The evolution of how providers will be paid continues its metamorphosis in 2014 and is gaining traction.  While having to deal with the recurring issue of SGR payment reductions, practices must also contend with the quality payment aspects that portend to be part of future reimbursement models.

Medicare is at the forefront of this change. Legislators and providers alike are struggling with how to move forward. Faced with an impending 20% reduction based on the SGR (sustainable growth rate) aspect of the current fee-for-service formula, Congress punted again.  A temporary fix for the SGR Medicare payment reduction was enacted on December 26, 2014.  The cut was replaced with a .5% increase.  However, this is only effective through March of 2014.  The intent was to give Congress a little more time to develop a permanent solution to the SGR problem.  Unfortunately, the passage of this legislation was also tied to the Ryan-Murray budget deal, which extended the sequestration cuts to Medicare through 2023.  The net effect is a little over a 1% reduction in payments.

In looking at  Medicare payments, most of the focus has been on the Conversion Factor associated with Medicare reimbursement.  That is the part of the payment formula that the SGR influences.  However, there are  Relative Value Units (RVU’s) associated with each CPT code that also affect payments.  These RVU’s are comprised of geographic cost factors, practice expenses, and the cost of malpractice insurance, each of which can fluctuate.  CMS reviews these annually, frequently making adjustments.  Depending on what CMS changes, the effect often varies among specialties.  For example, this year, the largest gains from RVU changes are for Chiropractors, Psychologists, and Clinical Social Workers.  Those specialties with the greatest loss are Diagnostic Testing Facilities, Pathology, Independent Labs, and Rheumatology.

While contending with reimbursement changes in Medicare’s fee-for-service model, providers are experiencing the prodding of CMS to begin looking at reimbursement from a different perspective, a result-driven or case management focus.  CMS wants providers to focus more on quality and less on just providing a service.  This can be illustrated by the move to reimburse providers for Care Coordination beginning in 2015.  Currently there are legislators indicating legislation may be introduced that provides a global payment for care of a chronic illness for a patient rather than paying for the individual services provided in the treatment of the illness.

CMS is also encouraging providers to utilize electronic health records and to measure performance based upon what it deems the standard of care should be for the treatment of a patient’s diagnosed problem.  This is reflected in the incentives and adjustments (i.e. penalties), associated with the implementation of electronic health records and PQRS (Physician Quality Reporting System) requirements.  The incentives are going away.  2014 is the last year a provider can qualify under Medicare criteria and receive incentive payments for implementation of an Electronic Health Record system.  This year will also be the last year for some PQRS incentive payments.  However, next year, 2015, will be the year providers will begin experiencing increased negative adjustments.

In addition to the 2% sequestration adjustment, an e-Rx penalty of 2% for not meeting requirements associated with electronically ordering prescriptions will be imposed.  Although this is the last year for the e-Rx penalty, 2015 will see penalties for failure to meet PQRS reporting requirements begin.  2015 will also see penalties for not meeting Meaningful Use requirements.  This will initially be a -1.5% adjustment for next year and increase to -2.0% for subsequent years.  Providers will also see the introduction of the VBM (value based modifier) in 2015 for clinics of 100 or more providers.  This penalty will apply to clinics of 10 or more in 2016 and to every provider in 2017.

It is important to understand that these adjustments are based on activity in prior periods.  For example, a PQRS adjustment applied to Medicare payments in 2015 is based on 2013 reporting activity.  So, to prevent future adjustments, steps must be taken now.  If a provider failed to meet requirements for PQRS participation, failed to implement an electronic health record system to meet meaningful use requirements, and did not meet VBM requirements, the provider could experience a 3.5% reduction in Medicare reimbursement.  Adding the impact of sequestration reductions, the total adjustments may be -5.5%.  Adjustments will increase over the next few years and may be as much as -11%.

Also on the horizon is the dreaded October 1, 2014 ICD-10 implementation date.  Most practices have been inundated with information on this topic to the point of becoming numb.  However, all indications are consistent that Medicare will not delay this implementation date.  Be prepared.  Providers should begin now examining the services they provide and develop a plan to learn how to code under the new guidelines.  Coding personnel in the practice need training.  The organizations providing the clinic’s EHR, Practice Management System, and Clearinghouse services should be monitored, and, if necessary, pushed to test and be compliant before the deadline.  And, the practice should build up cash reserves and/or establish a line of credit in anticipation that reimbursement delays are likely to arise.

Like recent years, 2014 portends to be an active one.  The SGR  issue is still unresolved and will need to be handled by March 31, 2014 to avoid payment hassles.  Practices will begin seeing patients enrolled in insurance plans through the Insurance Exchange or Marketplace, which will create its own set of problems.  The 2014 legislative session will see the introduction of “any willing provider” legislation.  The intent of this legislation is to prevent an insurance company from denying  a provider’s participation in a network if the provider meets the requirements for network participation.  Obviously, practice administrators must stay actively involved and informed to maintain a healthy revenue cycle.