In order to make that money, however, it takes literally decades of schooling and many years of training, racking up hundreds of thousands of dollars in debt. In order to become a specialist, it can take more than half a decade of training to get there. It is not an easy path.

And, it is also true that primary care physicians are among the least paid of the profession. Primary care physicians are the bulwark of the healthcare system, the load bearing walls of our field, and it is truly unfortunate that, sometimes, they can make less than many other professionals.

Having said all of that, it is also true that the latest rounds of physician pay cuts announced by the Centers for Medicare and Medicaid Services (CMS) are quite distressing and truly unsustainable.

They state that these cuts are mandated by federal law:

By factors specified in law, overall payment rates under the PFS are proposed to be reduced by 1.25% in CY 2024 compared to CY 2023. CMS is also proposing significant increases in payment for primary care and other kinds of direct patient care.

The proposed CY 2024 PFS conversion factor is $32.75, a decrease of $1.14 (or 3.34%) from the current CY 2023 conversion factor of $33.89.

The conversion factor is multiplied by relative value units, which quantify how much “work” something a physician does, to arrive at a payment from CMS. And, CMS only pays 80% of that rate, the rest being paid by supplemental insurance (if a patient has it).

Immediately, physician groups decried the cuts:

“While the ACR [American College of Rheumatology] appreciates CMS’ continued recognition of the value of complex care provided by rheumatologists and other cognitive care specialists … we are gravely concerned that the proposed rule’s physician payment cuts contained in CMS’ conversion factor would add to physicians’ uncertainty about their continued ability to provide the highest quality of care to Medicare patients,” ACR president Douglas White, MD, PhD, said in a statement.

The President of the American Medical Association also weighed in with a statement, saying:

When adjusted for inflation, Medicare physician payment already has effectively declined 26% from 2001 to 2023 before additional inflation and these cuts are factored in. Physicians are one of the only providers without an automatic inflationary increase … Physicians need relief from this unsustainable journey.

Anders Gilberg, MGA, senior vice president for government affairs at the Medical Group Management Association chimed in as well:

The proposed 2024 Medicare Physician Fee Schedule (PFS) raises significant concerns for medical groups related to its 3.4% reduction to the conversion factor, which further increases the gap between physician practice expenses and Medicare reimbursement rates. Medicare already largely fails to cover the cost of furnishing care to beneficiaries, and the proposed cut to the 2024 conversion factor compounds the problem.

This is the key to understanding why physicians are upset about these cuts. It is not about greedy physicians. It’s not about a doctor previously earning $400,000 and now earning $388,000.

It is about the costs of running a practice. When adjusted for inflation, physician reimbursement has declined significantly, as the AMA correctly pointed out. But, the costs of running a physician practice has not decreased by the same amount. They have, in fact, dramatically increased: there has been 7% inflation in healthcare labor costs, and now CMS answers this increase in costs with another 3% payment cut. This math is not sustainable.

I used to be a partner in a small private practice. Yes, I earned a comfortable living. But, it costed a lot of money to keep the practice open: the salary of the office staff; the rent of the office space; the utilities; office supplies; among many other costs. Those costs didn’t go down. Ever.

Yet, our reimbursement from CMS and other payers did. Eventually, if the costs of running a practice exceed its income, the practice closes. Or, they stop taking Medicare because the reimbursement was not enough to cover the costs.

In very large practices, there are other costs – such as interest on loans to cover payroll – have increased dramatically in the past few years. With every cut in reimbursement, it makes staying in business that much more difficult.

This is what physician groups mean when they say these payment cuts by CMS threaten access to care for seniors. If practices close their doors because the math is not sustainable, then that means less doctors are available to care for seniors. There is already a shortage of physicians, especially in rural areas, and these payment cuts could make it worse by making it impossible to run a practice.

Now, it is great that CMS is paying primary care physicians more. It is high time they get the proper reimbursement they deserve. What I don’t understand is why the law forces CMS to pay PCPs more by taking the money from other physicians, most notably specialists. This makes no sense to me.

“Well,” some may say, “specialists make too much money anyway.” That’s a non-argument. The whole formula under federal law needs to be changed for something much more sustainable for everyone.

Physicians can’t just keep working harder for less reimbursement. That is part of what is driving physicians to burn out and leave the profession. How does this help our patients? And, no one tells a plumber, after he or she fixed your leaky shower or faucet, “Well, your bill is $200, but I’m only going to pay you $120.”

Yet, that’s what happens to physicians all the time, and the math is not sustainable. CMS spends only 1 out of every 5 dollars on physician and clinical services. It is not right to keep cutting physician reimbursement to reduce healthcare spending. There has to be a better way.

The post The Unsustainable Math of Medicare Physician Reimbursement Cuts appeared first on Medika Life.

Challenges facing hospital leadership

Hospital leadership faces multiple factors as they try to balance shifting dynamics within today’s evolving environment. Financial sustainability for every hospital incorporates a variety of trends, requirements, and challenges.

