My reimbursement equation

[Gut Shot]

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A lot of discussion has centered around looming cuts to physician reimbursement. I find it annoying because virtually all of it completely misses a significant factor in how health reform will impact our bottom lines.

In my practice I provide services, and each one of them generates a bill. Each bill is then sent to each payer, be it private insurance, Medicare, individuals, etc. How much I actually make boils down to this:

Gross revenue = (# of bills that get paid) x (average amount of payment per paid bill)

While I will not divulge the % of bills that get paid (the collection rate), I can assure you that it is nowhere near 100%. Or even 90%. As health reform kicks in I am expecting my average payment amount to get squeezed, and indeed this is already starting. However, I am also expecting that by January 1, 2014, my collection rate will increase significantly as more people have insurance. Whether I break even or perhaps get ahead has yet to be determined, as there is always the potential to encounter unforeseen factors, but it will be difficult to ignore a significant upward shift in my collection rate.

The bottom line is that any discussion of physician reimbursement must consider both variables in the above equation rather than fixating solely on the payment amount.

 

[Postictal Raiden]

A lot of discussion has centered around looming cuts to physician reimbursement. I find it annoying because virtually all of it completely misses a significant factor in how health reform will impact our bottom lines.

In my practice I provide services, and each one of them generates a bill. Each bill is then sent to each payer, be it private insurance, Medicare, individuals, etc. How much I actually make boils down to this:

Gross revenue = (% of bills that get paid) x (average amount of payment per paid bill)

While I will not divulge the % of bills that get paid (the collection rate), I can assure you that it is nowhere near 100%. Or even 90%. As health reform kicks in I am expecting my average payment amount to get squeezed, and indeed this is already starting. However, I am also expecting that by January 1, 2014, my collection rate will increase significantly as more people have insurance. Whether I break even or perhaps get ahead has yet to be determined, as there is always the potential to encounter unforeseen factors, but it will be difficult to ignore a significant upward shift in my collection rate.

The bottom line is that any discussion of physician reimbursement must consider both variables in the above equation rather than fixating solely on the payment amount.

What do you mean by "break even"? is there a possibility that you generate no income?

 

[Bluto385]

What do you mean by "break even"? is there a possibility that you generate no income?

I think OP means that break even = no change relative to current compensation.

 

[DAPI]

Gross revenue = (% of bills that get paid) x (average amount of payment per paid bill)

I think it should be this...

Gross revenue = (% of bills that get paid) x (total # of patients billed) x (average amount of payment per paid bill)

 

[punkedoutriffs]

Does this apply to every service/specialty?

 

[Barcu]

A lot of discussion has centered around looming cuts to physician reimbursement. I find it annoying because virtually all of it completely misses a significant factor in how health reform will impact our bottom lines.

In my practice I provide services, and each one of them generates a bill. Each bill is then sent to each payer, be it private insurance, Medicare, individuals, etc. How much I actually make boils down to this:

Gross revenue = (% of bills that get paid) x (average amount of payment per paid bill)

While I will not divulge the % of bills that get paid (the collection rate), I can assure you that it is nowhere near 100%. Or even 90%. As health reform kicks in I am expecting my average payment amount to get squeezed, and indeed this is already starting. However, I am also expecting that by January 1, 2014, my collection rate will increase significantly as more people have insurance. Whether I break even or perhaps get ahead has yet to be determined, as there is always the potential to encounter unforeseen factors, but it will be difficult to ignore a significant upward shift in my collection rate.

The bottom line is that any discussion of physician reimbursement must consider both variables in the above equation rather than fixating solely on the payment amount.

Interesting point that hasn't been discussed much.

There's one question/problem I see with this, and I would like your input: will there be a significant difference between people working in private practice versus in a hospital or academic setting?

I would imagine that the % of bills that gets paid in private practice will be higher than the % of bills paid at an academic institution or large hospital. So, while you personally may end breaking even, some physicians still may see a potential cut, at least if we are only using this equation (I'm sure there are other factors too).

 

[punkedoutriffs]

Interesting point that hasn't been discussed much.

There's one question/problem I see with this, and I would like your input: will there be a significant difference between people working in private practice versus in a hospital or academic setting?

I would imagine that the % of bills that gets paid in private practice will be higher than the % of bills paid at an academic institution or large hospital. So, while you personally may end breaking even, some physicians still may see a potential cut, at least if we are only using this equation (I'm sure there are other factors too).

By that logic, the pay gap between academic/pp medicine will probably shrink in the future. That would be awesome, since academic med is what I'm aiming for. But oh wait, then it'll be even more competitive. 🙁

 

[Gut Shot]

I think it should be this...

Gross revenue = (% of bills that get paid) x (total # of patients billed) x (average amount of payment per paid bill)

Nice catch. It should have said (# of bills that get paid). That's what I get for doing math first thing in the morning.

 

[HurricaneKatt]

How many of these patients who will now have coverage will be covered by Medicaid or Medicare though? I know they do not reimburse nearly as much as private insurance. Though some reimbursement is better than none.... Just curious how you think that will play into the equation...

 

[DAPI]

How many of these patients who will now have coverage will be covered by Medicaid or Medicare though? I know they do not reimburse nearly as much as private insurance. Though some reimbursement is better than none.... Just curious how you think that will play into the equation...

I don't think it will be that Medicaid or Medicare is covering the extra people, but rather there will just me more insured people due to the ACA. People that had not been covered by their employers may now be, or people that had been unable to get insurance due to a pre-existing condition may now get it, or people that just didn't want to pay for insurance in the past may be enticed to now due to the 'tax' if you don't buy it, etc.

