Declining GI Medicare Reimbursement

It Stinks; Let’s Stop Complaining and Focus on Improving Management Strategies

Medicare facility fees have been frozen since April 1, 2004, as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). During these past 30 months, your local costs have continued to increase. In fact, the consumer price index (CPI) for medical services has risen somewhere between 7 percent and 13 percent, dependent on where your ASC resides. Thus, your Medicare facility fees have, in a sense, already been cut each year since 2004. Fees remain frozen again in 2007 — Happy New Year! — as you have another 2 percent to 5 percent “phantom decline” facing you over the next 12 months.

In January 2008, it is a near certainty that Medicare facility fee reimbursement will again decline, maybe dramatically — exactly how large a reduction is anyone’s best guess. If the proposed CMS (Centers for Medicare and Medicaid Services) rule is adopted in its current form, our analysis across our 12 partnered endoscopy ambulatory surgery centers (EASCs), which perform over 100,000 procedures annually, shows an average decline of 22 percent within the Medicare portion of the payer mix. This coupled with a reasonably projected rise in the CPI index during 2008, means the real cost to your facility is probably somewhere in the neighborhood of 25 percent. Not exactly the future you’d like to see.

The Good Management Top Three List

What are the top three ways to increase the bottom line at your EASC? Clearly, No. 1 is to increase procedural volume and maximize per room utilization. Most EASCs at least try to achieve this goal. Well-managed EASCs make it happen by establishing simple but real physician block time utilization standards.

For example, if a physician doesn’t fill greater than 90 percent utilization of his/her current blocks, then, sorry, they don’t get more block time until they meet the goal. If a physician fills less than 50 percent of his/her current blocks, some of their block time gets taken away. Successful EASCs also do everything in their power to help the GI professional practices recruit more GI physicians. More doctors mean more available outpatient cases. Most EASCs actually do deliver efficient staffing and purchasing processes (you might interpret this to mean cost reductions), another finalist in our top three list.

Examples of this process in action might be joining a better GPO (group purchasing organization), “right-sizing” your staff, or renegotiating your service agreements. Have you ever really looked at how much you spend on linens? It can be shocking!
But the critical remaining category, the one many EASCs never leverage, is to consistently (and in a disciplined manner) renegotiate your non-governmental third-party payer contracts within a defined frequency. Every 18 to 24 months is not greedy; it’s simply good management.

I remember back in April 2004 when the pessimists forecasted that all the third-party payers would follow Medicare’s lead and freeze their facility fees too. Guess what? It didn’t happen. Not by a long shot. In fact, in every single one of our partnered centers opened as of April 2004 (and in many of those opened since that date), we have consistently demanded and received the opportunity to renegotiate facility fees every 18 to 24 months with the major payers in each market. The vast majority have increased their facility fees, sometimes only to a minimal degree to essentially match the inflation index, other times with reasonably exciting increases.

Now is a time for action! Every voice counts, so I encourage you to lobby your elected officials in Washington to help ease your reimbursement pain. Maybe those reimbursement cuts will actually be less painful. However, I would also encourage you to do something that can and will make a difference in your EASC right now — focus on managing your facility better. The top three list above isn’t rocket science, it’s just good management in action.

John Poisson is executive vice president at Physicians Endoscopy, LLC, a nationally recognized company that partners with GI physicians to develop endoscopy ambulatory surgery centers (EASCs) across the United States. He currently serves on the board of directors of seven facilities that collectively have produced increased incremental profits every year since the famed Medicare freeze of 2004. He can be reached at jpoisson@endocenters.com or by calling (215) 589-9003.

Case Study #1

MICHIGAN ENDOSCOPY CENTER, FARMINGTON HILLS, MICH.

Michigan Endoscopy Center (MEC) commenced operations in March 2003 as a joint venture between a coalition of 1 GI and colorectal physicians and Physicians Endoscopy. This five-room center performed over 12,000 procedures in 2004 and is on track to perform over 1 ,000 procedures in calendar year 2005.

Over the early summer months of 2005, Physicians Endoscopy, as part of its management services arrangement with MEC, performed a comprehensive third-party payer contract reimbursement effort, resulting in substantial improvements to the center’s bottom line.

The eight payers listed constitute 5 percent of the facility’s overall payer mix, with the vast majority of the balance of the mix being Medicare.

THE RESULTS: These increases will yield over the next 12 months an 11.3 percent increase in the bottom line profits of the facility.

Case Study #2
EAST BAY ENDOSCOPY CENTER, SAN FRANCISCO, CALIF.

East Bay Endoscopy Center (EBEC) commenced operations in March 2000 as a joint venture between a coalition of ten physicians and Physicians Endoscopy. This well-utilized two-room center performed over 5,700 procedures in 2004 and is on track to perform over ,700 procedures in calendar year 2005. In late 2004, Physicians Endoscopy, as part of its management services arrangement with EBEC, performed a comprehensive third-party payer contract reimbursement effort, resulting in substantial improvements to the center’s bottom line. The four payers listed constitute 3 percent of the facility’s overall payer mix, with the majority of the balance of the mix being Medicare.

THE RESULTS: These increases will yield over the next 12 months a 7.5 percent increase in the bottom line profits of the facility.

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