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Many physicians are questioning the value of participation in health insurance plans. According to the Sixth Annual Fee Schedule Survey conducted among doctors nationwide by Physicians Practice Management Journal (January 2007), reimbursement by health insurance companies is less than ever. The findings indicate that reimbursement for medical E&M (evaluation and management) services decreased 10 percent nationally from 2005 to 2006. In many states — including Tennessee — Medicare is now the better payer compared to commercial payers, which often base rates either slightly above or 10 to 20 percent below Medicare.



Two Physicians Opt Out

In an article published in the April 2007 edition of the Bulletin of the American College of Surgeons, Dr. Robert DeGroote, FACS, a general and vascular surgeon in New Jersey, examined his experience with declining reimbursement. His “moment of truth” came in 2002 when there were insufficient funds in the business checking account after expenses to pay physician salaries. The shortfall was due to a cash-flow problem caused by payment denials, payment delays and downcoding by insurers.

DeGroote’s medical group analyzed what was happening. One thing they discovered was a general decline in reimbursement for many procedures. For example, between 1992 and 2002, Medicare reimbursement for an abdominal aortic aneurysm (CPT code 35092) declined 33 percent. The decline in payment for a coronary artery bypass graft (CPT code 33512) was even greater, falling 45 percent.

DeGroote and his associates regained control of their practice by becoming educated on medical practice economics. They closely evaluated their operations based on the same relative value units (RVUs) and conversion factors that payers use to determine reimbursement payments. They determined the cost per RVU to provide a service and the profit generated per RVU. Their findings indicated that the practice had an overall conversion factor less than the Medicare conversion factor. Further analysis revealed that the commercial payer conversion factors were less than Medicare.

The group began dropping managed care plans and had resigned from all of them as of January 2003. A yearly re-evaluation of the practice revealed an increase in their overall conversion factor from $36.20 in 2002 to $57.53 in 2006.

Dr. Brian R. Forrest, a family physician in North Carolina, underwent a similar reality check concerning reimbursement. In 2001, he realized that he would have to see 30 to 45 patients per day to maintain a financially viable practice. In an article, “My Best Idea: Cash and Carry Healthcare,” published in the June 2007 issue of Physicians Practice, Forrest explained his decision to opt out of all insurance plans. The result? By keeping his overhead low and achieving a 99 percent collection rate, his compensation now exceeds the average for his specialty.



Concierge Care

While a growing number of physicians are dropping out of insurance plans, a few have taken an additional step. They are offering what is described as “concierge care.” These physicians provide “premium services and amenities” to a limited number of people for a fixed annual fee. Services may include house calls, 24-hour access to a physician, after-hours appointments, and even massages. The annual fee can run as low as $1,000, and up to $20,000 or more depending on the services provided, the health of the patient and other factors.

An estimated 400 “concierge care” practices exist in the United States. The first in Tennessee is believed to be Marable Personal Healthcare in Franklin, a primary care practice of Dr. Charles T. Marable. Many financial, legal and administrative issues should be considered before taking a practice in this direction. The article, “Should You Consider Concierge Medicine?” by attorney Vasilios J. Kalogredis in the February 2004 edition of Physician’s News Digest examines many of the considerations.



First Steps

Frustration prompts many practices to think about opting out of healthcare plans; however, this important decision should be preceded by adequate analysis and soul-searching. Understanding the economics of a particular medical practice is the first step in understanding the impact of payer contracts. In addition, payer contract performance must be monitored and evaluated. Determine if the contract is negotiable. Be selective. Determine the effects of resigning only from those plans that provide poor reimbursement and that have a poor claims adjudication process, which increases administrative costs. Critical to the process is the establishment of a strategy, complete with well-considered tactics for managing the practice without participation in health insurance plans.

Do not believe that physicians have no control over reimbursement. They do. However, control only comes from knowing the facts, evaluating the figures, examining the options and establishing a strategy for living with nonparticipation.



Lucy R. Carter, CPA, and Sara S. Lankford, CPA, are principals of Nashville accounting firm, Carter, Lankford CPAs, PC. Carter can be contacted at lucy.carter@clcpas.com. Lankford can be contacted at sara.lankford@clcpas.com



August 2007

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