PA practice struggling with lump-sum payments

Change never comes easy. This has never been more clear to Robert Connelly, a part-time practice administrator for Suburban Cardiologists in Philadelphia. The cardiology practice is struggling with a new form of reimbursement instituted by a managed care organization it contracts with. Unfortunately, the practice’s costs often exceed reimbursements due to the nature of the formula, Connelly says.

Suburban Cardiologists is participating in a provider network for Keystone East, a Blue Cross/Blue Shield HMO that includes a reimbursement mechanism sometimes called an "episode of care" payment. Once a patient is referred to Suburban Cardiologists or another practice in the network, the referral initiates an episode-of-care payment of $500 to cover care (excluding surgery) for the next 90 days. The $500 payment is made regardless of the patient’s condition or the amount of work required.

"The idea is that hopefully the well patients will exceed the sicker ones," he says. "You may have patients who come in with chest pain and may not need any other services within 90 days — they probably use around $75 of services." But patients who require a cardiac catheterization, which Suburban Cardiologists has to outsource at an average $2,000 fee, incur costs that exceed the episode-of-care payment.

Connelly’s solution is to work with the 72-physician cardiology alliance of which his practice is a member to renegotiate rates as a large organization. The group plans to bring two years’ worth of cost data to the bargaining table. Suburban Cardiology also is moving to larger office space so it can provide more services in-house. "I’ve talked to other cardiology practices who do everything in-house with the exception of cardiac catheterizations, and they’re able to operate much more efficiently," he says.