Top 10 business issues you'll face in 2013

January 10, 2013

A new year means new challenges for your practice. Here are 10 issues that you may have to face.

When it comes to the business of healthcare delivery, 2013 undoubtedly will be a year of transition. This month, a slew of provisions will take effect as a result of the Affordable Care Act (ACA), private and public payers will continue to experiment with new payment models, and additional tightening overall will occur to trim healthcare expenditures.

Although policymakers have viewed primary care as “the value” in a system that consumed nearly 18% of the gross domestic product last year, doctors at the ground level will continue to be challenged by reimbursements and the government push to open up access to healthcare. Physician organizations will work toward putting an obese bureaucracy on a diet, but the challenges are daunting:

  • Although nearly 72% of healthcare providers have implemented an electronic health record (EHR) system, according to the most recent data from the Office of the National Coordinator (ONC) for Health Information Technology, the next push will be to make these systems interoperable.

  • Pressure to reduce costs will continue, and much of that pressure will be exerted on institutions and other high-cost areas of medicine.

  • Major hurdles will be experienced as the market moves to implement the International Classification of Diseases, 10th Revision (ICD-10), rules in October 2014. Although the numbers of codes increase substantially to offer a greater level of detail, the number is not the only change. The new terminology of ICD-10 “expands the concepts for injuries, laterality, and other related factors,” according to the American Medical Association (AMA).

Despite these challenges, upside exists for primary care physicians (PCPs). The work this year will be about transitioning, about guiding patients through a fragmented healthcare delivery system, about trying to prevent disease, about limiting intakes to hospitals and emergency departments, about gathering better data about the health of your patient panels, about building new avenues of communication with specialists and hospitals, and about getting paid for the work you do to help facilitate health and wellness for your patients.

Remember that in every great transition, innovation follows. Maybe the economist Theodore Levitt said it best: “The future belongs to people who see possibilities before they become obvious.”

Here is a list of 10 of the top business issues Medical Economics editors, board members, and consultants predict for the next year.

1. Affordable Care Act

In January, 10 key provisions of ACA go into effect. Some of the provisions will have a direct effect on doctors, including the launch of the Medicare bundled payment pilot, which aims to evaluate the model for physician services; acute, inpatient hospital services; outpatient hospital services; and post-acute care services for an episode of care. The 10% Medicare bonus for primary care (which took effect in 2011 and expires in 2015) has been tempered by calls for reductions to Medicare reimbursements due to sequestration.

On the other hand, Medicaid reimbursements will be increasing to 100% of Medicare rates, and provisions also will increase payments for Medicaid in states that offer Medicaid coverage with no patient cost-sharing for services recommended (rated A or B) by the U.S. Preventive Services Task Force and recommended immunizations.

When it comes to public payer programs, remember that seniors, two-person families, and low-income families higher incur higher healthcare expenses, according to a recent report by Deloitte Center for Health Solutions. Seniors account for nearly 37% of all healthcare costs yet make up about 13% of the population. The senior population also is expected to grow to 19% of the population by 2030.

Although the ACA implements a tax hike for Medicare Part A on people earning $200,000 a year or for couples earning more than $250,000 filing jointly, it also is giving patients deductions for unreimbursed medical claims.

2. Patient-Centered Medical Homes

The Patient-Centered Medical Home (PCMH) movement is on a fast track to grow even bigger in 2013, 1 year before the ACA fully takes effect.

Because the ACA gives physicians an economic incentive to improve the quality of care they provide, the PCMH model has become even more important for PCPs.

“2013 is really going to be the race to 2014, because that’s when many of the financial rewards for quality, and penalties for lack of quality, are going to kick in,” says Joseph E. Scherger, MD, MPH, vice president of primary care and academic affairs at Eisenhower Medical Center, Rancho Mirage, California, and a member of the Medical Economics Editorial Board. “You’ve got to be moving in this direction or, financially, you’re going to be in a negative spiral.”

The implementation of the ACA also will result in a bigger push for healthcare delivery systems to become accountable care organizations (ACOs), Scherger says. “As healthcare organizations move to be ACOs that deliver high-quality, value-driven care, at an affordable cost, they quickly realize that a PCMH model at the primary care level is very important,” he adds.

For PCPs who are part of a health system that is committed to becoming an ACO, the outlook is good. Practices that remain fee-for-service will have a tough time, however, Scherger predicts. 

“The bottom line is, your practice needs to become part of something larger or you’re facing more difficult times ahead,” he says. “Your quality numbers will not measure up if you’re not doing strategic, proactive care. Your reimbursements are going to be threatened.”

Also this year, look for care coordination payments to expand. “That’s going to be very important,” Scherger says. “As long as payment remains at nothing more than fee-for-service, the PCMH model is stymied.”

