Health care providers are facing a decline in revenues as a result of a widespread reduction in reimbursement for their services. The economic downturn has caused a shift, according to Michael L. Minotti, CPA, president of Skoda Minotti.
Insurance companies, Medicare and Medicaid have generally reduced the amount they will pay for procedures. Fewer people have coverage, which means more people are responsible for paying for their own medical care. However, if patients lack coverage and cannot afford care, hospitals do not turn them away.
“It’s forcing the physicians to spend more time chasing their patients for their co-pays and their portion of the procedures than ever before,” says Minotti. “All of that is leading to less top-line revenue for the physicians.”
Smart Business spoke with Minotti about what other industries can learn from the challenges facing health care and how innovation is helping some physicians get by.
How have today’s challenges affected the medical industry?
Health care providers are faced with the same economic issues that every other company, including their contemporaries in the nonmedical field, are facing. The economic times are similar for all of us — employee issues, rising business costs, etc. One of the largest problems for physicians specifically is the continually increasing cost of medical malpractice insurance.
What must health care companies do to adapt and succeed today?
They absolutely have to keep up with changing technology. There is a push to move all of the physician practices to electronic medical records. Currently, there is an incentive (reimbursements and funding) for physicians to put the technology in place. The Obama administration is forcing the acceptance and installation of electrical medical records by 2015. Otherwise, if you have not embraced it, your Medicare reimbursements will decrease by 7.5 percent at the first level. Certain things are being mandated, but others are necessary just to continue to provide quality care.
What hurdles are in the way of adopting new technology?
One of the issues is the sheer cost of buying and installing the technology, plus training costs for physicians and staff. That is a significant investment practices have to make. In all businesses, the larger the group or organization, the easier it is to absorb the costs, because you either have higher revenues or more people to spread the cost.
What it’s going to do is force a lot of the smaller practices to either join hospital-based groups or hospitals or join with other practices to create group practices. That will allow them to adapt and overcome the challenge of cost. From a financial standpoint, it’s a lot easier to practice in a larger group setting because there will be shared costs. A larger group can much more easily afford the investments of time and money that are necessary in these changing times. There is strength and safety in numbers.
Other than consolidating, how else can physicians defray rising costs?
What today’s physician needs to do is ask, ‘How can I legally create additional or ancillary revenue so that I can increase my top line and, therefore, bottom line?’ Medicare continually reduces what they’re willing to pay. So you can have the same number of patients, but for every procedure you do, you’re making less money.
Some very innovative physicians in Florida and Arizona have created a concept called concierge medicine. Let’s say the physician had 2,500 patients and does more and more work just to make up for the reduced revenues. If the physician gets 500 patients to pay a fee to join this concierge medical practice at $1,000 apiece, he or she can focus on those 500 patients and provide the more personal care they desire.
With that combination of fees plus reimbursements from Medicare, physicians have found they’re not working as hard, they’re able to concentrate on their patients and practice in a better manner, and they’re making more money. It seems somewhat simple, but it’s a very creative way to increase revenues and still provide quality medical care.
What can other industries learn from the challenges of the health care industry?
Other industries need to learn that they cannot be complacent, believing there will be little to no change that will affect their business lives. Physicians have seen an incredible amount of political and regulatory changes on top of the economic changes that are affecting everyone. You can’t be content. You have to realize that change is coming; be aware of that changing landscape.
Collaborate and consult with contemporaries within your chosen profession and outside your field. Seek out and work with appropriate professionals and consultants that can keep you abreast of changes and give you suggestions for options to adapt and deal with the changing environment. You need a vision of where you’re going and a plan to get there.
This economic environment is unique to anybody alive today. It’s being proven that we really don’t know how to get out of it that easily. You need a disaster and contingency plan — the ‘what if’ scenarios. What happens if our business contracts? What if we’re faced with changing regulations? How are we going to address it?
Be creative and nimble and adapt to the changing world. You can’t do it all on your own. You need help, and that help can be found in contemporaries within and outside your field and quality professionals who have the expertise.