Business In Medicine

Created by Martha Burk, MD

 Created by Martha Burk, MD

Healthcare Industryy Statistics 2008

• 14.3 Million jobs
▫ Making it one of the largest industries in the nation
▫ 1/10 people in the U.S. work in the Healthcare Industry
• 10 of the 20 fastest growing occupations
▫ Healthcare
H lth related
l t d
• Job Growth
▫ Projected
j to create over 3 Million jobs
j 2008-2018
 22% growth
 Greatest growth of ANY industry!

U.S. Bureau of Labor Statistics, Career Guide to Industries 2010-11 Edition

U.S. Bureau of Labor Statistics, Current Employment Statistics Highlights February 2010
 Created by Martha Burk, MD

Employment of Wage and Salary

Workers in Healthcare
(2008 and projected change 2008-2018)

Employment % Change
O
Occupation
ti # (K) % P j t d
Projected

All Occupations 14,336 100 23

Management,
g , Business and Financial 615
5 4 17
7
Professional and related occupations 6284 44 23
Physicians and Surgeons 513 4 26
Registered Nurses 2192 15 23
Pharmacists 68 0.5 14
Office and Administrative support 2540 18 20
Excerpted from: U.S. Bureau of Labor Statistics, Career Guide to Industries 2010-11 Edition
 Created by Martha Burk, MD

Percent Distribution of Employment

and Establishments In Health Services
Industry
dus y Segment
Seg e Employment
p oy e Establishments
s ab s e s
Ambulatory Healthcare Services 42.6 87.3
Hospitals 34.6 1.3
N i and
Nursing dR
Residential
id ti l CCare F
Facilities
iliti 22.8
8 11.4
Total 100 100
Excerpted from U.S. Bureau of Labor Statistics, Career Guide to Industries 2010-11 Edition
 Created by Martha Burk, MD

U.S. Bureau of Labor Statistics, Current Employment Statistics Highlights February 2010
 Created by Martha Burk, MD

Some National Perspective

I d t
Industry Number
N b Employed
E l d Projected
P j t d Ch
Change
(K) 2008-2018
2008
Healthcare 14 336
14,336 + 23%
Physicians & Surgeons 661 +22%
Federal Government 2,017 + 9.5%
Auto 877 - 16%
Abridged from: U.S. Bureau of Labor Statistics, Career Guide to Industries 2010-11 Edition
The Future of Healthcare
Implications of Mandatory Created by Martha Burk, MD

Nationalized Healthcare
 Created by Martha Burk, MD

G
Government IIncentives
i
• Control of the fastest g
growing
g industryy in the economyy
▫ Remember the auto and banking industry bailouts?
• Increased revenue
▫ Decreasing
g reimbursement to Healthcare Providers
 In many communities Medicare already paid only $0.50 on the
dollar
 Medicaid, when they pay, pays only $0.10-0.50 on the dollar
▫ Mandatory health insurance premiums (a form of tax)
 Forces young, healthy people to buy something that they do not
need in the name of providing affordable healthcare for “everyone”
▫ Taxes on “Cadillac” health insurance plans
p
 Federal insurance plans are exempt
 Irony: the Government now owns 60% of GM, makers of the
Cadillac
▫ Aggressive fines through “Fraud
Fraud & Abuse”
Abuse investigations
▫ Aggressive investigation of “Overpayments”
 No reimbursement is made for “Underpayments”
 Created by Martha Burk, MD

Reduced
R d d Healthcare
H lth Provider
P id (HCP)
Reimbursement
• Cost of health care delivery for Medicare patients
already exceeds reimbursement rates
• Further reductions will likely result in
HCPs declining government insured patients
Older HCPs taking early retirement
Younger HCPs transitioning out of patient care jobs
• Reduced health care access
F
Fewer physicians
h i i available
il bl tto care ffor patients
ti t

Only 40% of New York Internists currently accept Medicare patients

New York Times April 1, 2009 “Doctors Are Opting Out of Medicare”
 Created by Martha Burk, MD