 

[Long Way to Go]

I don't think it will be that Medicaid or Medicare is covering the extra people, but rather there will just me more insured people due to the ACA. People that had not been covered by their employers may now be, or people that had been unable to get insurance due to a pre-existing condition may now get it, or people that just didn't want to pay for insurance in the past may be enticed to now due to the 'tax' if you don't buy it, etc.

This is pre-Supreme Court decision, so these numbers are likely a bit too high as states now have the ability to opt-out of the Medicaid expansion, but millions of new patients will be covered by the Medicaid because of the ACA: http://theincidentaleconomist.com/wordpress/the-future-medicaid-expansion/

 

[Gut Shot]

How many of these patients who will now have coverage will be covered by Medicaid or Medicare though? I know they do not reimburse nearly as much as private insurance. Though some reimbursement is better than none.... Just curious how you think that will play into the equation...

Virtually every person eligible for Medicare (the program for people 65+) enrolls. It's pretty much a no brainer.

Medicaid is going to see significant expansion since the income limit has been raised. The CBO predicts ~16 million additional recipients in 2020. The good news is that Medicaid is paying Medicare rates (which are higher) to some providers during the transition, and I know the AAFP will be lobbying like Hell to keep that pay structure. But yes, some reimbursement is better than none. If I am not mistaken most of Medicaid's budget goes to indigent nursing homes, anyways.

The CBO also predicts an additional 24 million who were uninsured will be able to buy subsidized private insurance through the exchanges. By 2016 there will be an extra $50+ billion of new revenue added to the health care system each year, in addition to $150 billion spent annually on new insurance coverage. That money has to go somewhere.

 

[punkedoutriffs]

Virtually every person eligible for Medicare (the program for people 65+) enrolls. It's pretty much a no brainer.

Medicaid is going to see significant expansion since the income limit has been raised. The CBO predicts ~16 million additional recipients in 2020. The good news is that Medicaid is paying Medicare rates (which are higher) to some providers during the transition, and I know the AAFP will be lobbying like Hell to keep that pay structure. But yes, some reimbursement is better than none. If I am not mistaken most of Medicaid's budget goes to indigent nursing homes, anyways.

The CBO also predicts an additional 24 million who were uninsured will be able to buy subsidized private insurance through the exchanges. By 2016 there will be an extra $50+ billion of new revenue added to the health care system each year, in addition to $150 billion spent annually on new insurance coverage. That money has to go somewhere.

Will reimbursement rates for those plans be the same as if they were unsubsidized? Or are they lower because they are subsidized?

 

[couldabeenadoc]

A lot of discussion has centered around looming cuts to physician reimbursement. I find it annoying because virtually all of it completely misses a significant factor in how health reform will impact our bottom lines.

In my practice I provide services, and each one of them generates a bill. Each bill is then sent to each payer, be it private insurance, Medicare, individuals, etc. How much I actually make boils down to this:

Gross revenue = (# of bills that get paid) x (average amount of payment per paid bill)

While I will not divulge the % of bills that get paid (the collection rate), I can assure you that it is nowhere near 100%. Or even 90%. As health reform kicks in I am expecting my average payment amount to get squeezed, and indeed this is already starting. However, I am also expecting that by January 1, 2014, my collection rate will increase significantly as more people have insurance. Whether I break even or perhaps get ahead has yet to be determined, as there is always the potential to encounter unforeseen factors, but it will be difficult to ignore a significant upward shift in my collection rate.

The bottom line is that any discussion of physician reimbursement must consider both variables in the above equation rather than fixating solely on the payment amount.

I think this is a pretty big assumption. When the employer mandate kicks in (1/1/14), it requires employers with 50 or more full-time workers to provide the government-designed health plan or pay a fine. Some employers will trim their workforce, some will push workers into part-time status, while others will pay the fine. In the end, many workers will lose their on-the-job coverage. I think there are still quite a few growing pains ahead for the Obamacare before we can release the doves.

 

[Gut Shot]

I think this is a pretty big assumption. When the employer mandate kicks in (1/1/14), it requires employers with 50 or more full-time workers to provide the government-designed health plan or pay a fine. Some employers will trim their workforce, some will push workers into part-time status, while others will pay the fine. In the end, many workers will lose their on-the-job coverage.

Workers who lose their on-the-job coverage (or have no option for such coverage) will become automatically eligible to receive the subsidies necessary to purchase private insurance through an exchange. In fact they will be required to do so or face a fine/penalty/tax (remember the whole mandate thingy?).

 

[Gut Shot]

Will reimbursement rates for those plans be the same as if they were unsubsidized? Or are they lower because they are subsidized?

The premiums are subsidized, not the reimbursement. I am not expecting the plans to look much different from the ones currently available. Each state defines the lowest limit of acceptable coverage, and if the reimbursement is too low then the plan has a hard time finding providers willing to accept it.

 

[couldabeenadoc]

Workers who lose their on-the-job coverage (or have no option for such coverage) will become automatically eligible to receive the subsidies necessary to purchase private insurance through an exchange. In fact they will be required to do so or face a fine/penalty/tax (remember the whole mandate thingy?).

Oh yeah, the mandate thingy 😀 With the penalty for not buying insurance starting at $95 the first year, why would someone opt to pay thousands of dollars for health insurance when they know they will be able to buy it when they need it anyway? 😕

 

[Gut Shot]

Oh yeah, the mandate thingy 😀 With the penalty for not buying insurance starting at $95 the first year, why would someone opt to pay thousands of dollars for health insurance when they know they will be able to buy it when they need it anyway? 😕

Why don't you ask an MVA victim who is consuming thousands of dollars an hour in an ICU?