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Ways to Increase Fee Income

Welcome! This article is part of a Medscape Physician Business Academy course, . Visit the Course Page to take the full course and receive a certificate.

Payments Based on Efficiency and Cost

Several current programs provide the ability to improve payments to primary care, by rewarding efficiency and overall cost effectiveness. Some of these and other programs also contain financial penalties, in order to motivate physicians who want to avoid these penalties to meet the mandates of these programs. Programs are added and expire on a regular basis, according to the current political climate and the financial resources at the federal and state level. The various programs and their status can be found at the CMS webpage on innovation models. The programs, which are voluntary, that are currently active in 2015 include:

Accountable Care Organizations

An ACO is a group of physicians who band together to provide services to an assigned population of patients. This group is expected to do whatever is necessary to provide their assigned patients with quality and efficient healthcare for a reduced total cost.

The Department of Health and Human Services final regulations outline the following requirements for ACOs. Each ACO must:

  • Be willing to become accountable for the quality, cost, and overall care of the assigned patients;

  • Agree to participate for not less than 3 years;

  • Have a formal legal structure;

  • Include primary care professionals that are sufficient for the number of assigned patients;

  • Have at least 5000 assigned patients;

  • Provide any data requested by the Secretary of Health and Human Services necessary to determine the level of quality and cost savings provided to the assigned patients;

  • Have both clinical and administrative systems;

  • Have a process to evaluate the health needs of the population it serves; and

  • Have a method for distributing and identified savings to its members.

The groups can be organized to share risk, or to receive a lower portion of the shared savings but not share risk. In other words, the group will share in the potential savings but not be required to contribute if the costs increased under the ACO model. So if the ACO successfully lowers the cost of care beyond a certain threshold, physicians will share in the savings.

Physicians could share in the savings.

Because the cost to set up a fully functional ACO is significant, given that sophisticated technology systems are required, these organizations are usually established by hospital systems or by very large medical clinics.

The shared-savings program developed by Medicare includes two types of ACOs: (1) the initial model, in which payments are made as results are obtained, and (2) the advance payment model, an initiative developed for selected participants in the shared-savings program, who receive advance payments that will be recouped from the shared savings they earn.

The advance payment ACO model is intended to test:

  • Whether providing an advance (in the form of up-front payments to be repaid in the future) increases participation in the shared-savings program; and

  • Whether advance payments allow ACOs to improve care for beneficiaries, generate Medicare savings more quickly, and increase the amount of Medicare savings.

Episode-Based Payment Initiatives

This program, also called the "bundled payment initiative," links payments for multiple medical services that patients received during an episode of care into one flat payment. These payments are linked to an acute medical episode that centers around a hospital stay. Currently, four ongoing episode-based payment initiatives are active with Medicare.

Patient-Centered Medical Homes (PCMHs)

The term "medical home" is also being used to designate practices that report clear and specific quality measures and structure their practice to work in teams to coordinate care and improve the patient experience. These medical homes are being rewarded by commercial insurance plans in a similar manner to ACOs being rewarded by Medicare. The American Academy of Family Physicians and many other physician organizations are promoting the development of more PCMHs, in which the physician's office coordinates all elements of a patient's care across the community and the patient's healthcare system. Technology is an intrinsic element of the PCMH. The emphasis is on care delivery, and there are questions about whether or not PCMHs do indeed increase a physician's income.

PQRS Penalties From Medicare

In 2007, the government established the Physician Quality Reporting System (PQRS), which initially encouraged physicians to report quality measures in addition to diagnosis and work performed for government-covered patients. This encouragement came in the form of a bonus that would be paid after the reporting year ended. For 2009 and 2010, medical practices could send quality data to Medicare. If the submission met specific requirements, doctors earned a bonus equal to 2% of their Medicare payments for that year. After 2010, physicians were paid a bonus for providing quality data, but it decreased to 1.0% in 2011 and 2012, and 0.5% in 2013. At this point, reporting quality data is now a requirement, and physicians who still have not provided the required quality data will face a penalty of 2.0% in 2016 and 2017.

Reporting quality data is now a requirement

e-Prescribing Penalties From Medicare

Currently, Medicare requires physicians to meet specific requirements for e-prescribing that are separate from the requirements for quality reporting or electronic medical records (EMRs). Under these programs, physicians are encouraged to transmit prescriptions to the pharmacy electronically. If they do so for a large enough number of patients, they will avoid a penalty equal to a percentage of their Medicare payments for the year. This percentage changes in a similar method to the PQRS penalty, and it was 1.5% in 2015 and is 2.0% in 2016 and 2017.

EHR Penalties From Medicare or Medicaid

This program encourages physicians to implement an electronic health record (EHR) and show meaningful use. As of 2015, Medicare and Medicaid payments have been reduced if the practice qualified for an EHR and did not implement one. The reduction begins at 1% and increases each year the eligible professional does not use an EHR, to a maximum reduction of 5%.

Rural Health Clinic Increased Payment Schedule

If a medical practice is designated a Rural Health Clinic, it will receive enhanced reimbursement rates from Medicare and Medicaid. To qualify, a practice must be located in a rural, underserved area and must use one or more physician assistants or nurse practitioners.

Federally Qualified Health Centers

A Federally Qualified Health Center (FQHC) is a nonprofit, community-directed healthcare physician group serving economically underserved areas. The benefits of being qualified as an FQHC are that services are paid on the basis of a cost-reimbursed system; medical malpractice coverage is received through the Federal Tort Claims Act; the center is eligible to purchase prescription and nonprescription medications for outpatients at reduced cost through a federal drug pricing program; and the clinic is eligible for other federal and state grants and programs. The downside of an FQHC, however, is that there are many hurdles in order to be initially qualified, and the clinic is under constant review to determine that it continues to qualify.

To achieve "federally qualified" status, a medical group must:

  • Be governed by a community board drawn from the population the clinic is intended to serve;

  • Provide comprehensive primary healthcare services;

  • Provide health and nutrition education and training;

  • Provide transportation to the center for patients at no cost;

  • Provide translation services;

  • Charge on a sliding scale based on ability to pay; and

  • Meet other ongoing accountability requirements regarding administrative, clinical, and financial operations.

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Welcome! This article is part of a Medscape Physician Business Academy course, . Visit the Course Page to take the full course and receive a certificate.


Judith Aburmishan, CPA, MBA

| January 01, 2016