Reimbursement woes call for paradigm shift

April 1, 2008

Medicare funding requires dramatic changes as baby boomers age and economy slides

Recent economic headlines have been equally negative for both providers and vendors: "$45 trillion gap seen in US benefits," "Medicare spending surged in 2006," "DRA cuts enter year two," "Philips' imaging sales hit by DRA," "GE Healthcare profits decline in 2007," "Bush seeks surplus through Medicare cuts." Now looming on the horizon is a proposed 10.6% reduction in the Medicare Part B conversion factor, set to kick in July 1, 2008.

Many observers expect the U.S. Congress to act yet again to forestall this devastating across-the-board decrease for physicians and imaging centers. In both 2006 and 2007, the Centers for Medicare and Medicaid Services proposed an approximate 5% reduction, and Congress intervened late in December both years to deny any changes to the conversion factor. Differences this time are that the current fix is for only six months, as opposed to 12 months previously, and the proposed reduction is more than double the previous one. Optimism is certainly preferred to pessimism, but it does require a measure of prudence.

President Bush has released a $3.1 trillion budget that supports a sizable increase in military spending and protects his signature tax cuts. He is also seeking $196 billion in savings over the next five years in Medicare and Medicaid. What is seldom discussed is that Medicare Part D, the prescription benefit, has not been funded and continues to be paid from Medicare Part B. Medicare's fiscal pressures continue to mount with no proposed mediation for the pending funding crisis.

At some point, dramatic changes must be made to the funding of Medicare. It seems implausible that Congress will be able to continuously step in and temporarily "fix" Medicare, especially when record numbers of Medicare-eligible baby boomers and an economy trending south are factored in.

Fortunately, medical societies such as the American College of Radiology are using their ability to influence Congress and CMS, as are individual physicians. These efforts may not be enough, however, and providers should develop plans to address a significant shortfall from Medicare-based business.

Medicare represents, on average, 30% of a provider's business. The other 70% is represented by private payers. It is the private payer arena where the provider has the greater potential of influencing reimbursement outcomes.

FINDING OPPORTUNITY

Taking advantage of potential opportunity requires a shift in the current reimbursement paradigm. Typically, a single provider drives a reimbursement strategy, sometimes with the aid of a single vendor. This paradigm needs to shift to a much more coordinated effort between vendors and providers, increasing their ability to influence positive reimbursement outcomes. Vendors and providers have separate roles in the reimbursement process (see table).

Information is power, and it can facilitate positive reimbursement outcomes. Simply knowing regional payers' actions can be very beneficial, especially when current procedures are involved. New technologies or procedures often require knowledge of payer actions on a national basis. In both cases, knowledge of positive medical policies or payment can influence local payers' decisions.

The first step in this process is for both parties to appreciate their respective responsibilities. Vendors and providers need to address and implement strategies to effectively influence reimbursement. Once this is accomplished, the process can be enhanced by communicating the results.

The first critical question is, Who pays for this program? It is the vendors who stand to gain the most, through increased sales, from a successful reimbursement strategy. A vendor's efforts can be used by many providers, thus minimizing the cost of initiating the program, as it is amortized over all potential providers. The cost would be even less if vendors from a technology sector pooled their resources to develop and implement a reimbursement strategy. In this case, an outside source may be necessary to act as a referee and help manage the overall efforts.

The second critical question is, Who is best suited to coordinate the results of the provider's efforts? There are two potential answers to this question. The first is the vendors. Given the willing participation of the providers, a vendor certainly could collect and collate payer information and make it available to current and prospective customers. In the event that providers choose not to work with the vendors, then another entity should be selected. In this scenario, an integrated delivery network, group purchasing organization, or hospital corporation such as Hospital Corporation of America (HCA) would be ideal candidates.

Reimbursement issues are most often focused on new technologies, but this is not always the case. In September 2007, for example, United Healthcare announced that it would stop reimbursing for mammography computer-aided detection, a decision that was based on the results of a single, highly controversial published study. It subsequently postponed implementing this decision, after numerous comments from providers and the intervention of the ACR. Health First Health Plan in Florida, in another example, will not reimburse for digital mammography without a prior authorization. In both of these cases, the payer's stated reason for the decision was based on clinical evidence. The payer's motivations-clinical versus economical-aside, decisions of this sort have the potential to initiate similar actions by other payers, thus creating a ripple effect.

This behavior is expected to continue because payers are under increasing pressure to demonstrate a profit. In this situation, the most influential entities are not just the providers but the patients they serve. Patients need to be made aware of their role in influencing the payer. Calls to customer service from plan beneficiaries can influence payers' decisions. Patient education materials supplied by vendors are extremely helpful in this pursuit.

INFLUENCING DECISIONS

Reimbursement issues boil down to influencing decisions. Who is in the best position to influence a positive outcome from a payer? The obvious answer to this question is the entity that contracts directly with the payer. In this situation, vendors should play a supportive role in assisting the healthcare entity to implement the reimbursement strategy. Direct cooperation between vendors and providers represents the highest potential for a successful reimbursement program.

Some vendors are actively addressing reimbursement issues on behalf of their customers. Riverain Medical, for example, worked with its customers to help achieve coverage in excess of one million lives for chest x-ray CAD during the first year of full CPT III code implementation.

"Our customers find it reassuring that we are making every effort on their behalf to further the cause for universal coverage of this technology," said Kevin E. McBride, Riverain vice president of sales.

Another approach involves technological solutions that integrate software more tightly into billing and reimbursement workflow, keeping track of documentation musts, coding efficiency, and reimbursement ratios.

"Calgary Scientific is looking into IHE- and HL7-compatible audit trails and automated structured reporting tools to help providers include all required orders to substantiate coding submissions," said Pierre Lemire, president and CTO of Calgary Scientific Medical Group, a developer of 3D advanced visualization software.

These are two examples of vendors that actively participate in the reimbursement process. Vendors that take an active role in supporting reimbursement efforts should be acknowledged, and those that don't should be held accountable.

The current economic crunch and the pending July 1 Medicare crisis demand planning, commencing today, so providers can continue to offer the best care for the patients they serve. Providers must raise their expectations of vendors and encourage the participation of their staff. The potential to influence positive reimbursement outcomes increases when individual efforts are coupled with the efforts of vendors, other providers, and even patients. Imagine this effort not just from a regional standpoint, but also from a national perspective. This is the new reimbursement paradigm that needs to be accomplished: the multiplying of reimbursement influence, nationally, as a means to address the current and pending fiscal crises in radiology.

Mr. Longacre is a senior consultant with HealthCare Market Strategies based in Yamhill, OR.