Physicians get a temporary reprieve from Congress, but payment challenges loom.
The end of the 2021 session of Congress saw what has become an annual last-minute scramble to stem massive cuts to Medicare reimbursement. Although the reprieve was welcomed by physician organizations, at some point, cuts will have to be made to achieve the required budget neutrality. In addition, telehealth changes are likely coming whenever the public health emergency is lifted, and physicians can also expect more prior authorizations and other cost-saving moves from payers.
“People are wondering, ‘How much will I get paid for this or that?’ The answer is: It’s never enough,” says Mark Bethke, FSA, managing director of Deloitte Consulting LLP. “They are never going to cover your underlying costs that you need to get.”
Bethke adds that the congressional scramble around Medicare will probably continue each year and that fee schedules are not likely to increase by significant amounts. “At some point, people need to think about getting off the hamster wheel of fee for service and think of alternative ways to collect revenue.”
What follows are the reimbursement challenges that physicians face for 2022.
In mid-December, Congress averted what would have been a devastating cut to physician payments in Medicare, which were scheduled to be reduced by 9.7% across several areas. Physician payments were scheduled to see a 3.75% reduction to meet budget neutrality requirements, but because of COVID-19, Congress opted to delay all but .75%.
Physicians can also look forward to a slow reinstatement of the Medicare sequester. “The sequester is not completely going away,” says Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association (MGMA). “It will be phased back in 1%, in March, and the 2% will be phased back in in July.”
Gilberg says that 4% of the original 9.75% of Medicare cuts originates with Congress not offsetting money that was appropriated as part of the American Rescue Plan Act from early 2021.
“So what happens when Congress spends money and doesn’t offset it?” asks Gilberg. “It triggered statutory pay-as-you-go requirements, which would have resulted in 4% cuts.”
All told, physicians saw a .75% reduction to the Medicare conversion factor Jan. 1, which is a carryover from 2021. The other cuts — other than the phased-in 2% sequester — will be prevented through the end of 2022.
The challenge with Medicare reimbursement is when the program makes changes to its relative values that result in spending increases, it triggers budget neutrality requirements that reduce the Medicare conversion factor to offset increases in the relative values. Congress stepped in with a short-term solution of providing about $3 billion to fund the 3% of the scheduled 3.75% in cuts.
“But that was only for one year,” says Gilberg. “At some point, there will be a day of reckoning when the budget neutrality requirements will be implemented. That’s a requirement by law. The medical community has been successful in delaying this, but ultimately Congress is not going to repeal budget neutrality requirements, so we may have 3% of this to deal with in 2023.”
To permanently eliminate it would cost $30 billion or more, and Gilberg says he doesn’t see Congress being willing to do that. At some point, Medicare is going to have to square its books to meet the budget neutrality requirements. They were delayed in 2021 and this year because of the pandemic, but as 2023 approaches, will Congress be willing to do it again?
“Medicare doesn’t pay a lot, and oftentimes practices use their commercial contracts, which tend to be higher than Medicare, to offset what they lose on the Medicare side of their book of business,” says Gilberg. “But at some point, if rates go below a certain point and they can’t offset the losses that they incur by seeing Medicare patients, then they have to make tough decisions about whether they could still see Medicare patients.”
Bethke says that leaving Medicare probably isn’t a long-term solution to a practice’s problems, noting that commercial payers are dealing with the same challenges as the government and can’t keep raising rates at an increasing pace. “You don’t want to move away from Medicare because that is still where a lot of the money is; that’s still where a lot of services are; that’s where a growing percentage of the population is,” Bethke says. “And there is a lot of opportunity to still improve care, improve chronic conditions and focus on wellness and improving the quality of life and outcomes.”
If payment cuts are so severe that physicians start a mass exodus out of Medicare, it might force Congress to come up with a better solution. Gilberg points to the since-repealed sustainable growth rate. “It would have cuts looming over physicians every year in Medicare, and it destabilized practices; it caused them not to invest in new technology. It’s obviously hard to plan and project out in the year if every December Congress is deciding whether or not your reimbursement could be cut significantly.”
Because Congress got rid of the vast majority of cuts this year, it does show they are aware of the potential damage to the Medicare program. “Hopefully, this is more short term and not the long-term problems we had for at least a decade going up to 2015 with the SGR (sustainable growth rate formula),” says Gilberg. “But these cuts were largely a result of Congress overspending and not offsetting legislation that was completely unrelated to Medicare. We don’t know, for example, what may or may not happen with various infrastructure legislation, so it could happen again — that these cuts are kind of hanging over the head of physicians and Medicare.”
When the pandemic hit and many patients were in lockdown or simply afraid to go to a doctor’s office, telehealth filled the gap. Many practices invested in the technology to remotely talk to patients, and reimbursement was boosted to match that of an office visit. Everyone seemed to love the concept of expanded access and the convenience, except for one group.
“There’s still some degree of skepticism about telehealth, at least in Washington,” says Gilberg.
Prior to the pandemic, Medicare only covered telehealth services in rural areas — and with restrictions on which technology a doctor could use to talk to a patient. Those restrictions were lifted as part of the public health emergency. When the emergency is over, the rules will revert to existing law and Medicare will not cover telehealth in most cases.
“A lot of private payers also cover Medicare or follow Medicare-type payment policies, so I would expect a contraction in coverage for telehealth as well,” says Gilberg. “It would be both a contraction in coverage as well as a reduction in the amount paid for telehealth services.”
