Surviving the new landscape of physician reimbursement

CNN recently posted an article titled “Doctors Going Broke.”  It described several cases of independent physicians who are near bankruptcy although they once were quite well off.  For instance, the article detailed the case of Dr. William Pentz, a cardiologist in a small group practice, who had to borrow money last month to make payroll.  He and the other cardiologists have cut their salaries in order to meet overhead.  Dr. Pentz ascribed the budget problems of the practice to the 35% to 40% cut in Medicare reimbursements for certain tests, such as stress tests.  The practice overall saw a 9% decline in income compared to 2010.  The article did say that there is a worrisome rise in the number of physicians experiencing financial difficulties.  Although some point to new regulations and declining enrollment as the source of the troubles some financial experts point out that the problems may be due to the lack of business acumen of physicians and their staff.

A day after this report the Wall Street Journal posted an article about the bankruptcy and decline of several large corporations, including Kodak and Barnes & Noble.  It compared these organizations to successful ones such as IBM and Johnson and Johnson.  Briefly, it emphasized that the successful organizations were willing to take some risks on future developments and invest some of their capital into these risks.  Not all such investments were successful but enough were to insure the success of the business.

With a bit of insight and some reasoning skills I believe I see in these patterns similarities to Darwin’s theory on the survival of the species.  Businesses and physician practices that adapt to their changing environments succeed where others languish or subside or sell their practices to hospital groups or insurers.

What are some of the common challenges that independent physicians as well as those that are part of hospital groups must face that directly affect income?  Doctors face a 1% cut in Medicare reimbursement this year if they have not successfully demonstrated that they are using e-precribing in their practice.  Practices must start using the new HIPAA security protocols this year or face cuts in reimbursements.  This is the last year that physicians can receive the full $44000 for the adoption of EHR’s.  These are the most prominent challenges facing physicians but there are many others as mentioned in the opening paragraph.

What are some of the opportunities for independent physicians?  Some independent physician practices are doing well in spite of the challenges.  Many have looked at the changing landscape of reimbursement and have altered the way that they provide their services to maximize these new sources of income.  To me it seems that many of the increased sources of income are for primary care groups and others who provide primary care services.  One such example that comes to mind is the Patient Centered Medical Home.  Although CMS is not reimbursing groups for becoming PCMH’s yet, some private insurers are.  Blue Cross Blue Shield of Michigan is rewarding practices financially that become qualified as PCMH’s.  The January 27 edition of the Wall Street Journal stated that WellPoint and Aetna are beginning to reward primary care physicians for becoming certified a PCMH.

Another example is the formation of Accountable Care Organizations by physician groups.  Although it seems that most medical professionals think about CMS’s rules for ACO’s several physician groups are contracting with private payers to form ACO’s.  Advocate Care in Illinois has successfully done so.  The final rules from CMS on the formation of ACO’s has made it much easier for physician groups to contract with CMS in the formation of an ACO without the inclusion of a hospital group as a partner.

I have found some very good resources that describe in some detail pathways for physicians to adopt in order to improve their income and outcomes for patients in light of the new landscape for reimbursement.  One in particular that I like is Pathways for Physician Success Under Healthcare Payment and Delivery Reforms; it is posted on the AMA website.  It describes in some detail the major new initiatives in payment reform, including PCMH’s and ACO’s.  It also describes in some detail the skills needed by physician groups to successfully accommodate the new payment models.  Among the skills are the ability to improve the delivery of the quality of service and the ability to be able to read and interpret data for the improvement of the quality of services delivered.  The AMA also has a webpage that has many other resources for the successful adoption of new payment models. The American Society for Quality also has resources for healthcare that help develop the skills necessary for the adoption of the new payment models.

What are some of the change processes physicians can adopt in order to change their practices effectively?  There are several, such as Lean Healthcare, Six Sigma and Total Quality Management.  At the heart of most of them is the Plan-Do-Check-Act cycle, a skill which most professional healthcare providers can learn.  At its heart are teamwork and effective leadership.

Donald Tex Bryant is a consultant who helps healthcare providers meet their challenges. He can be reached at Bryant’s Healthcare Solutions.

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