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Scheduled Medicare reimbursement changes and quality-reporting requirements will affect all physician practices over the next two years.

Here’s what you need to know to prepare for the future of health care finance and delivery.

Physician reimbursement expert Linda Rouse O’Neill, recently led the above McKesson webinar “Reimbursement Outlook for Physician Offices and Other Outpatient Settings.” O’Neill is vice president of government affairs for the Health Industry Distributors Association, the trade group that represents medical products distributors.

O’Neill discussed the scheduled Medicare reimbursement changes and quality-reporting requirements that will affect physician practices over the next two years. She forecasted major shifts in how the government—and private insurers—will pay doctors by 2020 and beyond.

  • Sustainable Growth Rate. Of immediate concern to physicians is the 20.9 percent cut in Medicare payments scheduled to take effect on April 1 under the program’s Sustainable Growth Rate, or SGR, formula, according to O’Neill. At this point, it’s unknown whether Congress will delay that cut as it has done 17 previous times or come up with a new payment system that would replace the SGR system. The situation will continue to create uncertainty for doctors until it is resolved, she said.

  • Medicare Payments. Another near-term challenge is the growing share of Medicare payments to doctors based on performance. O’Neill said 4 percent of Medicare payments to doctors currently are performance-based. That means payments are specifically tied to how well physicians meet the measures of the HITECH Act’s “meaningful use” program, Medicare’s Physician Quality Reporting System and Medicare’s Value-Based Purchasing Program. In 2017—in just two years—that percentage will more than double to 9 percent, she said.

Physician practices will have to accelerate changes in the way they practice medicine and the way they collect, analyze, report and act on clinical and financial data and information, according to O’Neill.

Wanting to dispel any notion that foot-dragging by doctors would make new payment and reporting challenges go away, O’Neill warned, “With all things government, whatever is voluntary and offers you incentives to participate will become mandatory and penalize you if you don’t comply.”

  • Site neutrality. Medicare will start reimbursing providers the same rate for the same service regardless of setting. Medicare now pays different rates for the same service based on whether it’s provided in a freestanding outpatient setting or a hospital-based outpatient setting. Similar payment differentials exist for rehabilitation services based on whether a service is provided in a nursing home or in a rehabilitation facility.

  • Increase in quality and cost reporting requirements. Medicare intends to start paying ambulatory surgery centers (ASCs) the same as it does other providers, based on quality and value. However, it lacks the data to fully understand the type and volume of medical procedures done at ASCs. By requiring ASCs to report additional quality and cost data, Medicare will be able to formulate a value-based payment system for ASCs that treat Medicare beneficiaries.

  • Increased incentives for alternative payment models. Medicare will incent physicians to voluntarily drop fee-for-service and care for beneficiaries through alternative payment models like accountable care organizations (ACOs) and bundled-payment arrangements. The government will stop just short of requiring doctors to join such alternative payment models.

How can you best respond and take advantage of changes to position yourself for success in the new health care world?

Physician practices that learn how to competitively price their services, transparently report their cost and quality outcomes and effectively adopt a business model based on value rather than volume will be well-positioned for the foundational changes certain to rock established medicine in the next five years.

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