R d
Reduced
dHHealthcare
lh A
Access
• Lack of sufficient health care personnel
p
• Fewer health care services offered due to insufficient
government funds
▫ Examples
 VA healthcare system
 Healthcare for active duty military members, retirees and
their family members
Example:
3 Military Treatment Facilities in Illinois
5 states & DC have Military Treatment Facilities with Pulmonary Services for active duty members,
retirees and their family members (11 states if including VA Hospitals)

▫ Greater distance to travel to find health care providers

▫ Lack of funds for individuals to seek health care
 “Insurance poor”
 Created by Martha Burk, MD

Tricare Network of
Civilian Providers 2003
9.6 Million Beneficiaries
413 Medical Clinics
March 2010 Tricare.mil

125,000 Civilian Providers

April 2008
“More Civilian Providers Accepting
Tricare Standard” af.mil (official
website off the US Air Force))

How do we expect the

Government to do a better job
providing healthcare for
everyone else in the US?

United States General Accounting Office Report to Congressional Committees

Defense Health Care Oversight of the Tricare Civilian Provider Network Should Be Improved July 2003
 Created by Martha Burk, MD

Insurance Monopolies
p
• Inability of Private Insurers to compete with
government sponsored health care premium
rates
Subsequent collapse of private insurance market
Health insurance takeover by monopolies
(Government & select private groups)
 Created by Martha Burk, MD

Health
Insurance
Premiums
have outpaced
Inflation and
Income
Byy 4
4-fold
od

Health Care Costs: A Primer Kaiser Family Foundation kff.org

 Created by Martha Burk, MD

Hospital Closures
• Hospital costs will exceed reimbursement
▫ Unfunded mandates are not economically viable
▫ CMS plans to “Bundle” hospital care reimbursements so that
physicians
p y will no longer
g receive moneyy from Medicare or
Medicaid
 Hospitals will be solely responsible for determining a “fair”
payment for in hospital physicians’ services
 Conflict of interest for the Hospitals
 Meet their own costs versus paying physicians
 No oversight or guidelines for physician payment is planned
 A “downhill” scenario
▫ Fewer physicians will agree to work in hospitals
▫ Hospitals will be unable to meet patient care demands
▫ Hospitals will close
 Created by Martha Burk, MD

Economic Collapse
• Disruption of a major component of the Gross Domestic Product
▫ Massive job losses
 Exponential increase in number receiving unemployment benefits
▫ Increased burden on surviving healthcare providers
 More healthcare p providers exiting
g healthcare industryy
▫ Cascading effect on various other industries
 Insurance
 Pharmaceutical
 Medical equipment
 Medical supplies
▫ Loss of local and national revenue
 Less money entering the economy
 More banking
b ki and d auto industry
i d ffailures?
il
 Grocery store failures?
 3 Days to Anarchy?
▫ Decreased tax revenue
 Government unable to afford massive social welfare programs
 Government collapse
Healthcare Costs
A Critical and Complex System Created by Martha Burk, MD

Warrants Careful Consideration

 Created by Martha Burk, MD

Th H
The Healthcare
lh IIndustry
d
• Healthcare Is A Business
▫ A substantial economic influence
 Local and National economies
• Being pummeled by
▫ Governments
 Federal, State, County, City
 Taxes, Licensing, etc.
▫ Micromanaging through excessive regulations
 Unfunded mandates
 Decreasing reimbursements despite increasing business costs
 Aggressively increased “Fraud & Abuse” investigations
 Excessive fines that include imprisonment
▫ Private
ate Interest
te est G
Groups
oups
 AMA, ABIM, etc. through excessive certification programs that generate
tremendous revenue for them at great cost to physicians
 Business costs are rising while reimbursement is decreasing
 Certification requirements and costs are exponentially rising
▫ Justice system
 Excessive accountability and jury awards
 Created by Martha Burk, MD