These include:

• Quality, including patient safety, hospital acquired conditions and medication errors.
• Regulatory and compliance requirements.
• Reimbursement, new payment models and readmission penalties.
• Mergers, acquisitions, market competition (including other hospitals and health systems, and entities such as Amazon, Apple, retail based companies such as CVS, and urgent care centers).
• Capital improvements, innovation and new lines of business.
• External partnerships and population health initiatives using Social Determinants of Health to identify, prevent and control chronic conditions.
• Patient empowerment: This includes patient satisfaction, the consumerism, price transparency and patient access.
• Revenue cycle improvements, such as coding, billing, and patient communication.
• Supply chain transformation includes purchased services cost containment, prescription drug costs and shortages,and cost saving strategies for high cost medical devices and implants (PPIs).
• Labor shortages and costs.
• Physician and clinical staff productivity, including burnout.

IT challenges and future trends.

• New ONC strategy to reduce IT challenges for patients and providers. The goal is to reduce reporting burdens, strengthen interoperability and enhance the patient experience. [1]
• Cybersecurity, physical security and disaster preparedness.
• New technologies and care delivery models include telehealth, wearable technology, home-based medicine, and a trend towards outpatient surgeries.
• EHR upgrades, evidence based clinical decision support systems.

Looking at these factors, the task can appear overwhelming, and it often is.
There are multiple stakeholders, both internal and external. Coupled with the complexity of government oversight, accrediting bodies, private payers and the move toward consumerism, every hospital must plan, strategize and continually monitor budgets, costs, and revenue streams.

Creating a “patient centered vision”

This changing healthcare landscape requires a dedication to a “patient centered vision” by your hospital.
Historically, a healthy system is broadly divided into clinical and financial divisions. That model has evolved with the shift to value based reimbursement. Leaders from these respective functions are beginning to collaborate as they strive to provide high quality patient care.
Both understand that interdepartmental communication and transparency are crucial to success.
The insight of CFOs is essential in the development of strategic plans. As they take the lead in creating budgets, they simultaneously share the hospital’s vision and ensure that budgets are developed based on that organizational plan.
Current trends in budget preparation include a focus on operational performance with positive operating margins and a return on investment.
In this scenario:

• Each department’s budget becomes a cog in the wheel and is crucial to the success of the entire healthcare entity.
• The organization needs to create and share data-driven enterprise reports. This step enables departmental leaders to review the budget or change direction monthly.
• An annual review of results is no longer a viable option.

The need for leadership in healthcare

Healthcare thought leaders of 2022 must be forward-thinking, strategic, data-driven, patient-centered, adaptable, future-focused, open to change, flexible, an active listeners, team leaders, teacher and coaches.

“As the healthcare industry acclimates to disruption, major health systems are turning to their CFOs for crucial guidance.” [2]

“The modern CFO is a cross-functional leader involved with everything from strategy to customer acquisition.” [3]

Where do you begin to address the many challenges within the organization and each department and ensure financial stability? You start with great leadership.

As the health system leadership creates the strategic plan, hospital CFOs lead the way for department heads to become partners down the road to change.
Department leaders must exhibit leadership qualities and embrace their role in the patient-centered vision.

Collaborating with the CFO, finance and clinical departmental leaders can begin with the following steps:

Step 1 — Dedication to routine open communication: utilizing the “huddle concept” by meeting regularly to share successes and clarify issues through virtual or in-person meetings. In follow-up, department leaders can huddle with their team to continue the transparency focus throughout the organization.

Step 2 — Data driven: Is your data being effectively used? CFOs must strive to share monthly departmental data reports with their department leaders. Accurate, actionable data should include target volumes, costs, and current revenue (and highlight any reimbursement issues).

Step 3 — Ongoing reviews: Encourage department leaders to review the original plan, current data points and any variances on a monthly basis. Utilize new budgeting and forecasting concepts to adjust priorities based on results.

Step 4 — Develop standard budget processes: These should be created throughout the enterprise and provide continuing education for department leaders. The importance of understanding trends with department specialties must be emphasized. In order to remain current, participation must be encouraged.

Step 5 — Utilize evidence-based process improvement strategies: Engage clinical leaders to provide staff training.

Step 6 — Celebrate successes: Share insights and educate throughout the year.

Step 7 — Stay focused: Productivity requirements, multiple distractions, and increased responsibilities are always issues for leaders as they embark on change. Keep the goal at the forefront, ensure communication channels remain open, and continually regroup to review processes and find more efficient ways to stay on task with budget improvements.

Challenges in the healthcare arena, while they may evolve, will not disappear.
Teamwork, transparency, and a shared vision are the only strategies that will help your organization successfully provide exceptional care for your patients for the best value while maintaining the financial health of your organization.

The post Finance and Budgeting Challenges In The Evolving Healthcare Organization appeared first on Medika Life.