Profit trends don’t bode well in 2016

Knowledge is power, so get informed and plan accordingly for the New Year.

By Maureen Waddle

While many new and ongoing external forces and trends impact eye-care practices, many do not require the massive operational changes practices have endured in the last two years (i.e., ICD-10 and Stage 2 Meaningful Use). Still, understanding the 2016 trends and their potential impact is critical to help practices plan for the future.

Trends in 2016 are indicative of continued tightening profit margins and uncertainty for physicians. Generally, the trends fall into two primary categories: those that increase business costs and those putting downward pressure on revenue. This article contains some trends to expect in 2016 and an overview of tactics to manage the them. In part one, I’ll address the trends that will drive up the cost of doing business.

Regulatory requirements

The alphabet soup of governmental programs affecting practices includes the following from the Centers for Medicare and Medicaid (CMS): HIPAA, EMR, Meaningful Use, ICD-10, PQRS, CQM, and MIPS. Now add safety and human resource compliance items at both the federal and state level. The number of regulatory programs has increased significantly over the past five years, with continuous modifications. For 2016, changes to the Meaningful Use requirements have actually simplified compliance (contact your specialty organization for more details or visit http://tinyurl.com/nnfmlyg). Practices must increase staffing or find outsourced vendors to stay compliant with all programs. In our experience, this is raising practice’s expenses by $30,000 to $60,000 per year.

Affordable Care Act changes

The ACA has changed the health-care landscape since 2010. In 2016, practices can expect to see more impact on two fronts: health-care providers (see more below) and business employers.

As employers, be aware of the regulatory steps being implemented in 2016. “Large-group employers,” which the ACA previously defined as those with more than 101 employees, now includes employers with 51 to 100 employees. Ophthalmic practices that fall into this group must meet requirements, such as additional reporting and larger penalties for failing to meet employer mandates. Furthermore, the costs for purchasing health care continue to rise. Employers and individuals face higher deductible plans, higher copays and higher premiums.

A new component of the ACA effective in 2016 is the Small-Business Health Options Program. This program is supposed to allow employers to purchase more affordable coverage for their groups through the health-care exchanges. Although with the consolidation in insurance companies and the recent bankruptcies of several purchasing co-ops formed specifically to serve ACA programs, it may be difficult for purchasers to find good options. Expenses for actual purchase of health care as well as expenses to stay compliant will hit practices in 2016.

Advancing medical treatments and devices

New diagnostic equipment, surgical equipment and patient devices expand treatment choices, but they also expand the cost of doing business. Many insurance companies deny coverage for new technology. This makes it more difficult for physicians to decide whether to purchase equipment they believe will improve the quality of care, because they may not be able to generate enough revenue to offset the purchase cost.

Business technology

While computer and communication system updates come with a cost, they often include an efficiency advantage that offsets it. The challenge for practices is monitoring all of the options and identifying those that will be beneficial. Direct patient-to-practice communication now available in a variety of options may enhance patient satisfaction and improve patient outcomes.

A main reason eye-care providers look for different ways to practice is because they’d rather avoid the rising costs of technology. Many are consolidating, while others seek arrangements to share infrastructure components such as computer software, billing services and human resources. Mobile device companies help practices access big-ticket equipment when they do not have the volume to justify its purchase.

Provider/demand imbalance

U.S. Census Bureau figures show 13% of the population was 65 or older in 2010 and projected to be 14.5% in 2015. The aging baby boomer generation greatly increases the prevalence of eye disease and the demand for eye care services. On the other hand, many ophthalmologists in the baby boomer generation are retiring as too few ophthalmologists are entering practice to replace them. With a smaller candidate pool, practices are finding that provider recruitment takes longer. While the demand for service may indicate job security, this imbalance may drive up provider compensation expenses. The most significant impact will be changes to practice models as ophthalmologists seek physician extenders. More practices have added optometry, physician assistants and even nurse practitioners to help meet the increasing demand.

Shrinking quantity and quality of workforce

Another fact from the U.S. Bureau of Labor Statistics: Growth in the health-care market outpaces general growth in all jobs. While a thriving job market for our industry is good news, there are downsides too. The increasing complexities previously referenced require an increase in business acumen for practice administrators and all positions. And, as the economy slowly rebounds, the demand for employees across all industries has begun to shrink supply to drive salaries upward. This results in increasing expenses for practices as they struggle with retention and hiring costs. Many larger practices have taken the proactive approach of creating career paths and hiring entry-level personnel and then providing the necessary training. On-the-job training programs are augmented with seminars and online training; I’ve even seen some who have developed training through the local community college in order to have a steady stream of potential employees available.

Next month, I’ll examine the forces that will exert downward pressure on reimbursements and how practices are dealing with them. OM

About the Author
	Maureen Waddle is a senior consultant with BSM Consulting, an internationally recognized health care consulting firm headquartered in Incline Village, Nev. and Scottsdale, Ariz. For more information about the author, BSM Consulting, or content/resources discussed in this article, please visit www.BSMconsulting.com.