C
Complexity
l i off H
Health
l hCCare C
Costs
• Hospitals • Health
• Nursing Homes • Disability
• Clinics • Liability
• Ambulatory Surgery Centers • Property
• Health Care Providers (HCPs)
• Diagnostic tests
• Treatment
• S i
Services
Health
• Allied Health Care Staff Insurance
• Administrators Care
• Utilities

Equipment
• Imaging and Pharmacy
• Diagnostic S
Supplies
li
• ECHO
• Therapeutic
• Ventilation • Drug Companies
• Mechanical • Pharmacies
• Wheelchairs,
Wheelchairs Beds • Pharmacists
• Supplies • Drug packaging manufacturers
• Medical, Office • Shipping companies
 Created by Martha Burk, MD

Factors in Rising Healthcare Costs

• Technology
• Increased coverage
• Aging
g gp population
p
• Increased severity of illnesses
• Reduced personal fiscal responsibility
▫ Out of Pocket healthcare expenditures
 1970 40%
 2007 14%
• Inefficiency
I ffi i
• What is missing from the Healthcare Industry?
▫ Free Market pressures
p

Health Care Costs: A Primer Kaiser Family Foundation kff.org

 Created by Martha Burk, MD

Estimated Revenue for

Healthcare Industries (In Millions)
Kind of Business 2000 2005 2006 2007 % Growth
2000-2007

Ambulatory
Physician Offices 213,806 310,780 327,588 346,043 62%
Outpatient Care Centers * 69,464 75,936 82,133 18%
Since 2005

Medical & Diagnostic 23 450

23,450 34 690
34,690 37 224
37,224 38 558
38,558 64%
Laboratories
Hospitals
General, Medical & 397,526 573,007 603,800 642,670 62%
S
Surgical
i l Hospitals
H it l

The 2010 Statistical Abstract U.S. Census Bureau

 Created by Martha Burk, MD

Receipts for Healthcare Industries

By Source of Revenue (In Millions of Dollars)
Source of Office of % Hospital %
2007 2007
Revenue Physicians Revenue Revenue

2002 2007 2002 2007

Total 248,824 346,043 500,113 687,135

M di
Medicare 59 756
59,756 74 032
74,032 21% 161 306
161,306 177 200
177,200 26%

Medicaid 17,923 18,321 5% 59,385 69,408 10%

Private Insurance 121,246 173,245 50% 185,985 286,764 42%

Patient (Out of Pocket) 26,022 35,333 10% 26,108 31,251 4.5%

The 2010 Statistical Abstract U.S. Census Bureau

 Created by Martha Burk, MD

National Health Expenditures

Summary and Projected* (In Billions of Dollars)
Year Total Private Public Health Services & Supplies

Total Out of Insurance Total Federal State & Total Hosp Physician & Rx
Pocket Local Care Clinical Drugs
Services

1960 28 21 13 6 7 3 4 25 9 5 3

1970 75 47 25 15 28 18 10 67 28 14 5

1980
9 254
54 148
4 59 69
9 106 72
7 35 234
34 101 47 12

1990 714 427 136 234 287 194 93 667 252 158 40

2000 1,353 756 193 455 597 418 179 1,264 417 289 121

2010 * 2,624
6 1,374 291 8
892 1,251 912 338
8 2,458
8 8
830 552 256
6

2011 * 2,770 1,438 302 934 1,332 972 360 2,596 877 577 272

2018 * 4,353 2,120 427 1,376 2,233 1,649 584 4,186 1,374 865 454

The 2010 Statistical Abstract U.S. Census Bureau

Health Expenditures projected to double from 2000-2010 and triple from 2000-2018
 Created by Martha Burk, MD

Consumer Price Index of

Medical Care Prices (1982-1984
(1982 1984 = 100)

Year Medical Care, Medical Care Medical Care

Total Services Commodities
Physicians Prescriptions and Medical Supplies

2008 364.1% 311.3% 378.3%

The 2010 Statistical Abstract U.S. Census Bureau

“The Consumer Price Index (CPI) is the measure of change over time
of the prices paid by urban consumers for a market basket of consumer goods and services.”
United States Department of Labor, Bureau of Labor and Statistics
 Created by Martha Burk, MD

