Most physicians who have been practicing for a few decades remember the days when private payer reimbursements dwarfed Medicare reimbursements. That dynamic has long since changed, starting with the 2008 recession. Further, reimbursements have been flat or have lost value from inflation while practice costs have seen double-digit increases.
Meanwhile, hospitals and insurance-owned health networks have seen reimbursements increase to 300% or more of Medicare in some cases. This is occurring even though it is not uncommon for some private practices to receive rates far below Medicare standards.
Ironically, even as COVID-19 disease is ravaging communities across the U.S., many physicians’ practices have seen their patient volumes decrease from 30% to up to 90% because of the pandemic. A significant number of them are closing their doors for now.
As states start to allow elective surgeries to resume in the coming months, some physician specialties will see increases in patient volume. However, I believe that the pandemic will have long-lasting repercussions for every practice and every specialty.
With that in mind, let’s take a look at some examples from our consulting business in order to illustrate how the COVID-19 pandemic is affecting some specialties across the nation in real-time:
A solo physician primary care practice: an unsung hero of the pandemic
One solo physician primary care practice in southern Florida has been hit particularly hard by the pandemic. The physician owner took it on himself to create a separate ‘isolation’ intake entrance with safety gear and safety partitions. He went to these lengths so he could still see patients who might be COVID-19 positive without putting his other patients at risk.
It is noteworthy that every patient that this doctor sees in his clinic that is prevented from going to the emergency room with a false positive saves the system, and the payers, tens of thousands of dollars. Despite this physician’s efforts to do right by patients, none of these measures are reimbursable. Everyone can see just how unfair and intolerable that is, yet he refuses to stop seeing sick patients.
Our society has chosen to give the lion’s share of the revenue and resources to the hospitals, even though they are overwhelmed and unequipped for this sort of a pandemic.
Doctors like this one are the heroes of the pandemic.
A creative podiatry practice
A podiatry group practice in New Mexico was also frustrated with the ever-increasing practice costs and narrowing margins caused by years of stagnant reimbursement rates. The owners decided to merge their practice with another group to find savings thus creating efficiencies, consolidating costs, and increasing patient volume.
As the pandemic hit, they saw their patient visits decrease by 65%. The practice had to furlough most of the staff. They then started the process of converting to a multi-specialty with Medicare and the payers to try to capture more revenue from more lucrative procedures. It was hoped that this would allow them to capture more revenue from more lucrative procedures.
They viewed COVID19 as an opportunity to diversify their services to better weather future disruptions. There is, however, no guarantee such a move will insulate their practice from further disruptions if the pandemic continues or sees another wave of outbreaks. But they want to invest in the future while they have the time to see the change through.
Related content: Strategic Planning for Physicians in the Age of COVID
A solo neurology practice calls it quits
A single physician Neurology practice was successfully operating in a fairly saturated marketplace in the Baltimore area for over two decades. As reimbursement rates stagnated over the last ten years, it became harder and harder to make the same revenue as each previous year.
The physician owner cut costs and staff, outsourced billing, moved to a cheaper location, and even worked an additional day or two a month. She enjoyed running her own practice and practicing medicine the way she deemed fit. She valued her autonomy over a large income.
In early March the owner saw the pandemic writing on the wall. She started preparation to close the doors to her practice for good. She had seen a 35% reduction in visits. This would not have been sustainable for more than a few weeks, let alone a few months.
She has resolved close her practice for good and is planning to go work for a local hospital or join a larger neurology group that had been recruiting her for years.
An OB/GYN practice chooses to negotiate reimbursement rates
One gynecology and obstetrics practice in Chicago took yet another approach. There is no delaying visits and procedures for this specialty. Although they’ve had to make dozens of safety protocols and stretch resources and staff, they’ve kept their doors open.
They have been able to absorb the increasing costs because they decided to negotiate their reimbursement rates with their payers. The practice was being reimbursed an average of 16% below Medicare before the COVID-19 pandemic. They decided that the current rates were not sustainable and could not support the practice during disruptions.
Although the payers might argue that increasing rates isn’t realistic during the pandemic, this is exactly the time for practices to use their leverage and hold the payers accountable.
4 strategies to overcome poor payer reimbursement
These four cases exemplify different strategies that practices are employing during this pandemic:
- Soldier on and hope for the best
- Consolidate and change the focus of the practice to try to find new revenue streams
- Give up on owning and operating a private practice and consolidate or join a larger group
- Negotiate your rates and hold the payers accountable
Most practices fall into category one or two, and very few have the option of category three as their resources are already at a breaking point. But, I believe that every practice should be employing the fourth strategy.
Negotiating with the payers to increase reimbursement rates is not only possible but maybe the only viable solution to saving many practices in the long term. Why should practices carry the burden of the pandemic when the payers are doing little to battle the pandemic or help physicians carry the financial and systemic load?
Many physicians don’t pay enough attention to their contracts, even though fair paying contracts are fundamental to the long term success of a practice.
The bottom line for payer reimbursement in the Age of COVID-19
Practices can and should utilize their current time and resources to start negotiating their payer contracts. Alternatively, they can retain an experienced contract negotiator to help them hold the payers accountable.
This is the simplest way for almost every specialty to find more revenue when the shutdown eases in the months to come. Remember, the payers aren’t returning their premiums even though overall healthcare encounters have plummeted. This means that, now more than ever, physician practices have the right to pursue proper and fair compensation.
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