Cost of Complying With Regulations? $40K per Physician

Ken Terry

August 11, 2017

Nearly half of physician practices report spending more than $40,000 per full-time physician per year on complying with federal regulations, according to a recent survey by the Medical Group Management Association (MGMA).

That includes costs related to "loss of physician productivity, staff training regarding regulations, IT implementation and upgrade costs, consulting and attorney fees, etc.," the survey said. Thirteen percent of respondents said they spent $70,000 to $100,000 per full-time doctor, and 14% reported spending $100,000 or more.

Robert Tennant, director of health information technology policy for MGMA, acknowledged in an interview with Medscape Medical News that these numbers only represent estimates by the responding practices. The wide range in spending, he said, reflects the amounts that various practices invested in complying with Medicare programs, such as the electronic health record (EHR) incentive program and the Quality Payment Program (QPP), including the Merit-Based Incentive Payment System (MIPS).

Michelle Holmes, a principal with ECG Management Consultants in Atlanta, Georgia, told Medscape Medical News that it would be difficult for practices to track all of the activities involved in compliance, let alone the impact on physician productivity. The median of $40,000 per full-time doctor would be high for a large group with hundreds or thousands of doctors, she said, but it sounds right for a sample of small and medium-sized practices that had fewer full-time physicians to spread the costs across.

Of the 750 group practices that MGMA polled in July 2017, nearly 80% were independent practices. Thirty percent of the groups included 1  to 5 full-time doctors, and 37% had 6 to 20 full-time physicians. The rest were larger groups.

More than 8 in 10 of the respondents said that complying with MIPS was "very" or "extremely" burdensome. Eighty-four percent of the respondents agreed with the statement that "a reduction in Medicare's regulatory complexity would allow our practice to reallocate resources toward patient care."

Yet the same percentage of practices (84%) said they were participating in MIPS, and 72% said they reported more data than the minimum required in order to avoid a financial penalty in 2019. In fact, 41% of respondents said they have fully reported MIPS data this year.

Tennant, of MGMA, said that many practices are fully reporting to MIPS because they hope to get a bonus or a super-bonus for superior performance, and "they don't want to leave money on the table," especially if they've made big IT investments.

Another possible reason for the high MIPS participation rate, Holmes said, is that EHR upgrades (in systems certified to both the 2014 and 2015 edition standards) enable practices to report MIPS quality data to the Centers for Medicare & Medicaid Services (CMS).

More than 70% of the respondents said the MIPS scoring system is very complex and hard to understand. About the same number said that unclear guidance from CMS will affect their ability to participate successfully in the Medicare pay for performance program.

Tennant conceded that MIPS' basic requirements are straightforward and that CMS has held a number of webinars to educate physicians about MIPS and QPP. However, he said, the scoring is complex and even some of the practice improvement criteria are opaque. What is meant, for example, by "extended office hours"? he asked.

It's also hard for practices to understand what qualifies as an advanced alternative payment model (APM), participation in which exempts clinicians from MIPS, he said. Tellingly, 40% of respondents were unsure whether their practice was in an advanced APM.

Insufficient Regulation?

Some of the respondents' concerns were not about overregulation but about insufficient regulation of certain aspects of health IT. For example, 74% of practices said the lack of standardized electronic attachments for claims and prior authorizations was very or extremely burdensome. It has been 20 years, Tennant noted, since these attachments were required under the Health Insurance Portability and Accountability Act [HIPAA] and later, under the Affordable Care Act. But nothing has been done, and physicians are increasingly frustrated because of the amount of staff time that must be devoted to copying or attaching and sending documents required by payers.

Sixty-eight percent of respondents said they were fed up with the lack of EHR interoperability, which hampers the ability of providers to exchange patient data. Here again, MGMA would like to see more government regulation to prevent hospitals and EHR vendors from charging exorbitant interface fees — a practice that Tennant termed a form of information blocking.

Another concerning issue, as noted by 59% of practices, is the increasing use by payers of "virtual credit cards." This is a form of electronic funds transfer (EFT) in which a health plan issues a one-time credit card number that can be entered into a credit card terminal to pay a practice for a particular batch of claims. According to Tennant, practices that use virtual credit cards must pay charges of around 3% to the bank issuing the credit card. Alternatively, he said, plans may do direct EFT to the practice's bank account but often charge 3% to 4% for the privilege.

Holmes said larger groups can usually negotiate these charges out of their payer contracts but that small and medium-sized practices lack the leverage to do that.

Moreover, Tennant noted, virtual credit cards make it impossible to use electronic remittance advice to trigger automated payment posting, which can save practices money. MGMA is working on this issue with other health industry groups and hopes to get some action from CMS (which governs HIPAA transactions) in the near future.

Forty-one percent of the respondents were very or extremely concerned about Medicare credentialing. Most commercial payers, Tennant noted, have long used the ProView database of the Coalition for Quality Affordable Healthcare (CAQH) for credentialing, but CMS refuses to come aboard.

Despite the very high costs of regulatory compliance, Holmes emphasized, neither administrative tasks nor a loss of physician productivity entirely accounts for them. Some of this spending represents investments in practice transformation, such as using portals to increase patient engagement or improvements in quality and outcomes, which can translate into higher-quality scores and bonuses, she said.

The full text of the survey is available on the MGMA website.

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