H lh
Healthcare R
Reform
f
• Reducing reimbursement to healthcare providers
• Forcing everyone to purchase healthcare insurance
▫ Tax is defined as
 A fee levied byy a g
government on a p
product,, income or activityy
 Indirect tax = tax on the price of goods or services
• Physicians will be taxed multiple times by
▫ Purchasingg insurance for themselves
▫ Paying for employees’ healthcare
▫ Essentially paying for Americans’ healthcare
• Creates worse financial hardshipp for those who are
already unable to afford healthcare
• Creates a domino effect with disastrous economic
consequences
 Created by Martha Burk, MD

R l off Physicians
Role Ph i i in
i HHealth
l hCCare
• Provide professional services
▫ Diagnostic
▫ Therapeutic
• Perform professional services with
▫ Confidentiality
▫ Compassion
▫ Dignity
▫ Respect
▫ Due Diligence
 Created by Martha Burk, MD

B
Benefits
fi off Health
H l hC Care
• Health maintenance
• Diagnose and treat individuals in poor health
• Improve quality of life
• Stabilize communities and businesses
▫ Education
▫ Preventive care
▫ Treating individuals
▫ Limiting the spread of disease
▫ Productivity
▫ E
Economici growthth and
d stability
t bilit
 Created by Martha Burk, MD

Aging Physician Population

1980, 1990, and 2007 600
Age Group
550
500
Aging
g gp physician
y
450
population 65 & Over
400
350
Number of new
nd over
300 55-64
physicians
p y is not Age 45 an
250
keeping up with the
Numbeer of Physicianss (Thousands)

200
aging or “soon to
150
retire” physicians
100 45-54

50
Aging population
0
means increased
50
demand for
100 35-44
healthcare
44

150
Age under 4

200
Fewer physicians to 250
meet future 300 Under 35
demands 350
400
1980 1990 2007

American Hospital Association aha.org/aha/trendwatch

Source: American Medical Association. (2009 Edition). Physician Characteristics and Distribution in the US.
How Physicians Are Paid
What the government giveth, Created by Martha Burk, MD

the government can taketh away!

OR
If it sounds too good to be true . . .
 Created by Martha Burk, MD

H lth
Healthcare M
Models
d l
• Beveridge
g Model
▫ William Beveridge, designed Britain’s National Health Service
▫ Government provides health care that is funded entirely by taxes
• Bismarck Model
▫ Chancellor Otto von Bismarck, created welfare state 19th Century Germany
▫ Insurance purchased by employees through payroll deductions and
subsidized by employers
 Plans must cover everybody
y y but g
government regulates
g costs

• National Health Insurance Model

▫ Private insurance companies paid from government insurance fund into
which everyone pays
• Out of Pocket Model
▫ Self explanatory – individuals pay for their own care

Health Care Systems - - - The Four Basic Models

http://www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/countries/models.html
 Created by Martha Burk, MD

How Americans Receive Healthcare

• All
ll models
d l
▫ Out of Pocket Model
 Primarily uninsured or underinsured
 Healthcare
lh providers
d ultimately
l l pick
k up the
h tab
bbby
absorbing the losses
▫ Bismarck Model
 Primaril
Primarily employed
emplo ed people with
ith insurance purchased
with assistance of employers
▫ National Health Insurance Model
 Medicare and Medicaid recipients
▫ Beveridge Model
 Veterans
 Created by Martha Burk, MD

Physician Reimbursement
• Employed v.
v Self-employed
Self employed
▫ Employed
 Salaryy 100%
 Salary + Productivity
 Productivity 100%
 M i
Maximum payouts = SSalary
l caps
 Possible partnership
▫ Self-employed
Self employed
 Revenue from billing for services provided
 Third party payers (Insurance)
 Billing directly to Patients
 Created by Martha Burk, MD

