Management Essentials

Avoiding Death by a Thousand Cuts

With so many changes to reimbursements, we must rethink our business models.

By Farrell “Toby” Tyson, MD, FACS

Many of us have heard the saying “death by a thousand cuts.” For at least two decades, ophthalmology practices have been living it. The latest CMS fee schedule results in a 3% overall cut for ophthalmology and a 20% discount on all diagnostic tests after the first on a given date of service. These cuts will not be the last. We still face more than 27% in cuts January 1 if Congress doesn’t fix the SGR formula.

Political Roadblocks

Politicians have learned many lessons from dealing with medicine. First and foremost is to divide and conquer. This was quite evident during the passage of the Affordable Care Act. Instead of organized medicine standing together, they allowed themselves to be splintered and deemed irrelevant. This fracture is not likely to heal in the near future.

Second, politicians have learned that change is best done gradually. This is Washington’s greatest skill: patience. Washington doesn’t work in months or years, but over decades. We have seen cataract surgery reimbursement go from more than $2,000 in 1980s dollars to a little more than $500 today. While the cost of surgery has increased and the dollar’s value decreased, our reimbursement has plummeted.

Third, politicians have learned they can legislate practice patterns. Just last year, CMS drastically slashed reimbursement for OCT imaging to the $30 range. Meanwhile, fundus photography reimbursements have remained around $70. So ophthalmologists shifted away from a diagnostic test that can visualize the different cell layers of the retina in favor of a photograph of the back of the eye. At $30 a test, a $60,000 OCT system is difficult to justify when a $15,000 camera reimburses twice as much for the same diagnosis code. This is dumbing down medicine.

Weaning Off Government

The latest cuts to cataract surgery are not just aimed at reducing costs, but also at limiting access to care. Cataract surgery reimbursement received a disproportionately severe 13.5% decrease. These cuts place an emphasis on inclinic care and penalize operative procedures. It is getting very close to the point where only a limited number of very efficient surgeons with high volumes will be able to financially perform cataract surgery. One only needs to look at our retina colleagues who find it better, financially, to stay in the clinic and avoid the operating room.

The clear answer to these problems is to wean your practice off government dollars. This can be accomplished by developing lines of business usually paid out-of-pocket. These areas include laser refractive surgery, oculo-facial plastic surgery, optical dispensing, audiology and premium IOL cataract surgery.

Areas to Expand

Laser refractive surgery has seen its highs and lows. Currently the trend is that LASIK volumes are increasing nationwide. Add to this the falling prices in excimer and femtosecond lasers and the overhead models start to look much more attractive. One no longer needs high LASIK volumes to just break even. The same holds true with oculofacial plastic surgery.

The baby boomers are coming and they are more active and don’t like aging. In addition, they have weathered the recession better than most and have more available liquid assets. Cosmetic lasers that once cost up to $70,000 are now selling brand new for around half that. This allows for more attractive pricing of procedures and better margins for doctors. Optical dispensaries and audiology, if run carefully, can produce a nice income stream that can help offset reductions in reimbursement schedules. These areas of your practice, though, will require close supervision.

The biggest opportunity remains premium IOL cataract surgery. Adding toric IOLs to your surgical options can add significantly to the bottom line. Along with accommodating and multifocal IOLs and intraoperative aberrometry, you can quickly see close to a 50% upsell rate.

Through these additions to your practice you can not only stop the bleeding, but also help to protect yourself and your practice from a slow, agonizing death. OM

Farrell C. Tyson, MD, FACS, is a refractive cataract/glaucoma eye surgeon at the Cape Coral Eye Center in Florida. He may be reached at tysonfc@hotmail.com.