Physicians Experience Payment Problems Due to ACA Hiccups

May 14, 2014

Why one pediatric practice that received over $100,000 in increased payments due to an ACA initiative has to pay the money back.

I’ve written a number of recent blogs on how provisions of the Affordable Care Act (ACA) impact physicians and the practice of medicine.  As the ACA is a relatively new law, it is expected that physicians may be impacted in ways that have not yet been realized or intended.  Recently, I encountered an instance where the ACA garnered some unintended consequences for a client.  Hopefully this information will help you minimize such issues at your practice.

The Affordable Care Act contains a provision allowing certain physicians to be paid at Medicare rates for services provided to Medicaid patients in 2013 and 2014.  Those physicians practicing in the areas of family medicine, internal medicine, or pediatrics and who provide at least 60 percent of all their Medicaid services within certain E&M codes are eligible for this so-called “Medicare-Medicaid parity.”  As one can imagine, the difference between Medicare rates and Medicaid rates can be substantial and amount to a significant increase in practice income.

One of our pediatric practices received over $100,000 in increased payments in 2013 as a result of the Medicare-Medicaid parity.  They quickly spent the increased revenue on expenses and bonuses for hardworking physicians.  In April 2014, the practice received a letter informing them that the majority of the Medicaid services subject to the parity payment were ineligible.  At the time it began receiving increased payments, it was not yet known that only certain Medicaid programs (those funded under Title XIX) were eligible, and those Medicaid programs funded under Title XXI were not. Additionally, the state has Medicaid programs that are funded by both Title XIX and Title XXI, with no way to determine at the point of service what program funded that patient’s Medicaid plan. 

Accordingly, $80,000 was being recouped from the expected 2014 payments, leaving the practice out money already spent and without anticipated future income.  To make matters worse, two physician-shareholders left the practice at the end of 2013 after receiving bonuses based on the perceived parity “windfall.”  Not only was the practice now in a financial emergency, but also in the position of contacting former partners to return income they were paid.

This example is not just important for pediatricians (although such providers can learn more about Medicare-Medicaid parity here), but also serves as a cautionary tale for all healthcare providers.  When laws like the ACA are in their infancy, there are a number of nuances and outcomes related to implementation and enforcement that only are discovered down the road.  Until any new law or program is “tested,” physicians should consider the following:

Save for a rainy day. People have been saying it for years, and I know that is easier said than done when physicians are being squeezed like never before.  Make financial decisions for your practice that allow you to put aside some income in case of a recoupment action or mistaken payment.  Most incentive payments are time-limited, so don’t count on receiving bonus income or government subsidies for the long haul, and budget accordingly.

Plan ahead.  The pediatric practice could have avoided some of its issues by considering how to treat payments made to the departing physicians in the event of any recoupment or liability which was unknown until after they left the practice.  Make certain your employment or shareholder agreements address this issue.  Consider paying out money owed to a departing physician for a period of time after he or she leaves the practice (in accordance with federal and state wage and employment laws) so that discovered liabilities can be deducted from amounts to be paid.  Particularly with payments such as the EHR incentives, make certain that employment agreements clearly provide that such amounts belong to the practice and not the individual physician.  As discussed in my prior blog, EHR payments are assumed to go to the physician unless a contractual obligation otherwise exists between the practice and the physician.

Use your advisers.  Although often no one can predict the impact of a new law or program, legal counsel, accountants, and financial advisers familiar with the healthcare industry and historical trends can be a good resource to help identify potential issues and solutions.