S l i
Salaries
• MGMA Medical Group Management Association
▫ Physician
Ph i i Compensation
C ti and
dPProduction
d ti S Survey
 Annual Reports compiled from voluntary responses from
medical practice participants
 Data includes,
i l d but b is
i not li
limited
i d to
 Demographics
 Physician compensation and benefits
 Ph i i productivity
Physician d i i
 Physician time worked
• Virtually ALL medical practices use this data (weak as
it often is!) to justify
j if
▫ Lower salaries to physicians
▫ Productivityy expectations
p
▫ Amount of benefits to offer
 Created by Martha Burk, MD

Physician Compensation
# Phys # Med Mean Std 25th Med 75th 90th
Practices Dev %tile %tile %tile
Emergency Med 754 57 $244,842 $63,800 $207,437 $243,449 $281,220 $319,644

Internal Medicine: 4,343 434 187,558 73,593 141,440 174,664 215,205 274,312
General
Internal Medicine: 853 116 189,403 50,427 160,493 182,184 206,035 234,666
Hospitalist
Pathology: 43 15 291,280 106,604 220,000 251,704 322,000 510,408
Clinical
Pulmonary Med: 177 38 285,808 101,993 214,388 269,313 326,374 441,497
Gen and Crit Care
Surgery: 214 57 481,867 201,902 341,377 472,582 576,500 696,602
Cardiovascular
Medical Group Management Association Physician Compensation and Production Survey 2006 Report
Problems:
1. Pay is not determined by your merit, but by an arbitrary average
2. Thus, a p
physician’s
y p
payy is artificiallyy lower because of a trend to offer less moneyy to others!
3. Pay is subdivided by multiple characteristics, such as number of years experience,
geographic location, etc. and often arbitrarily starts out at less than the median!
4. Academic salaries are based on a different report, and are significantly lower!
 Created by Martha Burk, MD

Physician Ambulatory Encounters

# # Med Mean Std Dev 25th Med 75th 90th
Physicians Practices %tile %tile %tile
Int Med: 2880 330 3646 1366 2747 3518 4381 5369
Gen
Int Med: 132 36 1,416 987 457 1,351 2,161 2,619
H
Hosp** *Observation status and Emergency Department encounters are considered ambulatory
Neurology 336 120 2524 1645 166 2080 3017 4038

Pediatrics: 1872 260 4643 1881 3394 4444 5660 6846

General
Urgent Care 339 67 5077 2189 3519 4736 6358 7935

Urology 361 110 2839 1461 2009 2605 3268 4112

Medical Group Management Association Physician Compensation and Production Survey 2006 Report

# Annual Office visits / # Days worked per year (Example: 5 day work week) = # Office visits per day

Example: A General Internist works 50 weeks per year (or 250 Days per year) and sees the median number of patients

Median 3518 / 250 = 14 ambulatory patients per day An economically nonviable number!
90th %tile 5369 / 250 = 21 patient per day
 Created by Martha Burk, MD

Physician Hospital Encounters

# Phys # Med Mean Std 25th Median 75th 90th
Practices Dev %tile %tile %tile

Internal Medicine: General 1,785 249 708 626 240 527 956 1,527

Internal Medicine: Hospitalist 316 66 1,913 832 1,405 2,025 2,530 2,911

Crit Care: Intensivist 16 8 1,432 864 929 1,279 1,904 2,955

Nephrology 96 39 1,549 872 855 1,388 2,340 2,743

Gastroenterology 416 112 659 505 290 529 857 1,360

Medical Group Management Association Physician Compensation and Production Survey 2006 Report

A
Average Number
N b Hospital
H i lEEncounters per d
day (7
( dday work
k week)
k)
Working 47 weeks per year (Median for Hospitalist)

Median 90th %tile

General Internal Medicine 527 / 329 = 1.6 hospital patients per day 1,527 / 329 = 4.6
Hospitalist 2,025 / 329 = 6.2 patients per day 2,911 / 329 = 8.8

Hospitalist numbers are not “usual” and are economically nonviable.

