Non-Assigned Medicare Payment Increases Practice Revenue & Lowers Medicare Costs

Summary

Private practice physicians can increase practice revenue and also save Medicare money. What seems like a paradox is instead a choice. The non-assigned Medicare payment option allows physicians to bill 8% more for their services. This also decreases Medicare payment 5%. Selecting the non-assigned payment method does not require permission from Medicare or any Medicare contractor. This is a physician decision and for 2014 must be made between mid-November and year end 2013.

A Decay of Revenue

Cells can die two ways. First, necrosis occurs when an external force depletes cellular energy, which causes, cell disintegration. The second way is apoptosis, a sequence whereby cell death signals open a cascade of executioner proteins like cytochrome c, which then cleave cell organelles and lead to cell death. Necrosis is cell murder; apoptosis is suicide.¹

Private practice medicine dies one way by decay of revenue. Similar to cells, practice necrosis is caused by external factors. Increased regulations, a litany of auditing metrics (i.e. PQRS, MRUR 1, and MRUR 2), and capital expenditure for electronic health records all add practice expense. In these examples costs are added to avoid future punitive reduced reimbursement consequences. These expenditures are not balanced by greater practice revenue long-term. Cost center audits show practice visits and services can increase and yet the practice can become bankrupt when the practice expenses outpace revenue.² Identifying one way to mitigate this margin loss and explain the benefits of financially healthy private primary care practice are the objectives of this paper.

Make a Choice

Following is one policy a private practice may employ to improve its Medicare revenue. Every November the Centers for Medicare and Medicaid Services (CMS) offer physician offices a choice between accepting and not accepting payment through assignment. This ultra-important decision must be made by 12/31/13 for the year 2014.

The difference is illustrated in the Medicare Manual 100-4 Chapter 1, Section 30.3.12. A hypothetical service with a payment fixed by CMS to be $2,185.00 is paid by one of two reimbursement pathways.

1. Physicians accepting assignment and direct payment from Medicare receive a total amount equal to $2,000.

2. Physicians who do not accept assignment bill the patient. They receive 95% of $2,000 or $1,900 through Medicare. Their total charge is 115% of $1,900 or $2,185.³

Medicare pays 5% less and the physician revenue increases 8% when the doctor bills the patient. The patient pays the doctor and Medicare reimburses the patient. Beneficiaries never pay more than the Medicare fixed price. Doctors can adjust charges within the boundaries of a Federal allowed charge based upon the complexity of the service and patient resources.

Medicare paid doctors $20.5 billion for office visits (E&M services) in 2011. By employing a non-assigned billing scenario physicians would have saved Medicare $1.02 billion an increased their revenue $1.64 billion.⁴

No special approval by Medicare or any Medicare carrier or Medicare Administrative Contractor (MAC) is required. Physicians can make a decision to create a direct fee for service relationship with patients.

Why is the Medicare participate/non-participate decision so critically important? Figures 1 and 2 illustrate how the economic underpinnings of private practice have eroded over 20 years as an unintended consequence of Medicare policy between 1992 and today.

Figure 1.

Years 1993–1997 are approximations derived by calculating the average of the surgical, non-surgical, and primary care conversion factors, beginning in 1998 the previous method was abandoned in favor of a single conversion factor.

Figure 2.

Source: Information from the Centers of Medicare and Medicaid Services and the U.S. Bureau of Labor Statistics.

Medicare payments for each unit of physician work, the conversion factor (CF), have been nearly flat for a generation.⁵ (See Figure 1.)

The Medicare CF is an important determinant of revenue growth. The CF determines Medicare payments per service and can affect private insurance payments if private insurers index their payments to the Medicare fee schedule.

The relationship between the annual percent change in the CF and consumer price index (CPI), which the Bureau of Labor Statistics uses to reflect inflation, is depicted below.^{5, 6} (See Figure 2.)

Annual inflation increases the practice overhead for items like rent, employee salaries, and utilities. Previously referenced practice cost center audits combined with Figure 2 together are warnings. When inflation exceeds revenue growth for a sustained time physicians can be busy and yet move toward bankruptcy.

Private practice physicians unable to fund their overhead due to regulation and withering reimbursement often sell out to hospital consortiums. This inevitably increases the total cost of US health care. One day in a private practice office an electrocardiogram (EKG) costs $20.00 and a colonoscopy costs $400.00. The next day the hospital owns the medical practice. Using the same building, equipment, and physician(s) the hospital bills and is paid $35.00 for the EKG and $875.00 for the colonoscopy. Medicare pays more because the hospital bills these services as hospital outpatient services. Not only does Medicare pay more but patient’s deductibles are higher as well. In spite of these increased costs hospitals and the federal government argue such acquisitions make care more efficient.⁷ (Editor’s note: see “Bitter Pill: Analysis of Steven Brill’s Time Magazine Article May/June 13 page 166 for further documentation of hospitals being the primary driver of health care costs).

