Medicare fee schedule has foothold in contracting

This article is part of a comprehensive examination of the RUC that includes in-depth features, commentary, infographics, and more. Click here for complete coverage. - See more at: http://www.modernmedicine.com/news/what-you-need-know-about-ruc-and-medicare-payment#sthash.a039VAc5.dpufThis article is part of a comprehensive examination of the RUC that includes in-depth features, commentary, infographics, and more. Click here for complete coverage. - See more at: http://www.modernmedicine.com/news/what-you-need-know-about-ruc-and-medicare-payment#sthash.a039VAc5.dpuf This article is part of a comprehensive examination of the RUC that includes in-depth features, commentary, infographics, and more. Click here for complete coverage. - See more at: http://www.modernmedicine.com/news/what-you-need-know-about-ruc-and-medicare-payment#sthash.a039VAc5.dpuf

Future reimbursement methodology will include more innovative payment models, but they are unlikely to supplant Medicare’s Resource Based Relative Value Scale (RBRVS), which has been an industry standard for physician payment since 1992.

“The interim or bridge approach is going to be where blended provider organizations are going to use RBRVS to find out what their cost of service is so they can determine-based on their capitated models or discounted fee schedule with an incentive bonus plan-whether they’re covering their costs or not,” says Laura Corn, senior manager for Accenture, a global consulting firm.

Historic trends in actual dollar payments can serve as the benchmark. But physicians will increasingly need data analytics to judge their financial risk and reward in payer contracts that include value-based strategies.

However, payers have an additional concern. They need to review their physician-reimbursement strategies not just for pure adjudication purposes, but in a broader economic context under health reform.

“Historically, commercial payers floated off Medicare or some derivation thereof,” says Bill Fera, principal at Ernst & Young. “The medical loss ratio (MLR) under the Affordable Care Act had to change that because there now is a stipulation on how much money can be spent on operations.”

Fera says plans are adjudicating to the MLR because they have less room for actuarial error. To ensure optimal pricing, it’s incumbent on payers to also use their own data, rather than relying on Medicare rates for comparison. He says it’s more so a question of feeding the right data into the algorithms.

Some larger payers have recently acquired entities that add not just market share but market data. For example, Cigna purchased HealthSpring in late 2011 and gained 350,000 Medicare Advantage members and another 800,000 Part D members. Beyond the members, Cigna gained new experience in Medicare Advantage contracting.

“We’ll see commercial payers parlaying the experience they’re learning through these acquired entities . . . how do to managed care and how to price managed care contracts appropriately,” Fera says.

Creating a new system

Even with experience, Corn says creating an alternative system to arrive at appropriate physician payment is not just data-intensive, it’s also labor intensive. Few plans would be able to justify the expense, especially when Medicare fee schedules are already an industry standard.

“We do see some proprietary systems, but most are using a system that is based off of RBVRS, which is still considered the most comprehensive and valid determination of work effort and geographic distribution,” Corn says. “For payers using a proprietary approach, they’re taking their own values and determining what the gap is compared to what Medicare has and are setting that fee schedule based on that variation.”

Payers and providers are going to have to spend more time understanding how each of the market segments-Medicare, Medicaid, exchange products, commercial products-impact their respective revenue outlook, she says.

Taylor Moorehead, regional partner of Zotec Partners, a provider revenue cycle management organization, says the Medicare payment system is a broken model that relies on draconian fee reductions to balance the budget.

“Most physician groups just take that reduction year over year, every year,” Moorehead says. “Major payers come out with fee schedules every year that are lower and lower.”

He says patient care suffers when commercial payers ride on the coattails of RBRVS. And providers don’t usually know what to look for in their contracts with commercial payers.

“They’ve reduced reimbursement so much, it’s a volume game now for providers,” he says.

Fera says providers have to prepare for the future with the advent of more coordinated, collaborative care. Those that have data available and are “ACO-ready” will be preferentially singled out for deeper partnerships with payers.

“They need to get lean in their operations and think about enterprise cost-reduction strategies to get ready for this new environment,” he says.

- Julie Miller

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