Many hospitalists see more like 25-35 patients per day! Far above the 90th %tile, but make a “Median” salary!
 Created by Martha Burk, MD

Ph i i Work
Physician W k RVUs
RVU bby G
Group T
Type
Single Specialty Multispecialty
Phys Med Median Phys Med Median
Practices Practices
Internal Medicine: General 110 25 3,582 2,134 189 4,049

Internal Medicine: Hospitalist 22 3 4 184

4,184 416 71 3 446
3,446

Family Practice (W/O OB) 162 45 3,976 2,575 188 4,056

Nephrology 51 12 5,413 252 81 4,634

Orthopedic Surgery: Hip & Joint 29 16 9,737 23 10 8,315

Radiology: Diagnostic & Invasive 69 13 8,499 56 20 9,769

Rheumatology 13 5 2,917 151 71 4,216

Medical Group Management Association Physician Compensation and Production Survey 2006 Report

Example for Perspective $76 x 4,184 visits = $317,984 in Collections

Assumptions:
p
Hospitalist sees only Medicare patients
Every visit is a high level follow up visit If overhead is fixed at $150,000,
Medicare reimburses at approximately $76 the Hospitalist’s Employer is left with less than $170,000
Medicare pays EVERY bill How much do you think the Hospitalist will be paid?
 Created by Martha Burk, MD

MGMA Scenario 1
• Problems
• Family Practice physician • Most physicians do not understand
medical documentation
• Straight Salary $164,021 requirements, or billing and coding
• R
Revenue $350,000
$350 000 issues
• Work RVUs 4,000 (Median • Lack of awareness of billing and
reimbursement issues does not equal
4,056 based on 2006) lack of interest in productivity (code
for laziness).
)
• Inherent conflict of interest
“This model appeals to physicians who • Physician employers want to
generate profits
have a low interest in productivity.” • Physician reimbursement is
MGMA simple
i l
• Pay physicians the least
amount in order to maximize
profit!

http://blog.mgma.com/blog/bid/27974/4-physician-compensation-models-for-your-group-practice-or-hospital
 Created by Martha Burk, MD

MGMA Scenario 2
• Gastroenterologist
▫ Base Salary
l + Productivity
d i i (Maximum Payout = Salary Cap)
• Base Salary $418,139
▫ Median $384,015
$384 015 75th %tile $518,241
$518 241

• Productivity = 30% Collections over $750,000

▫ Median = $740,094
▫ 75th %tile = $878
$878,215
215
• “If the physician produces $800,000, he or she will earn a $16,500
bonus, plus $418,139 for a total compensation of $434,639.”

“This model appeals to physicians who are moderately interested in productivity and revenue
generation.” MGMA

Profit to Employer
$800,000 - $434,639 =$365,361 minus overhead costs
 Created by Martha Burk, MD

MGMA SScenario
i 3
• Female Primary Care Provider
▫ Why is this important?
 According to the MGMA women earn less money!
• Payment model:
d l 50% salary
l + “i
“incentive
i model
d lbbased
d
on work RVUs generated”
▫ $20 for 0 - 4,000
4 000 work RVUs (Median IM 4,019;
4 019; FP 4053)
▫ $25 for 4,001 - 4,900 work RVUs (75th % tile 4,847; 4,844)
▫ $30 for 4,901 - 5,800 work RVUs (90th %tile 5,717; 5,762)
“ . . . the hospital would like to move to a 100% production model.”
“Physicians who have high interest in productivity usually are moderately attracted to this model . . .”
MGMA

The average reimbursement

Th i b t rate
t per wRVU
RVU ini 2005 was $$45-55!!
This reimbursement model cheats physicians out of 50% of revenue generated!
Where is the incentive?
 Created by Martha Burk, MD

Median Compensation
p byy Gender
Male Female Diff
(%)
Phys Med Median Phys Med Median
Prac Prac
Int Med: 2,847 396 $184,840 1,055 284 $151,042 $33,798
General
Ge e a ((-18%)
8%)

Fam Prac 3,142 497 $170,537 1,070 341 $135,000 $35,537

w/o OB (-21%)

