Dan McAfee, Sr. Managing Director, Payor Contracting and Reimbursement Strategy, for The Godbey Group discusses the increasingly stressed relationships between providers and payers on the horizon and how a collaborative approach towards clinical integration and technology will drive changes in reimbursement methodologies.

HFMA:  What role do you see the Obama administration playing in terms of Medicare payment?

DMcA:  Well, with respect to the Obama administration and the impact on managed care, I think the one consensus is we don't know, that's the only consistent piece in the debate right now.  And even, of course, the President's message has changed over the last few months regarding the most hotly debated topic now, which is the public option.  So, even his opinions and messages from June, August and September have changed over time.

And until something comes out of that, it's going to be very difficult for anybody to predict the outcome with respect to a public option, what it might look like, how it would compete or provide competition to the current market. And that will certainly vary by market, meaning in markets where there is very little competition where a particular health plan may own 80 percent of the market, and there are a lot of those markets out there, it'll certainly have a different impact.  I don't know what that is, but it'll certainly have a different impact as opposed to a market that has a high level of competition.

So, what I've heard is that's certainly one of the goals with that option.  But, until we see what the reimbursement looks like for that program, we don't know how it'll impact the overall provider's financial situation and the macroeconomics of the whole system.

HFMA: Where do you see the relationship between the providers and payers in the next five to 10 years?

DMcA:  I see it continuing to be stressed.  Right now, the payers are really ratcheting down on reimbursement levels with the providers across the board, and it's become much more tense and more difficult to maintain a win-win relationship with the providers.  And having said that, the organizations that will most likely do well in the future, are those that will be able to implement the type of healthcare oversight that takes the waste out of the system. 

So, right now, we've got everybody screaming for a piece of the pie, and everyone's piece of the pie seems to be getting smaller.  But, the organizations will have to derive from the provider side with respect to a new age of providing healthcare such that we're managing quality.  We're managing populations.  We're targeting chronic disease and managing the 10 percent of the population that consumes 90 percent of the healthcare resources right now.

HFMA:  Have you seen any trends recently in terms of payments?

DMcA:  Yes. We've seen the payers' willingness depleting, meaning it's getting tougher and tougher to create the win-win deal that is obviously the best scenario.  But, the payers have really tightened the purse strings with respect to reimbursement to providers and, likewise.

The segment of the provider world that's been most negatively impacted have been physicians.

The increases to physicians have not kept pace with inflation from the government perspective, certainly.  And the heath plans have really ratcheted down the physician fee.  And that's a stereotype, but, of course, there are exceptions to that.  But, they ratcheted down the physician fees to the point where any additional cuts that are threatened by Medicare would severely harm the physician community.

HFMA: What role do you see technology playing in future government reimbursement activities?

DMcA:  The sustainable growth rate method that the government has adopted, the SGR, is what projects the increases or decreases for physician reimbursement.  And over the past few years its projected deficits and then legislation has come in at the eleventh hour and actually granted small increases. 

But, this year the 20 percent that I'm talking about is that the SGR is estimating a 21 percent decrease in physician reimbursement, which would be catastrophic to the entire healthcare system, obviously.  And that does include some shuffling of the physician specialty dollars, that more dollars would go to primary care for managing quality and managing patient care, which is the right idea, and the cuts would come from some of the specialty areas, which will of course raise them higher in and of itself. 

But, the current budget plan submitted for 2010 by the Obama administration also calls for shifting of some of those dollars to the primary care family doctor bucket and, likewise, for the management of the patient as opposed to simply providing care. 

And then, if we shift gears to the hospital side, essentially we've got a system that was built and designed for the single largest payer, which of course is Medicare.  In a fee-for-service reimbursement system that it simply promotes and feeds waste and over-utilization and fraud.  And without some new designs with respect to, again, patient management, catastrophic management, disease management, and without changes in reimbursement methodology, throwing another trillion dollars into a bucket that has a dozen or two holes in it is probably not wise.

But, the hospitals and the physicians have the ability to drive the dramatic part of the change, and if Medicare and the government would get on board with respect to changes in reimbursement methodologies and what they reward providers for, which should be quality and access to healthcare, the providers have the ability to drive clinical integration, which is probably going to be the next big buzz word in healthcare for the next 10 years. 

And basically, that stems from the ability to improve the technology and the data information that's collected throughout the healthcare process system.  Right now, it's convoluted.  The healthcare companies have not done a good job in clinically integrating the data and managing it.  Most of them are still using the old, "Mother, may I" form of utilization management, which is a proven failure.

So, if the hospitals and physicians can organize themselves and work with technology companies that can bring the entire medical record and the entire episode of care and the population management and disease management all within focus, they'll have the ability to cut the waste out of the system.

HFMA:  What should hospitals be thinking about for the future of Medicare payment?

DMcA:  I just heard yesterday that the White House Press Secretary, Robert Gibbs, said that, if you get insurance from the VA or Medicare or Medicaid, you're not going to be impacted. 

Well, that might be an accurate point with respect to that one particular topic, but don't get confused.  There will be some significant changes.  I think you'd be foolish to think there won't be significant changes, is probably the better way to say it, to Medicare reimbursement for hospitals and physicians in the future.

The trend here over the last couple of years basically by how CMS has changed the DRG formula with respect to payment and the new MSDRGs, which have replaced the CMS DRGs, are that coding is becoming crucial.  It's becoming a real hot item, if not already there, obviously.

For those folks who are managing it, they've been able to significantly increase reimbursement due to the fact that they are capturing the clinical notes, the appropriate diagnoses, and then, more importantly, storing them and recording them into a system that has the ability to track, manage and then submit that information to the payer.  And due to the way that CMS redesigned the DRGs with the diagnoses, they've broken out acuity levels, and that documentation is golden, is very important for the hospitals to make sure it's being implemented in coordination with their physician staff to appropriately document and transmit that information.

Another little saying we use is for being the largest industry in the US, healthcare has fallen woefully behind on technology.

Publication Date: Thursday, October 08, 2009