Happy 2016: Let’s talk less $$$

With several factors impacting your revenue in the new year, have a good defense.

By Maureen Waddle

In part two of my series on trends and where and how they’ll impact practices this year, I will examine downward pressure on revenue. Then I’ll discuss actions that practices are taking in the face of tighter profit margins. (For Part one, on the trend of increasing expenses, see the December issue of Ophthalmology Management).

CMS quality pay programs

Practices that did not meet quality-reporting criteria in 2014 will have their Medicare payments reduced by up to 2%, and an additional 2% adjustment may be added for lack of Meaningful Use (MU) reporting in 2014. For more information regarding how Medicare calculates whether providers have met quality requirements, visit the CMS’ website (http://tinyurl.com/OMNewYear1).

Also, the criteria for the new Merit-Based Incentive Payment System (MIPS) will be established this year. Practices can avoid the 6% penalties slated for 2018 that will hinge on their quality measures and MU reporting in 2016.

Continued expansion of ACA

Despite warnings of payment program adjustments, I haven’t seen this develop in the past few years. However, in 2016, I predict that more payers will come to providers with programs that “share risk.” I anticipate programs such as capitation or simple shared-savings programs that mirror the CMS program. These might include bundled payment programs to pay per diagnosis or to cover all components of an episode of care (e.g., anesthesia, facility and professional fees lumped into one sum).

Forces driving this conclusion include:

1. Increased enrollment in Medicaid programs. The ACA expanded the poverty rate that allowed more people to qualify for coverage in the Medicaid programs. Because most of these programs have lower reimbursement rates an increasing number of covered patients are demanding services, but practices are contracted at lower reimbursement for these services. Providers may want to offer a different payment methodology for this patient population.

2. Increased regulations for health insurance companies and a stripping of profits. With greater consolidation of payers, we now have only three mega players. With their mergers finalized in 2015, I expect the impact of those consolidations to be felt at the bargaining table, giving payers more power to negotiate with employer groups and providers.

3. Lack of cost savings with current models of accountable care organizations (ACOs). More Medicare and Medicaid patients are slated to move into ACO programs. Our nation had 744 ACOs in 2015, according to Leavitt Partners Center for Accountable Care Intelligence. With the lackluster success of the pioneer ACOs (13 dropped out of the program), such organizations will undoubtedly look to adjust pay methods to meet the “triple aim” (improved quality, increased patient satisfaction and lower costs).

Big data/population health management

Big data refers to the use of large data sets to analyze and then reveal patterns and trends. In the health-care industry, understanding data helps lead to better “population health management” by focusing on preventive measures and to better understanding the early signs of disease, which simplifies treatment and ultimately reduces costs.

However, now that CMS has started to capture more of this information, no one is exactly sure how it will be applied. The release of provider payment information under the “Sunshine Act” proved that releasing data without necessary filters can lead to wrong conclusions. In 2015, several independent insurance companies began sending reports on “Quality Provider” ratings. They gave little explanation to the formulas for determining these ratings, and many providers and ASCs quickly found they were strictly tied to claims, and much more, related to cost rather than quality.

Many similar reports will be released in 2016 as CMS and all payers try to discover how the information will help lower the costs of providing health care. While observers might not see compensation directly tied to this type of reporting in 2016, these types of reports may build the foundation for future payment methods and provider negotiations.

Practice responses

To combat decreasing reimbursement while sharing rising expenses, consider tapping into other sources of revenues. One way to do this: partner with different eye subspecialties. Such consolidation should give a practice more power when negotiating payer demands. Larger practices are acquiring smaller practices to form regional eye-care provider groups.

In 2014, private equity (PE) emerged as a player in practice acquisition, a reminder of the 1990s’ physician-practice management companies. While tightening profit margins presents unique challenges for PE models, more practices are considering this alternative due to the uncertain future of health care and because they can earn a decent return on their investment by selling to a PE firm or other entity such as a larger multispecialty medical group or hospital.

Other practices are working to position their future in light of the trends. Their strategies include:

• Physician extenders. The provider-demand imbalance has led many practices to expand use of physician extenders and I anticipate this trend will continue in 2016. Optometrists are the most natural physician extenders, but physician assistants are becoming more common as well.

• Diversification. To counter declining reimbursement, more practices are looking to diversify added cash-pay service lines. These include cosmetic services and products, dry eye clinics and advanced technology services associated with cataract surgery.

• Increasing communication with local health-care systems. Practices are talking with their local health-care systems and ACOs to better understand positioning for the future. Potential positioning strategies include providing all subspecialties and, perhaps, expanding geographic coverage — either through networks or by opening satellite locations.

• Using data to prepare for payer conversations. Looking at the practice through the eyes of the payers and using the practice’s own data to evaluate its position vis-á-vis payer negotiations should help prepare for conversations with payers regarding payment options. Many practices have adopted patient satisfaction data to help prove they can meet the “triple aim” (improved quality, patient satisfaction and lower costs) that insurers are touting.

Good year to strategize

Because of tightening profit margins, practices must find creative ways to meet patient demands in a cost-effective manner. More practices are looking to engage employees to help find solutions and create a continuous improvement culture. They want technological solutions to save staff time without diminishing the patient experience.

While practices will try out new programs, 2016 should be a good year for them to settle into their recent infrastructure changes to meet all requirements and strategically position for the future. The impetus to curb health-care costs will be the major force for years to come. 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.