Medical Group Management Association Physician Compensation and Production Survey 2006 Report
 Created by Martha Burk, MD

Work RVU Based Productivity Bonus

• Medical practice overhead averages between 40-60%
40 60% of gross
revenue, depending on how efficient the practice is
▫ Is 20% of productivity over a set number of work RVUs fair?
▫ Assumptions
 Physician generates 10,000 work RVUs and $500,000 in revenue
 Physician’s salary base of $200,000
 Productivity
P d i i B Bonus = 20% % off work
k RVU
RVUs > 8,000
8 (2,000
( in
i this
hi case))

Overhead Costs = $250,000

S l
Salary = $200,000
$
RVUs eligible for Bonus = 400 20% of Eligible work RVUs = 0.20(2,000)
If each work RVU is worth $50, the Bonus = $20,000 400 x $50

Total Revenue generated – (Overhead + Salary + Bonus) = Employer Profit

$500,000 – ($250,000 + $200,000 + $20,000) = $30,000

Employer profit remains higher than physician bonus!

 Created by Martha Burk, MD

Collections Based Productivity Bonus

• Physician base salary of $100
$100,000
000
• Productivity bonus = 20% Collections – Overhead
• Work RVUs g generated = 10,000
• Physician Charges = $100 (10,000) = $1,000,000
• Collections = $600,000
• O h d iis $
Overhead $300,000 (50%)
Total Collections – (Overhead + Salary) = Net Profit
$600,000 – ($300,000 + $100,000) = $200,000
Productivity Bonus
20% Collections AFTER overhead AND salary = $40,000 0.2($200,000)

Total Physician Salary = $100,000 + $40,000 = $140,000

Employer Profit = $160,000 $200,000 - $40,000
 Created by Martha Burk, MD

MGMA Scenario 4
• Surgical
i l group with
i h 5 shareholders,
h h ld 4 non-
shareholders and 5 PAs
• Production-based
Production based Income
Production + Revenue
– Overhead split equally or allocated
– Direct Expenses

= Physician Compensation Pool

Problem:
Overhead is often allocated disproportionately
Non-shareholders often pay a larger portion of overhead
 Created by Martha Burk, MD

Physician Compensation per Work RVU

Single Specialty Multispecialty
Phys Med Median Phys Med Median
Practices Practices
Internal Med: General 110 25 $ 6
$46.35 2 098
2,098 188 $
$41.59
Internal Med: Hospitalist 22 3 42.58 403 70 52.16
Family Practice (W/O OB) 161 45 36.65 2,538 187 38.97

Nephrology 7 2 * 82 41 $42.56

Orthopedic Surgery: Hip & Joint 27 16 48.53 19 9 51.55

Radiology: Diagnostic & Invasive 54 12 44.46 54 18 50.20

Rheumatology 13 5 48.16 146 71 50.21

Medical Group Management Association Physician Compensation and Production Survey 2006 Report

The average number of work RVUs per patient varies roughly around 2-3
Academic Institutions may pay as little as $10-20 per wRVU!
Why Documentation Matters
Created by Martha Burk, MD

Medicare “Allowable” Reimbursement Rate – CMS pays 80% of this

CPT Code Description Non Facility Facility Price Work RVUs
Price
ce
New Outpatient Visit $89 Difference
99205 High Complexity $180.98 * 3

99204 Moderate Complexity $143.66 * 2.3

99203 Low Complexity $92.15 * 1.34
Initial Hospital Care $90 Difference
99223 High Complexity * 182.71 3.78
99222 Moderate Complexity * 124.46 2.56
99221 Low Complexity * 92.00 1.88
Subsequent Hospital Care $ Difference
$29 iff
99233 High Complexity * 95.09 2
99232 Moderate Complexity * 66.27 1.39
Hospital Discharge Services $30 Difference
99239 > 30 minutes * 94.50 1.9
99238 < 30 minutes * 64.82 1.28
CMS Reimbursement for “Rest of Illinois” 20Jan2010
 Created by Martha Burk, MD

