By: Becky Petross, Vice President of Practice Management
The population of the United States is aging. Estimates indicate that by 2050 the population of people aged 65 and older will nearly double, reaching 88.5 million, or 20% of the total U.S. population.
This shift in population age will increase the number of patients needing care, the complexity of health issues, and the cost of providing care, and decrease the payment received for this care. Medicare has already started working to decrease costs and control quality of care. Hospitals and physicians were previously incentivized to demonstrate high-quality care and now face penalties for failing to meet minimum standards. Along with other anesthesia billing modifiers, The Value-based payment Modifier is another vehicle for Medicare to penalize under-performing clinicians and reward those meeting or exceeding quality and cost metrics. In 2016, Medicare will be implementing bundled payments on joint replacement procedures in select localities in an attempt to reduce cost and improve quality outcomes. Beginning in 2019, a merit-based incentive payment system (MIPS) will be implemented to closely match cost with value. Each of these Medicare policies will create downward pressure on anesthesia revenue, even if the correct anesthesia billing modifiers are in place.
Another concern for anesthesia groups as the population ages is the Independent Payment Advisory Board, which was established as part of the Patient Protection and Affordable Care Act. Each year the board will evaluate and project Medicare growth for the next two years. If the expected growth exceeds pre-defined metrics, the board is to recommend a reduction in Medicare payments. Without transparency and stakeholder input, the 15-member non-elected board has unilateral power to reduce payments to physicians. Hospitals and hospice are exempt from reductions through 2019 (American Medical Association, n.d.), leaving physicians to bear the brunt of the Medicare growth-offset.
It will be difficult, at best, to estimate the impact of changes in payment methodologies by Medicare as they have not yet been outlined in sufficient detail. However, it is important to take a look at how a shift in payer mix due to the aging population, from higher paying commercial payers to lower paying Medicare payers, will change revenue for your group. The sample analysis to the right demonstrates how a small shift from commercial to Medicare has a significant impact on the bottom line, all other things equal.
Strategy to Mitigate Revenue Decline
While there is nothing that can be done to change the fact that the average age of U.S. citizens is increasing, there are steps that can be taken to help protect your business. One important task is to be knowledgeable of your patients’ various managed Medicare plans. It is important to negotiate with the payers that offer Medicare products in addition to their commercial plan to maximize your revenue. There may be opportunity to negotiate a rate more than 100% of the Medicare rate.
Another important step is analyzing your practice costs. Monitoring OR utilization and staffing will ensure you are making the most of the time you are working. Regular communication with the facility regarding optimum OR schedules will go a long way for your practice and your relationship with the hospital.
Anesthesia practices will be well served to monitor their payer mix closely as the average age of the U.S population increases. Incorporating anesthesia billing modifiers early on can help preserve earnings by off-setting the downward pressure on payments with increases in managed care plans and critically evaluating the group’s expenses.