The trend of inflation adjusted income, which decreased 7.1 percent for all physicians and 10.2 percent for primary care physicians between 1995 and 2003, continues.⁸ The Association of American Medical Colleges predicts a shortage of 45,000 primary care physicians by 2020.⁹ This development is an unintended consequence of Federal policy. Long waiting times for an appointment to see a primary care physician and more expensive hospital outpatient facilities and emergency departments overflowing with patients who do not have timely access to primary care will be the result. This is not a good outcome for patients, physicians, or Medicare.

The Patient-Physician Relationship

Abandoning Medicare assigned payment renews an old-fashioned relationship between patient and physician. The recipient of care pays the person who orders the care and together they make value versus cost judgments. For fifty years the percents of national health care costs paid out-of-pocket have declined and absolute dollar amounts have increased only slightly based upon CMS National Healthcare Expenditure Accounts (NHEA) data on the average annual healthcare expenses of Americans.¹⁰ (See Figure 3.)

Figure 3.

Source: Information from the National Health care Expenditure Accounts.

Patient out-of-pocket costs of 11¢ per dollar spent and physician payment by a third party (i.e. Medicare or an insurance company) distills away important incentives for patient and physician collaboration to find efficient care the patient values.

An example illustrates this point. Ophthalmologists use two similar biologic drugs, one a progenitor, to treat exudative “wet” macular degeneration. The Food and Drug Administration (FDA) approved the more expensive drug, which cost $2,000.00 per dose, to treat wet macular degeneration. The much less expensive progenitor biologic drug cost below $150.00 per dose. But the manufacturer has not requested FDA approval for this purpose. Physicians designed a national study and with the cooperation of patients proved the two agents achieved equivalent outcomes. Now about half the patients choose the less expensive equivalent drug for treatment. Patients save hundreds of dollars from lower deductibles and Medicare saves tens of millions of dollars.¹¹

Data from BLS and NHEA shows that during the recent recession Americans could quickly adjust the out-of-pocket expense of meals away from home but not on health care.^10,12 (See Figure 4.)

Figure 4.

Information from the National Healthcare Expenditure Accounts and the U.S. Bureau of labor Statistics

Dollars spent on national health care costs were less than eating away from home prior to the recent recession. The amounts are closer to equal now. Americans adjusted the money spent eating away from home but they were unable to affect their health care costs because government bureaucracies and private insurance control 89¢ of every dollar spent; personal discretion is less a factor.

The Affordable Care Act, “Obamacare”, funding depends upon $455 billion coming from cuts in government payments to health-care providers that serve patients on Medicare and two other federal programs.¹³ The annual Medicare Trustees Report notes that based upon the Sustainable Growth Rate Formula (SGR) the 2013 conversion factor (CF) should have been $25.5217 for each unit of physician work. But because of legislative manipulation the CF is $34.0230 in 2013.¹⁴ Our federal government does not have enough revenue to continue legislative overrides, create a new health care entitlement, the Affordable Care Act, and pay for services patients’ value.

Governments can, and do, offer benefits to constituents before the revenue to pay for them is available. There are many previous examples of unexpected deleterious consequences of bureaucratic policies failing to meet funding goals and/or improve the lives of US citizens. These serve as yellow warning lights - proceed cautiously or red lights - stop and rethink the whole policy. In 2010 the Institute of Medicine published a consensus committee report, which supported the position that nurse practitioners should be able to lead medical teams and medical homes. Contrary opinions from the American Academy of Family Physicians and the Council of Medical Specialty Societies highlight the association of expert, physician lead best care for each individual and sufficient payment for efficient care.¹⁵

Governments frequently ask physicians to create value from elements physicians do not control. Alchemists in the 12^th century were supported by monarchs and regents in their empiric pursuit of chrysopoeia i.e. creating gold from lead. Our Federal government seeks a modern form of chrysopoeia. Elemental combinations and acronymic formulas for example,: health care organizations, (HMO), SGR, EHR, medical homes, or accountable care organizations (ACO) historically do not mutate into improved quality, availability and lower costs. Physician hard work, long hours, being accessible on call, continuity and rigorous training create the gold standard of health care Americans value.

Conclusion

Thoughtful adoption of non-assigned payment is not chrysopoeia. It is one step primary care physicians can take to solve a paradox: How to contribute to Medicare’s long-term solvency and generate sufficient revenue in private primary care practice to attract the individuals best trained to care for a patient.

Biography

Patrick K. Price, MD, is a Kansas City ophthalmologist, MSMA member since 1982, and formerly served as Medical Director for Kansas, Nebraska, and Western Missouri between 1993 and 2008.

Contact: pprice@discovervision.com