He says that Congress has concerns that if the originating site restrictions are lifted to allow telehealth outside of rural areas, then Medicare spending might increase significantly, perhaps by billions. The idea is that easier access would promote greater utilization. In addition, there are concerns about privacy, fraud risks and the quality of services when physicians can’t actually lay hands on the patient.
“All of those things need to be sorted out before we would see a permanent telehealth expansion in Medicare,” says Gilberg. “My best prediction on this is after the public health emergency, I do see a residual demand for telehealth, but I don’t see Congress just permanently extending all this indefinitely.”
One possibility is that Congress will keep the expansion for a couple years to study the overall impact to Medicare. Private payers are also somewhat skeptical of it having a negative impact on their bottom lines.
“Private payers do like telehealth, especially for primary care services, (because) they can make sure that certain preventive care is delivered,” says Gilberg. “But that doesn’t mean that they’re necessarily going to just pay physicians in their network the exact same amount for telehealth visit.”
Bethke says he expects telehealth will remain in some form. “I don’t see how it makes sense to back off of telehealth and technology and evolving our care model,” he says. “It just seems like a backward approach of not helping evolve and transform out industry.”
The strategy some payers are using is to buy a telehealth company and only reimburse for telehealth if the patient uses their in-house service. “I’m a little contrarian about telehealth and that they’re just not going to open up the floodgates for telehealth on the public or private side,” says Gilberg. “They’re going to kind of assess the situation and then move forward based on findings.”
Surprise billing legislation intended to protect consumers could end up hurting the reimbursement of practices that negotiated good deals with payers. “The way CMS (Centers for Medicare & Medicaid Services) implemented some of the criteria using benchmark rates could have a very negative effect for those practices that have negotiated contracts above benchmark rates that would be set as a result of surprise billing regulations,” says Gilberg.
In addition, payers have reinstated different utilization management techniques, such as prior authorizations. Gilberg says MGMA members have reported a significant uptick in prior authorization usage, as well as expanding into different areas. For example, some prior authorization requirements now restrict where a patient can get services, so if the insurer deems the patient could receive the same service in an outpatient setting, they will only cover it being done outside the hospital setting.
These increasing payer demands are putting more pressure on practice staff, which has been exacerbated by the shortage of workers, costing practices more money in talent searches, training and time.
Bethke says it’s all part of payers’ attempts to focus on their premiums and what those are made up of. “Yes, it’s their admin costs, but it’s also utilization and unit prices, and they’re getting aggressive about how to manage that. They’re realizing they need to do more than just the old way of utilization management — prior authorizations and hammering fee schedules. They’re still doing that, but (they’re) also realizing they have to focus more on the provider relationships and the consumer experience because (those) ultimately (are what create) their network and those are the people who are buying their product.”
To be successful with payers, practices are going to have to not only improve outcomes, but also the consumer experience. This means understanding what the practice does well and marketing that to both payers and patients, Bethke says.
“That doesn’t mean you have to be the cheapest provider or the least expensive because if you think about that in retail, that’s not always a good thing,” Bethke says. “You don’t want to be the most expensive, but you want to create a brand and market to the individuals that you want to come to your practice.”
That same information used to promote the practice to patients can be used to show payers where the practice fits in the market and how it adds to the overall patient experience when it comes time to renegotiate, according to Bethke.
Many practices with value-based contracts fared better than those on fee-for-service deals, mainly because many of the value-based ones offered a monthly fee per month for payment or a set amount of money to manage a patient population. As a result, value-based practices saw less disruption to their revenue.
“Where it’s become a little tricky with value-based care in the middle of the pandemic is that a lot of quality measures and measures of cost are based on benchmarks,” says Gilberg. “And because of the disruptions that we’ve seen as a result of the pandemic, the benchmarks have a lot of anomalies or aberrations in the benchmarks. It’s always tricky, for example, if volumes went down significantly in 2020, only to rebound in 2021.”
As the country emerges from the pandemic, value-based measures may have to deal with some anomalies as care returns to more normal levels. Practices probably won’t see a huge surge in value-based contracts, at least for now. “The measurement of both costs and quality has been affected by the pandemic,” says Gilberg. “It’s hard to envision a situation where you are going to see significant growth in value-based care until we emerge from the pandemic and kind of normalize the benchmarks for cost and quality.”
With so much economic pressure hitting smaller practices harder than most, can an independent practice with limited resources survive in a post-pandemic health care world with so many reimbursement obstacles?
Bethke says without scale, smaller practices will have a challenging time keeping up with the demands of the evolving health care industry. “That doesn’t mean those small shops have to close and go join the biggest system,” he says. “There are ways around that — they can join clinically integrated networks, and there are other ways to collaborate.” A smaller practice may have to join an accountable care organization or similar group to help with the logistical challenges and the data many payers now require. But being small can be a good thing too.
“I think the advantage that smaller practices have is that they’re nimble and they can adapt quickly,” says Gilberg. “And we are seeing a positive trend in terms of their ability to recover. If we can get beyond some of these near-term staffing shortages, then I think that will be a very positive thing. The fact remains, and most studies show that, especially either independent practices or just practices that are smaller in size, they tend to be able to deliver more personalized care and also at a lower cost than some of the larger institutional systems.”
For the best financial results, practices need to decide how they want to be reimbursed and then build from there. “Don’t focus on how you’re currently reimbursed; focus on what you think it should be,” Bethke says. “Once you’ve determined that based on the data, your history, where you believe you are valuable to the system and thinking about that part differently — maybe in the past you were in the fee-for-service world — then and only then can you think about what the right payment model to live in is.
“Change the order of operations about how you think about payment models.”