Planning for 'What If' Scenarios at Your Medical Practice

April 7, 2013
Gregory Mertz

Reimbursement decline, global payments, and the shift from volume to value are all possible scenarios your medical practice should explore today.

My last post on planning must have struck a nerve. I received a number of e-mails asking for more details about how to plan for future changes in reimbursement and care models. While the traditional planning process addresses these issues and more it seems that income is on everyone’s mind.

You might want to start your planning process with a "what if" exercise. There are many topics that could be addressed but many require you to collect data before you can effectively complete your task.

Let’s look at what is involved:

• What if reimbursement drops? First, decide what new level of payment will be the new norm. Perhaps you choose Medicare rates. Then what? Determine your cost per relative value unit (RVU) and compare this with the published reimbursement rate per RVU in the current Physician’s Fee Schedule for Medicare. Hopefully your billing system can produce a report that converts all your CPT codes into RVUs, otherwise you need to do that manually. Divide the cost of running your practice including what you want to earn by the total RVUs you produced for the recent year. Now multiply the total RVUs by the Medicare Conversion Factor (the amount Medicare will pay per RVU for your region) and, hopefully the two amounts are close. If the reimbursement doesn’t equal or exceed your cost you need to find ways to reduce operating expenses.

• What if payers shift to global payments? This means that you and the hospital will receive a fixed amount that is tied to the diagnosis of the patient. This will require you and the hospital to agree on a formula to divide that amount. If you and your specialty colleagues have developed a risk-friendly organization, you can negotiate as a group; otherwise you are on your own so that you avoid anticompetitive issues. If you think this outcome is likely then it is time to open a dialogue with the hospital leadership.

• What if value replaces volume as a reimbursement model? What can you do to use your support staff to handle appropriate care tasks? Essentially you will be provided a fixed amount to care for the patients in your panel. If you can resolve a patient concern on the phone this avoids a more expensive office visit. Can your nurse handle this? If not, what staff might you need? Create a budget that reflects the cost of your practice under this new staffing model so that you have a reference point to use when presented with a value care payment model.

• What is the timeframe for change? Don’t make major changes to the structure of your practice before payers are prepared to reward your efforts. Creating processes that offer alternatives to office care in an environment that is fee-for-service based is not healthy.

Perhaps your hospital has already begun to develop models that might assist in your "what if" process. If they have, they should be happy to share their findings because they will know that a strong medical staff is key to their future. An alternative is what I suggested in an earlier post; create a physician organization that is focused on quality and will permit you and your colleagues to plan together.

Whatever your approach to planning the outcome will be far more valuable than not making the attempt.