3. Jobs outlook

Good news for PCPs looking for employment: Your job prospects for 2013 and beyond are excellent. The hospitals and group practices that are looking to hire doctors are recruiting with a sense of urgency.

More than two-thirds, or 77.6%, of medical group administrators plan to hire more PCPs in the next 12 months, according to the Cejka Search annual Physician Retention Survey.

“This increased demand is the result of several seismic changes we’re seeing in the healthcare industry,” says Lori Schutte, president of the St. Louis, Missouri-based physician, allied health, and healthcare executive search firm. These changes include a surge of ACOs, reform measures, and changing workforce demographics.

“All medical practices and healthcare organizations will need to assess-and most likely increase-their primary care and advanced practice staff,” she adds.

Another contributing factor to the bright jobs outlook is a critical shortage of PCPs. The Association of American Medical Colleges projected in 2010 that there would be 90,000 too few physicians by 2020, a figure that remains unchanged.

“In 2013 and 2014, medical residency programs will experience more medical school students favoring primary care,” predicts John Hawkins, senior vice president of Merritt Hawkins, a physician search and consulting firm based in Irving, Texas.

But although the number of physicians in the workforce will increase, the number of hours they work each day will decrease due to more physicians working three-quarters of the time or part time, he says.

“We are in the business of recruiting families, not just physicians,” Hawkins says. “The next generation of doctors wants to balance their personal needs with their professional needs.”

Practice mergers and acquisitions by hospitals and healthcare systems will continue in 2013. As a result, many PCPs will work for hospitals, Hawkins says.

“By 2016, 75% of all practicing physicians will be employed by hospitals or healthcare systems,” he predicts, noting that “of the physicians that Merritt Hawkins placed last year, 63% were employed by hospitals.”

Four years ago, 35% of hospitals were not employing physicians because they didn’t want to do so, he says, adding that the physician shortage leaves them no choice anymore.

4. Physician Payment Sunshine Act

The ACA also included the Physician Payment Sunshine Act, which requires pharmaceutical, medical device, biological, and medical supply manufacturers to report to the U.S. Department of Health and Human Services (HHS) any payment of $10 or more (or multiple transfers of less than $10 that add up to $100) “or other transfer of value” they make to physicians or teaching hospitals. Reports also will include information such as the date of the payment, the form of payment, and the nature of the payment (for instance, whether it was in the form of a gift, consulting fees, entertainment, travel, research, grants, education, royalties, ownership or investment interest, etc.).

The Centers for Medicare and Medicaid Services (CMS) says the rule will “provide important transparency.”

In one survey published in March, 47% of the 500 compliance officers and physicians queried said they had not heard of the Sunshine Act. Several medical societies, those who would have reporting duties under the law, and members of Congress have expressed concerns about the act’s provisions or frustration with the delay in implementation, however. Issuance could come any day now and is expected by mid-February at the latest.

The ACA required the reporting procedures to be established by October 2011, with information collection beginning in January 2012 and data submitted to HHS by the end of March 2013. CMS ultimately published the proposed rule in December 2011, however, and accepted comments until February 2012. In November, CMS submitted a preliminary version of the final rule to the Office of Management and Budget for review by the Office of Information and Regulatory Affairs. Review could take up to 90 days, and then CMS will either revise it or the rule will be published.

CMS expects about 1,150 manufacturers and 420 group purchasing organizations to be required to submit information. Penalties for noncompliance range from $1,000 to $100,000 for each payment reported, with a maximum of $1 million per annual filing.

CMS expects 334,500 physicians and 1,100 teaching hospitals to be affected in the first year of the program and 250,875 physicians and 1,100 teaching hospitals to be affected in subsequent years.

5. Reimbursement

Reimbursements are decreasing in 2013. Fortunately for PCPs, however, specialists are expected to take the brunt of the loss, says Maxine Lewis, president of Medical Coding Reimbursement Management in Cincinnati, Ohio.

For example, “tremendous” reductions are on the way for reimbursement for cataract surgery, she says, adding that one of her ophthalmologist-clients is predicting a $75,000 loss. Lewis hasn’t seen much in terms of specific reductions on the primary care side and notes that the federal government appears to be getting the message that PCPs are the backbone of the medical community.

Another reimbursement issue to be aware of in 2013 involves bundled payments and chronic care. Lewis says physicians should take care to bill chronic conditions separately, because updates from CMS indicate that bills for chronic services bundled with less expensive services will not be reimbursed. Instead, the lesser of the bundled services will be the one that is paid for, she says.

“I really don’t think that was the intent of the code,” she says, “but CMS interprets things very differently.”

