Colorado Medical Society

Physician payment

Monday, January 01, 2018

The Centers for Medicare and Medicaid Services has taken note of a trend indicating that when hospital employment of physicians increases, costs to Medicare also rise. The government is taking action through a proposed rule for “off-campus departments.”

Starting in 2018, the federal CMS proposes to reduce current fee schedule payment rates for non-excepted items and services furnished by off-campus hospital outpatient provider-based departments by 50 percent, changing the payment rate from 50 percent of the Hospital Outpatient Prospective Payment System payment rate to 25 percent of the OPPS rate. “CMS believes that this adjustment will encourage fairer competition between hospitals and physician practices by promoting greater payment alignment,” the agency said in a July 13, 2017 fact sheet.

As stated in the proposed rule published in the Federal Register on July 21, 2017, “for CY 2019 and for future years, we intend to examine the claims data in order to determine not only the appropriate PFS [physician fee schedule] Relativity Adjuster(s), but also to determine whether additional adjustments to the methodology are appropriate – especially with the goal of attaining site-neutral payments to promote a level playing field under Medicare between physician office settings and non-excepted off-campus PBD [provider-based department] settings, without regard to the kinds of services furnished by particular off-campus PBDs.”

Jennifer Souders, FACMPE, CPC, practice administrator for a family medicine practice, agrees with Medicare’s proposed rule, calling it “unfair” when employed physicians bill a hospital fee. Her practice is in the process of being acquired by a hospital system in early 2018. “I just think it isn’t in the spirit of true billing,” she said. “Just because you’re employed by a hospital doesn’t mean you’re in the hospital system. It doesn’t mean you can bend the rules.”

While it does cost more to run a hospital than a physician practice, she said the increased billing for off-campus departments was a loophole that the hospital systems used that will now be closed.

The difference in payment between independent physicians and employed physicians is stark. A study by the Physicians Advocacy Institute conducted by Avalere Health found that for four specific cardiology, orthopedic and gastroenterology services, physician employment has resulted in more than $3.1 billion in increased costs from 2012-2015. The Medicare program paid $2.7 billion more for these services in employed settings and Medicare beneficiaries faced $411 million more in financial responsibility for these services in these settings.

The authors concluded that when physicians are employed by hospitals or health systems they perform more services in a hospital outpatient department (HOPD) setting than independent physicians for a variety of reasons, including enhanced care coordination, reimbursement incentives, network access and specific HOPD assets. A higher proportion of services performed in a HOPD setting brings increased costs to the Medicare program and patients.

Between 2012 and 2015, the number of physicians employed by hospitals grew by 46,000 (49 percent) nationwide, and the number of physician practices employed by hospitals increased by 31,000 practices (86 percent). As the trends of employment continually increase, cost implications on Medicare and patients will continue to keep this issue in the spotlight.