Does the Bipartisan Budget Act of 2015 Spell the End of Reimbursement Differential Based on Site of Service?
Business Consult | John Bry Manager, ECG Management Consultants Kevin Kennedy Principal, ECG Management Consultants
The highly publicized Bipartisan Budget Act of 2015 does more than just raise the nation’s debt ceiling. It also presents significant changes in Medicare reimbursement. More specifically, new, off-campus hospital outpatient departments (HOPDs) will not receive reimbursement under Medicare’s Hospital Outpatient Prospective Payment System (OPPS). Now, this can get a little confusing, so bear with us. Effective January 1, 2017, practices acquired by a hospital to operate as an off-campus HOPD (after enactment on November 2, 2015) will be reimbursed under the Ambulatory Surgical Center Prospective Payment System or the Medicare Physician Fee Schedule. Simply put, this means these practices will not be able to take advantage of the higher reimbursement available under the OPPS.
How This Impacts Cardiology Practices
At this point, only hospital-owned cardiology practices that have yet to convert to provider-based status are affected. However, if the legislation is successful at driving down costs, Congress may look to reduce differences in payment rates based on the site of service (e.g., between HOPDs and physician offices). This may go as far as excluding all off-campus, and potentially on-campus, HOPDs from receiving the enhanced reimbursement available under the OPPS. MedPAC and other policy organizations have been advocating this direction for years.
Commercial payers are also pursuing this idea. UnitedHealthcare recently announced that it will not reimburse certain procedures in an HOPD setting when less expensive options are nearby. In fact, some payers are contacting patients directly to steer them toward non-HOPD facilities, including communicating the (often significant) differentials in patient out-of-pocket expense.
Independent cardiology practices are not immediately impacted by this legislation. Still, many hospitals built business cases for acquisitions based on the enhanced reimbursement that would have resulted from converting a cardiology practice and its ancillary services to provider-based status. Going forward, however, hospitals will likely explore alternatives to acquiring a cardiology practice, such as pursuing service arrangements that maintain the practice’s independence.
Additionally, employed cardiology practices have seen a noticeable drop in work relative value units (WRVUs) for several years, accompanied by a meaningful increase in compensation. Part of the economic equation that facilitated this was the ability to convert practices to provider-based status. If site-of-service reimbursement differentials converge over time, additional pressure on physician compensation seems inevitable.
How Should Your Practice Prepare?
The good news is that, in the short term, few cardiology practices will be materially impacted by the legislation as it stands today, since the majority of cardiology HOPDs are on campus. Yet despite the lack of immediate impact, forward-thinking cardiology practices should be preparing for the potential that reimbursement differential based on site of service will be eliminated. Here are a few ways to prepare your cardiology practice for the reimbursement landscape post–January 1, 2017:
- Consider Moving on Campus – If your practice is considering being acquired, then financial and operational plans likely need to be updated to reflect the lower reimbursement under the OPPS. You will also want to consider moving all or some services to an on-campus location—within 250 yards of the main facility. If moving on campus is not feasible, the bill allows for practices to convert to provider-based status as long as they are within 250 yards of a remote location providing inpatient services under the name and control of the main provider. This option may provide a work-around to salvage a transaction that needs OPPS financial support to work. It is not without cost and inconvenience, however.
- Alternatively, some cardiology practices may be able to operate effectively without having provider-based status, and instead choose to only relocate ancillary services to an on-campus facility. Reimbursement for imaging and testing procedures is more significantly enhanced under the OPPS than are office-based professional fees.
- Increase Practice Efficiency – Moving your practice on campus may only be a short-term solution, as it relies on the legislation not extending to existing off-campus or on-campus HOPDs in the future. In order to best prepare for any potential reimbursement scenarios, practices should also focus on ways to improve overall efficiency, providing a greater volume of services with fewer resources. Greater efficiency can be achieved in various ways, including utilizing advanced practice providers (APPs) and streamlining scheduling and clinical assignments.
- Expand Service Offerings – Cardiology practices can also look toward expanding service offerings and growing geographic reach to increase revenues. New procedures and technologies are allowing expansion without a major financial investment. For example, by developing a telemedicine presence in the market, a cardiology practice could greatly broaden its outreach network and increase referral volume. A comprehensive strategic planning process that assesses key strengths, the competitor landscape, and market opportunities can help a practice identify these avenues for growth and develop a tactical plan that will lead to successful implementation.
How to Best Manage Any Reimbursement Change
As with the enactment of the Bipartisan Budget Act of 2015, MACRA, mandatory bundled payments, and the like, big changes are going continue in health care’s migration toward value-based care. By taking proactive steps to capitalize on revenue opportunities and reduce costs to improve overall financial performance, cardiology practices can effectively manage any and all reimbursement changes that may materialize in the future health care landscape.
For more information, contact John Bry at email@example.com or Kevin Kennedy at firstname.lastname@example.org.
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