee Schedule Survey reveals a number of practices will have to educate themselves quickly to take advantage. More than 30 percent of respondents say they are fee-for-service and are not prepared for MACRA; 20.1 percent of respondents say they have done some value-based reimbursement but are entrenched in fee-for-service; and 19.6 percent couldn't even identify MACRA. Only 13.1 percent of respondents say they are preparing for the switch, with another 15.9 percent already involved with mostly value-based contracts through an Accountable Care Organization or a Patient-Centered Medical Home.

One thing to keep in mind, says Cantrell, is that private payer contracts are still predominantly fee-for-service. For that reason, he says, any additional revenue coming from quality will still not overcome the disparity between independent and employed physicians.

Advice

Experts all agree that while it's harder for an independent practice to get reimbursed on the same level as employed physicians, there is hope. Mullins at AAFP says the one piece of advice she shares with independent physicians is to not be afraid to ask questions and negotiate. "You never get anything you don't ask for," she notes. Cantrell says practices should educate themselves on what others in their area have done.

Cloud-Moulds stresses the importance of paying attention to details. She says too often physicians will just sign contracts or go along with contract changes without protesting. Insurance companies will send any contract changes their way on a small postcard to get physicians to overlook them. "Pay attention to those. Go and find out what's changed," she says. "Look at your EOBs and make sure you are being paid what they said they are going to pay you." 

Madden takes on a different tone.  She focuses on value-based care and says that practices should find out what they are doing that's worth paying more for. "Are you ahead when it comes to understanding a patient population, offering good programs for them? Are you tracking how you are performing in various areas? Do you have a fundamental understanding of how you are performing in that network?"

Moreover, she says independent practices need to invest in the transition to value-based care to survive in the coming world of MACRA. "If you are not investing in technology, if you don't have an [EHR], and you're not interested in quality programs, there is nothing for you in the market and there will be nothing for you in the market going forward. To stay independent, you need to understand the market and what you're working in."