Overall, however, new incentive packages for PCPs should offset most reimbursement reductions, she says. But Lewis does see many more physicians gravitating toward ACOs and PCMHs for additional reimbursement. She has also seen-and expects to see more of-more care being relegated to nonphysicians. More PCPs and hospitals are hiring them, and Lewis says an emergency department in her area is even staffed entirely by physician assistants.

“We’re talking about quality of care, and it’s sort of in the background right now,” she says.

Lewis says physicians are having to see more patients to make ends meet, but says PCPs are less affected than specialists.

6. Sustainable growth rate

Could 2013 finally be the year that an alternative to the sustainable growth rate (SGR) is found?

Not anytime soon. Despite a rumored fix to the SGR in President Barack Obama’s proposal to avoid going over the “fiscal cliff,” organizations representing doctors were bracing themselves for a big cut at press time-and advising their members to do the same.

Physician groups have long criticized lawmakers for not addressing the SGR issue sooner, and Washington insiders say the formula has few fans on Capitol Hill, yet few are willing to delve into the work required to fix it. A full repeal of the formula would cost an estimated $240 billion-plus.

Congress may pass a last-minute short-term “patch,” as it has every year for several years now, to avoid a 27% cut in payments to physicians who treat Medicare patients that would kick in January 1. But if not, Jeremy Lazarus, MD, president of the AMA, says that physicians who treat Medicare patients would face individual losses of anywhere from $10,000 to $35,000. The White House predicts a total drop in Medicare payments of $14 billion-$39 million each day that the SGR is it not addressed-and says the cut would jeopardize care for 50 million people with Medicare, unnecessarily destabilizing the program.

The American Academy of Family Physicians estimates the loss at an average of $27,000 for individual family physicians. Additionally, the average small group practice would experience an $80,000 drop in Medicare payments, the organization estimates.

CMS already has announced that it won’t delay processing Medicare claims, meaning that physicians who care for Medicare patients will see immediate reductions January 1 if the SGR issue is not addressed.

“With no sign of action from Congress, physicians must prepare themselves and their patients for an impending Medicare crisis,” Lazarus says. Doctors who would have no choice but to restrict their involvement with Medicare if the SGR cuts go through should notify their patients as soon as possible so they can make other arrangements, the AMA advises.

7. Technology

More than three-fourths of physicians have now adopted EHRs, and the numbers have been climbing steadily, according to new data from the ONC.

Although the effort by doctors to go digital has been nothing short of monumental in just 3 years, ONC data indicate that the functionality and uses of EHR systems will only improve. In fact, it is already happening. At the end of December, the ONC reported that 72% of physicians are using e-prescribing (up from just 33% in 2009). Similarly, 80% of doctors were using computerized entry for medication orders.

For 2013, the buzzword is interoperability. Not only is communicating with other physicians a requirement for meeting meaningful use 2 as part of the government incentive program, doctors need these technologic tools to facilitate better communication with other physicians, not hinder it. In addition, 2013 will be about building more robust capabilities and better interfaces with medical equipment and diagnostic services.

Chronic care management and the support for home-based patients (or caregivers) will emerge as another key area to watch in terms of technologic applications. To reduce costs in the healthcare system, some of the care associated with chronic conditions will move back home, and experts say that change will drive an increasing need for patients to have the right monitoring tools, education, and reporting system. According to the Deloitte Center for Health Solutions, the demand for supervisory care (defined as care provided by friends and family members) is expected to increase. To meet this demand, the focus will turn to critical components of successful home-based care, including the use of mobile health monitoring technologies and care coordination models through PCMHs.

8. New taxes

Get ready for a likely triple whammy to your tax bill in 2013.

That warning comes from Steven Antico, LLM, a tax attorney in the Bergen County, New Jersey, office of law firm Garfunkel Wild PC.

The ACA, he explains, contains two tax-raising provisions. The first is an increase in the Medicare tax for self-employed individuals-a category that includes many PCPs-from 2.9% to 3.8%. The second is a 3.8% tax on all forms of unearned income, such as dividends, interest, and capital gains, intended to fund other parts of the ACA.

“A lot of physicians have passive investments, so those two [changes] are of particular relevance to doctors,” Antico says.

A third hit to tax bills may be the scheduled expiration of the President George W. Bush-era tax cuts, still on the table as of press time. Unless Congress has acted by the end of 2012, tax rates for everyone will have increased from 35% to 39.6%. Applying the increase only to joint incomes of more than $250,000-as the president proposed at the start of the “fiscal cliff” negotiations, still would affect many PCPs, Antico says.

A lesser-known change in the tax code with the potential to affect PCPs, he adds, is an increase in the income threshold for itemizing medical expenses, from 7.5% to 10% of an individual’s adjusted gross income.

