Best Practices

New payment patterns could affect access to patients

Ophthalmologists need to prepare for changes in their payer ecosystem.

By Derek Preece

Passage of the Affordable Care Act (ACA) in 2010 has sent multiple shockwaves through health-care payers, providers and patients in the United States — and the changes are not complete. As leaders at insurance companies, hospitals, physician practices and ancillary providers struggle to figure out the new paradigms they will need to work under, many traditional processes are being replaced by experimental approaches designed to address the evolving landscape. Nowhere are these changes more disquieting for ophthalmology practices than in how the ACA could potentially disrupt their access to patients.

In practical terms

Losing access to even a relatively small group of patients can mean dramatic changes in the health of a practice. For example, let’s take a small practice that collects $1 million a year for patient services and spends $600,000 on operating expenses — for an overhead rate of 60% and an owner-income rate of 40% of revenues. In this practice, the owner-doctor makes $400,000 per year, but if the practice loses access to 10% of its patients and has revenues reduced to $900,000 per year, the owner-physician will take a big hit — 25% of his income will be gone ($100,000 in lost revenue ÷ $400,000 in income). Of course, the practice may be able to reduce some costs to soften that blow or replace the lost patients with others, but the fact remains that losing access to patients is a major challenge for any practice.

The ground is shifting

When the ACA became law, it authorized Medicare to allow establishment of Accountable Care Organizations (ACOs). The development caused considerable concern among ophthalmologists that Medicare patients assigned to an ACO would not be allowed to see physicians who were not members of that ACO. However, Medicare’s final rules make it clear that ACOs cannot force patients to see specific providers, much to the relief of the eye-care community.

On the other hand, the ACA has pushed insurers, hospitals and other providers to reduce costs within health care. One reaction to that pressure has been for payers to change the way they pay for services. In some markets, insurance companies are contracting with the biggest providers (i.e., hospitals and/or large multispecialty clinics) to provide all care. The large provider then is responsible for contracting for any needed care that is not within its current services. As hospitals have become the employer for many physician specialties, they also have found themselves negotiating physician contracts with insurance companies.

The evolution of that circumstance has been for insurers and hospitals to contract for physician care for all specialties. For ophthalmology practices, this could mean a contract with a hospital for access to certain groups of patients, rather than directly signing provider agreements with individual insurers.

These changes in payment methodology benefit the insurer because insurers delegate much of the responsibility for containing costs to the large entity. The changes benefit the hospital or large medical group that holds the contract with the insurance company because it becomes the payer for all services and can better control costs by keeping care within a network of physicians and ancillary providers.

Using data derived from the claims of many practices, the hospital or large provider, the theory goes, will be able to detect patterns of overuse of services, unnecessary or duplicative tests, improper prescriptions, and so on, and will be able to control those factors to hold down costs. In addition, insurers have long held that by shrinking physician panels in various specialties, claims for services in those specialties can be reduced, thereby decreasing their costs. That method of controlling costs is not lost on hospital administrators.

Transparent peril

The danger for ophthalmology in these new relationships is clear: Having payments shift from insurers to hospitals or other entities creates a situation in which those payments could be at risk. For example, say in one particular market there is a practice with a doctor who is well-connected in the hospital that has contracted with a payer for physician care: The other ophthalmology practices in that market may find their access to patients restricted or denied. In addition, as insurers squeeze overall payments for care, the entity that controls the money will make sure its margins are preserved at the expense of reimbursement rates for other providers.

Also, regarding facility and physician reimbursements for a course of treatment being bundled into one payment, the entity that controls the payment will take its cut first and the doctor will get what is left over. All of these arrangements will be subject to negotiations, but the entity that controls the flow of funds will be in the strongest bargaining position.

Because health care is a localized business, each market is evolving in a different way. So it is imperative that ophthalmology practice owners and management teams stay close to what is happening in their specific location. I suggest these strategies:

Monitor the landscape

Changing payment patterns might affect your practice’s access to patients. Consequently, monitoring the health-care landscape in your local market could become a vital priority. Failure to build good relationships with medical businesses outside of ophthalmology could put your practice at risk of losing patients and income. OM

Derek Preece is a principal and executive 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.