February 2002 Bulletin

Is a financial train wreck ahead?

How to cope with declining reimbursments

By Sandra Lee Breisch

Orthopaedic surgeons might be facing significant reductions in reimbursements due to upcoming changes in the Centers for Medicare and Medicaid Services (CMS) 2002 physician fee schedule (see previous article). According to a Nov. 1, 2001 CMS announcement, the Conversion Factor for the Resource-Based Relative Value Scale (RBRVS) payment system will be reduced 5.4 percent in 2002.

"This means many orthopaedic surgeons will feel a significant economic impact as the level of reimbursement declines for the services they perform. This is because nearly a quarter of the typical orthopaedic practice is comprised of Medicare patients," says Bruce A. Johnson, JD, MPA, principal, Medical Group Management Association (MGMA) Health Care Consulting Group in Denver, and special counsel, Faegre & Benson LLP, Denver.

Though the initial prognosis sounds grim, Johnson notes that there may be strategies that orthopaedic practices can follow to help make up for the revenue shortfall. They include:

  1. Diversifying revenue streams. Some strategies that can help offset the declines in revenue include investments in Ambulatory Surgical Centers or through the provision of new services such as bone densitometry services and others.
  2. Increasing productivity through development of additional physician services, as well as increased use of staff, physician extenders such as nurse practitioners and physician assistants.
  3. Paying increased attention to private payer and cash patients due to the higher reimbursement that they can provide. This can occur through the development of more specialized practices such as sports medicine, services to executives and other marketing and clinical care opportunities that may enable a practice to expand its share of private pay (non-Medicare) patients.
  4. Reducing practice-operating costs through changes in staffing and other tactics. However, keep in mind that the reductions in costs ultimately may not help the practice in the long run because better performing practices tend to have larger numbers of support staff and higher operating costs, which translate into higher revenues per physician.
  5. Since many payers link their payment reimbursement levels to Medicare, practices might attempt to negotiate a higher rate with non-governmental payers, specifically, everybody other than Medicare.

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