Tighten your belt: Changes coming in outpatient reimbursement

Prepare now for Medicare cuts, increase in managed care

If you’re an outpatient provider, you’re likely to face a whole new ballgame with your reimbursement in the near future. Consider these issues:

• The Balanced Budget Act of 1997 sets a $1,500 cap on therapy reimbursement, scheduled to go into effect Jan. 1, 1999, for Medicare patients treated at freestanding outpatient facilities. The legislation limits reimbursement to $1,500 in a calendar year for physical therapy and speech therapy services combined, with an additional $1,500 limit for occupational therapy.

• The Health Care Financing Administration (HCFA) is requiring that all outpatient providers — whether in a hospital or freestanding center — use a standard set of codes for reimbursement. Some fiscal intermediaries have not required the codes for billing in the past.

• HCFA is moving toward a fee schedule for outpatient services for providers in all settings. This means that the old days of being reimbursed on a cost basis for Medicare patients is clearly drawing to an end.

• Managed care is still on the increase, with few fee-for-service payers left in many parts of the country.

• Reimbursement for workers’ compensation and Medicare patients is increasingly falling un der managed care plans in many states.

• Non-Medicare managed care plans and other third-party payers are continuing to cut the number of treatment visits, offer capitated contracts, and force providers to shave costs to the bone.

"My view is that outpatient providers have to do spring cleaning to get ready for all of the changes that are coming in reimbursement," says Nancy J. Beckley, MS, MBA, president of the Bloomingdale Consulting Group, a rehab consulting firm based in Valrico, FL. "It’s not just a matter of figuring out your Medicare fee schedule. You need to analyze everything about your program to succeed in the future, and now is a perfect time."

Whatever changes are made in reimbursement, whether it’s through HCFA, workers’ compensation, or private-pay insurers, this is the bottom line: You’re likely to have to do more with less.

This change may mean you need to start providing fewer treatments per diagnosis, developing more home exercise programs, using lower- cost employees for some tasks, and keeping a close tab on your outcomes vs. cost to come up with more efficient and effective ways to treat patients.

Outpatient providers must start now to analyze their case mix, utilization, and types of reimbursement for all their patient populations to see how they will fare when reimbursement changes in the future, suggests Malcolm Morrison, PhD, president of Morrison Informatics, a health care information management company based in Mechanicsburg, PA.

"The most important issue is to understand what your costs and utilizations are for treating outpatients. Evaluate carefully whether the amounts are within the limits and to what degree and for which patients," Morrison says.

Managed care reimbursement declines

Some providers have taken advantage of the fact that, in the past, Medicare has reimbursed based on costs, Beckley says. Their costs were high, and their reimbursement was high. "Unless those providers have really been doing something to move costs down, they may be in deep trouble."

Medicare reimbursement isn’t the only reason outpatient providers need to cut costs. Managed care reimbursement is shrinking. The number of treatments insurers will cover is shrinking. Pay ers in many areas are moving to capitated contracts. "If people just look at Medicare as a carve-out, they still have a moving target," she points out. "Medicare managed care is growing, and Con gress wants it to do that." Workers’ compensation also is switching to managed care in some areas, she adds.

Don’t miss out on contracts

If your market isn’t already saturated by managed care plans, it will be soon. If you don’t work on forming strategic alliances and networks with acute care hospitals, rehab hospitals, and other health care providers throughout the continuum, your outpatient facility may be left out of contracts.

"The important thing to remember is that you can’t start today and work all night and get a managed care contract tomorrow morning," she says. "A lot of markets are in a lockout. If you’re not in a network, you are not going to get in on a managed care contract unless you bid the price down."

In some marketplaces, reimbursement for rehab services has dropped dramatically as providers who are left out of managed care contracts bid down prices just so they can get the business, Beckley says. "Yes, we might have gripes against managed care in general. We might not like the managed care reimbursement. But a lot of the onerous drops in reimbursement has been market-driven by providers."

The Medicare therapy cap would have the most dramatic effect on your bottom line in the near term. A coalition of rehabilitation organizations and individual providers has been working in Washington, DC, to convince lawmakers to at least delay implementation of the cap before the 105th Congress adjourns. (For more information on the legislative initiative, see related article, p. 149.)

Drastic changes’ may be necessary

Frank Pugliese, CHE, chief executive officer of Riverside Rehabilitation Center in Plains, PA, says, "If we are not successful in changing the cap, we will need to make drastic changes in the way we practice medicine in our type of facility." Riverside is an outpatient rehab provider with two comprehensive outpatient rehabilitation facilities (CORFs) and five other satellite clinics in rural Pennsylvania.

Pugliese has made three trips to Washington, DC, to talk to his senators and representatives about the adverse effect of the therapy cap and to urge that it be eliminated or at least postponed. "Many providers will not be able to continue to provide services to Medicare recipients with the therapy cap," he says.

For example, Riverside performed an analysis of all stroke patients at its seven outpatient centers. The patients received an average of $6,000 in outpatient therapy services a year. However, the tab for some of the older patients ran as high as $12,000 a year, he points out. And while outpatient rehab providers are coping with pending changes in reimbursement, their staff have to be trained to use a whole new set of codes for reimbursement.

Progressive Steps Rehab, which operates outpatient rehab clinics throughout the country, has compiled information on the number of visits needed for the various diagnoses and is looking at how to cut the number, says Agnete Mansori, national clinical director for outpatient services of the Milwaukee-based provider.

"For most diagnoses, we can manage well within the $1,500 cap. But as far as the consumer is concerned, they’d better not get sick more than once a year," Mansori says.

The HCFA Common Procedure Coding System codes, now required for reimbursement, are procedure codes, which contain the current procedural terminology codes.

If you haven’t already done so, check with your software vendor to make sure the products you are using have been upgraded to deal with the new codes, Morrison says. Otherwise, you’ll have to do all your coding by hand on the bills, and it will be a time-consuming task.