New regulations and laws effective in 1998 will increase costs for medical groups while at the same time enhancing their ability to engage in managed-care contracting with Medicare.
In 1998 Medicare's new fee schedule will increase payments to primary-care physicians while decreasing specialists' pay. For example, family practitioners will get a 2.2% increase, but cardiologists will receive a 3.8% reimbursement reduction. Most other specialties will fall within this range.
"This will be a huge change for groups in single-specialty practices," says Thomas Adams, executive director of the Medical Group Management Association. "It will have less impact on the larger multispecialty groups because their revenue is spread out more evenly."
Says Michael Wilson, president and chief executive officer of 400-physician Catholic Healthcare West Medical Foundation: "The new fee schedule will have a negative impact. We are assessing how bad it will be right now."
HCFA initially had proposed as much as a 40% reduction in some subspecialties. However, a coalition of medical groups, including the MGMA, convinced Congress to send HCFA back to the drawing board for 1999. Full implementation has been postponed to 2002 as HCFA collects additional practice-expense data.
"We will continue to push for reliable data collection and analysis," Adams says. "Without good, actual practice data, you cannot make good public policy."
While Congress cut specialist fees to save money on Medicare, providers won the right this year to form provider-sponsored organizations through which they can contract directly with Medicare patients without creating an HMO.
"PSOs will help smaller groups," Adams says. "Most of the larger groups already have HMOs."
Effective in January, Medicare also will allow physician assistants and nurse practitioners to bill Medicare directly as independent contractors, allowing reimbursement at the rate of 85% of what physicians are paid. The practitioners also can independently contract with physicians. The federal law pre-empts all state laws.
"This will greatly help expand access in rural and underserved areas where there is a shortage of providers," Wilson says. "It will make our relationships with (nurse practitioners) more of a partnership approach."
Another major issue for groups is developing compliance programs to abide by Medicare's anti-fraud and abuse regulations, Adams says.
"With the feds investigating on all fronts, people want to develop programs to
protect themselves," Adams says. "Groups have to spend more time, effort and money in creating a compliance program."
Such efforts may include appointing a compliance officer, developing staff and physician training programs and hiring additional staff to audit and monitor billing and coding.
Breaux Castleman, administrator at Scripps Clinic in San Diego, says his 280-physician group's new compliance program will require the addition of three full-time employees in 1998 to monitor billing and coding issues.
"Our problem here is errors, not overcoding or undercoding," Castleman says. "The difference in error in healthcare is that there are jail terms. The mind-set change is if a doctor orders a test to rule something out, he cannot charge for it. If he orders a test because there is a symptom, he can charge for it."
The Health Insurance Portability and Accountability Act of 1996 mandated a standardized form for electronic data transmissions of medical claims. The final rules are expected to be released sometime in 1998. The law also requires a system for ensuring data confidentiality as well as a method for patients to access their own records. To help track claims, each hospital, physician, health plan and employer will receive a national provider number.
Finally, in accordance with the Balanced Budget Act of 1997, Congress appointed a bipartisan commission last year to recommend an overhaul of the 32-year-old Medicare program. The panel must issue its recommendations by March 1999. As of December, nine members of Congress had been appointed to the 17-member panel, which also includes three healthcare academics, two managed-care executives, a lobbyist and a Medicare case worker. The designation of a chair was expected by year-end. Because the panel includes so many members of Congress, its recommendations likely will lead to federal legislation.
"This may be the most important commission ever," Adams says. "For the first time this group has the charge to deal with the basic structure of Medicare."