“Some people might say, ‘If I’m never going to get any of these [medical] expenses back for purposes of my tax returns, maybe I just won’t go to the doctor,’” Antico says.

As for ways to minimize the additional tax bite, he recommends funding  all available pension and tax-deferred retirement plans up to their allowable limits. “That way, you can defer taxes until later in life, when your marginal tax rates will have decreased,” Antico says.

9. Practice consolidation

The coming year will see continued pressure on independent primary care practices to become part of regional health systems or to join forces with other practices. That’s because no letup is expected in the larger forces driving the merger and consolidation trends, including the increasing difficulty of going it alone, the proliferation of ACOs, and the decline in entrepreneurialism among new doctors.

Many independent practices face ever-rising overhead costs, insurance companies that don’t pay attention to small practices, and the need to acquire costly electronic health record systems, says Michael Wiley, CHBC, president of Healthcare Management and Consulting Services in Bay Shore, New York, and a Medical Economics editorial consultant.

“Now someone comes along and says, ‘I’ll pay you what you’re making now, or maybe a little more, as long as you keep up the volume, and you don’t have to worry about all the other stuff.’ A lot of doctors are going to say, ‘Where do I sign?’ ” Wiley says.

The hospitals, meanwhile, are eager to ensure themselves of a steady flow of patients to fill their beds and provide work for specialists, he adds.

Contributing to the urge to merge is the growth in ACOs and other practice models other than the traditional fee-for-service model.

“If a good potential [exists] that insurance companies will be giving pools of money to ACOs for them to dole out to physicians, then the need to be part of an ACO only increases,” Wiley says.

Meanwhile, the increasing complexity of administering a medical practice and emphasis on “lifestyle” issues are causing more new doctors to reject independent practice in favor of employment. Wiley, who lectures regularly at the Yale School of Medicine, frequently polls his audience on their career goals. “The increase in the interest in lifestyle over being an entrepreneur during the past 5 years has been significant,” he says.

“The main message I give my primary care clients is that they have to keep a constant eye on what’s going on in their market,” Wiley adds. “How diverse are your payer sources? How big is the hospital system in your area, and how much control does it really have? All these things factor in to how viable it is for you to remain independent.”

10. Medicare Fraud

Amped-up efforts to catch Medicare fraud in 2012 aren’t about to ease up in 2013.

In 2012, HHS formed the Healthcare Fraud Prevention Partnership, a public-private group with representatives from the federal government, state governments, insurers, professional associations, and other groups, to detect and prevent payment of fraudulent healthcare billings.

Other action, via a joint effort between HHS and the Department of Justice, the Health Care Fraud Prevention and Enforcement Action Team’s Medicare Fraud Strike Force, resulted in 198 doctors, nurses, and other licensed medical professionals in multiple cities being charged for allegedly participating in schemes to defraud Medicare of more than $884 million through false billing. And an additional 30 healthcare providers were suspended or had other action taken against them by HHS for fraud-related activities.

Federal funding for Senior Medicare Patrols, groups of volunteer elderly citizens who train their peers to identify, prevent, and report healthcare fraud, was greatly expanded in 2012, too. More than 2 million beneficiaries are now looking for fraud in 54 states and territories.

The government says that it recovered $4.1 billion via anti-fraud efforts in fiscal year 2011, and the ACA contains provisions to bolster existing efforts. Under new ACA screening requirements, CMS expects to revalidate the enrollments of all 1.5 million Medicare providers and suppliers by 2015 via licensure checks and site visits. Providers identified as high-risk will be required to undergo fingerprint-based criminal background checks. Since March 2011, CMS has deactivated 136,682 enrollments and revoked 12,447 enrollments.

The law also establishes penalties for those who obstruct fraud investigations or audits and eases the government’s ability to recapture funds determined to have been acquired fraudulently. It also brings tougher sentences and more jail time for those found guilty of fraud. Sentences will increase 20% to 50% for crimes involving losses or more than $1 million.

So in addition to making sure your coding and billing are accurate and error-free, what can an honest physician do if caught in investigators’ or auditors’ crosshairs? The advice that Lori Brocato of HealthPort, an audit management and tracking technology firm, shared with Medical Group Management Association 2012 annual meeting attendees warrants repeating:

  • Gather, track, and manage all audit requests centrally.

  • Check for duplicate audits, and create a process to dispute duplicitous requests.

  • Review and approve records before releasing them, and only release what you are legally required to submit.

  • Manage decision and demand letters, and keep detailed notes of any telephone communications with auditors.

  • Appeal wisely, because the process can be costly and takes time to prepare for.

See www.MedicalEconomics.com/audittips and www.MedicalEconomics.com/moreaudittips for additional insights.

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