ED physicians could face tougher setting under looming Medicare PPS
Strict payment formula for hospitals may spill over to physician practices
This January, hospitals nationwide will undergo a silent transformation. Although most emergency physicians will hardly notice, the era of cost-based reimbursement for hospital-based outpatient services paid by Medicare will quietly come to an end. A new system of paying hospitals for everything from blood tests to ambulatory surgery will become the law of the land for Medicare-certified institutions.
Emergency physicians aren't likely to feel the effects of this watershed event, not at first. But the sweeping reforms coming from Washington could ultimately put anxious, cost-cutting hospitals in the position of peering over emergency physicians' shoulders and further chill an atmosphere already darkened by years of pervasive managed care, according to Medicare experts.
"Yes, it is conceivable that hospitals will begin to take a closer look at the way physicians order tests and medications under Medicare," says James Mathews, PhD, a senior policy analyst with the influential Washington, DC-based Medicare Payment Advisory Commission (MEDPAC).
A historic Medicare outpatient PPS
Under the plan, hospitals will no longer be paid for services based on their costs but under a fixed fee schedule in which groups of services related to the same patient visit will be bundled into a single payment group and paid according to a pre-set rate.
Affected by the change will be most ambulatory services provided by hospitals that are ordered by physicians, including virtually all emergency department (ED) procedures that require anything much larger than a pushpin. On January 1, 1999, therefore, the cost of each x-ray you order for your patient will mean a lot more to the hospital's financial viability.
Why? The reimbursement for it is likely to be less than what your facility is currently getting. The actual payment will be based on a complex series of economic weights and measures and is certain to be bundled into one of 290 payment groupings the Health Care Financing Administration (HCFA) has termed an "ambulatory payment classification (APC)."
HCFA wants to slow the growth of Medicare outpatient reimbursements to hospitals, which have more than doubled since 1987 and exceeds $15 billion per year since 1994.
Not since the 1980s, when HCFA imposed a system of prospectively paying hospitals for inpatient services, has the hospital industry been hit so hard by Medicare payment reform. "What diagnosis-related groups (DRGs) of illnesses means to inpatient care, APCs will be to emergency medicine and other outpatient services," says financial analyst William Kelly, executive vice president of CHPS Consulting based in Albany, NY.
The fallout on emergency physicians could be significant:
Hospitals that decide to monitor providers more closely are likely to implement cost controls in subtle but noticeable ways. For example, they may further tighten already highly formal drug formularies and imaging protocols and create tougher internal physician peer review standards for certain specialties, including emergency medicine.
Due to the way Medicare carriers will calculate reimbursements for most outpatient procedures, hospitals may begin to formally question the medical necessity of certain tests and procedures and could ultimately increase the trend toward profiling physicians as a way to detect over-using providers.
Medicare carriers will calculate payments based on a series of set algorithms that automatically bundle ancillary services, exclude some tests, and group relevant significant procedures such as upper GI endoscopies (CPT 43239) based on the reported diagnoses. This means that certain tests, which fall outside the groupings, will be either excluded from payment or heavily discounted.
Tougher role for physicians predicted
Individually, emergency physicians could be urged to play a larger role than they do now in long-term, patient case management in collaboration with primary care providers and would have to keep a closer eye on their own use statistics.
Passage of a facility perspective payment system (PPS) leaves open the possibility that Medicare officials may decide to align physicians' professional fees with the hospital reimbursement rates. The possibility is currently remote, but some analysts have speculated about the idea's plausibility.
The processing of Medicare claims under the new payment system relies heavily on automated technology, namely a specialized grouper software program that performs many of the calculations. However, hospitals that are denied payments or are underpaid for certain claims will have to justify their claim through evidence in the medical record.
Physicians already face stepped up pressure to maintain complete, accurate patient documentation under Medicare. The new system is likely to increase the mandate, especially at hospitals that experience large claims rejection volume.
Furthermore, hospitals might insist that contracting emergency physicians bill through the hospital rather than the staffing firm in order to keep a tighter rein on individual physicians and their practice patterns. Medicare officials are already enforcing existing billing regulations on group practices. The outpatient PPS could lead to tougher Medicare oversight.
How likely is it that physicians will face these conditions? The field is mixed on that question.
Fearing the worst, some hospital administrators predict that Medicare patients with non-emergencies will be diverted away from hospitals in large numbers to less expensive neighborhood clinics. Others expect little or no drastic change: "Hospitals have adjusted quite well to DRGs. They're making more money now than ever before. The same could happen on the outpatient side," says Heidi Wagner Hayduk, JD, an analyst who advises the insurance industry on Medicare.
However, there is some precedent to point the way. "There has been next to no impact felt in Iowa," says Mark Menadue, DO, an emergency physician and reimbursement expert in Ankeny near Des Moines. In 1994, Iowa Medicaid implemented an outpatient PPS for certain hospital services amid concerns that the reform would drastically alter reimbursements for many already financially strapped hospitals. "That has not occurred," says Menadue, who operates a 400-member emergency physician practice. "In fact, there has been no perceptible sign of any effect by the PPS on reimbursements," he adds.
Little change felt under Iowa Medicaid
Indeed, more than two years after the implementation of ambulatory patient groups (APGs), which is the term used by Iowa Medicaid for the rate-setting methodology, many Iowa hospitals still don't know how the system works or what it's financial impact is on reimbursements.
And Menadue has not seen any of the grim predictions come true concerning tougher peer review of emergency physicians and stepped-up clinical documentation pressures. "None of that has happened here," he says.
Iowa was among the first states to adopt APGs after HCFA commissioned the development of the outpatient PPS for Medicare in the early 1990s. The Medicare version of APGs (now called APCs) was tangled for years in public debate and congressional delays until the 1997 Balanced Budget Act.
President Clinton ordered implementation of the plan to occur on January 1999. However, some HCFA officials privately acknowledge the federal plan has not cleared HCFA's bureaucratic hurdles and faces certain further delays.
But, the Iowa experience could be an isolated instance. On a national scale, an outpatient PPS could have more far-reaching consequences. "Everything in Iowa is still done largely on a fee-for-service basis. So, it isn't a good test-case for prospective payment," according to a local physician practice executive who asked not to be identified in print.
"Consider the population and rural nature of the state," adds Margo Grimm, executive director of the American College of Emergency Physicians' Iowa chapter in Waterloo. "In Iowa, we have a much lower volume of both ED visits and Medicaid patients compared with other states," Grimm says.
In fact, a 1997 survey of payers and hospitals that included ED providers suggested that in areas where versions of APGs are being used by private insurers and programs such as Iowa Medicaid, the impact has been minimal. "For the most part, the payers that have implemented the system to date accounted for a relatively small portion of facilities' business. Thus, the facilities we contacted have viewed the system as just another mechanism payers are using to reduce payments and have not attempted to understand the system or respond to its incentives," the report stated.1
However, the report concluded that "a Medicare APG system, because it would affect a much larger share of facilities' business, may magnify effects that have been too small to recognize under existing systems." And it added: "The greatest impact may occur if and when payment incentives related to facility outpatient services are aligned with the incentives in payment for physician services."
Reference
1. Mathematica Policy Research. Toward A Prospective Payment System for Outpatient Services: Implementation of APGs by State Medicaid Agencies and Private Payers. Washington, DC; 1997.
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