P d i i
Productivity
• Work Relative Value Unit
▫ Sounds like volume, doesn’t it?
▫ “Value” of work done
 Varies
V i with
ith the
th payor and d the
th employer
l
 No industry standard as to how work RVUs are calculated
 Each business usually creates their own formula
▫ “Pay
“P ffor P
Performance”
f ”
 Sounds like a reward for positive behavior
 Created to limit reimbursement
 Based
d on documentation
d i
 Assumes that what is not documented was not done
 Another means to limit reimbursement
Revenue Cycle
Created by Martha Burk, MD
 Created by Martha Burk, MD

Billing & Coding

• Healthcare
H lth services
i are bill
billed
d tto
▫ Private insurance providers
▫ Government run insurance providers
▫ Individual
I di id l patients
ti t
• Bills for medical services must “qualify” for payment
▫ Evaluation and Management service levels are dependent on level of
information documented in the patient encounter note
▫ Bills must include a CPT code and up to 4 ICD-9 codes
 CPT codes indicate the medical service provided
 ICD-9
9 codes indicate the diseases or symptoms
y p evaluated
 The AMA has negotiated with the Centers for Medicare & Medicaid to
make this mandatory! The AMA makes millions from the healthcare
providers they purport to represent!

CPT = Current Procedural Terminology

ICD-9 = International Classification of Diseases, 9th edition
 Created by Martha Burk, MD

The Revenue Cycle

Claim Rejected (25%)

Average Time to Collection:

60-90 Days

Accounts Receivable
Physician Dependent Amount billed for services pprovided,,
but for which you have not yet been paid

You want this amount to be as small as possible!

 Created by Martha Burk, MD

What You Need To Know

• Understand documentation requirements
• Document patient encounters promptly
▫ Discharge summaries are critical to complete ASAP!
• Understand Coding requirements
▫ Changes annually
 W
Wasn’t
’ that
h smart off the
h AMA?
 Annual fees generate a tidy sum!
• Submit bills promptly
• Promptly address rejected bills and resubmit
• 60-90 days is a long time to wait to be paid!
▫ Everything YOU pay for requires monthly payments!
E & M Coding
Evaluation and Management Created by Martha Burk, MD

Services
 Created by Martha Burk, MD

P ti t E
Patient Encounters
t
Evaluation & Management
The Centers for Medicare and Medicaid Services
(CMS) has published definitions and
documentation guidelines for evaluation and
management services
 These guidelines establish the minimum documentation
necessary for
f billi
billing purposes
 Used by virtually all insurance companies
 This minimum documentation is not necessarily adequate
for
 Communication with other healthcare providers
 Medical/legal documentation
 Created by Martha Burk, MD

Key Components of Documentation

 History Key components in
 Exam selecting
l ti th the level
l l off
E/M services
 Medical Decision Making
 Counseling
 Coordination of Care
 Nature of Presenting Problem
 Time
1997 Guidelines for Evaluation & Management Services
http://www.cms.hhs.gov/MLNProducts/Downloads/MASTER1.pdf
 Created by Martha Burk, MD

The History
Components and Levels
HPI ROS PFSH Type of History
Brief N/A N/A Problem Focused
Brief Problem N/A Expanded
Pertinent Problem Focused
Extended Extended Pertinent Detailed
Extended Complete Complete Comprehensive

New patients must have AT LEAST a Detailed History

 Created by Martha Burk, MD

History of Present Illness

Elements of HPI
Location
Brief
Q lit
Quality Contains 1-3 elements listed
Severity
Extended
Duration Contains 4 elements
Timing OR di
discusses 3 chronic
h i or inactive
i i conditions
di i
Context
Modifying factors
Associated Signs and Symptoms

EVERY encounter MUST contain a Date & Time AND a Chief Complaint
1 or 2 lines, stated in patients’ words, describing the presenting complaint

Lack of either component can result in lack of payment for services!

 Created by Martha Burk, MD

Sample HPI
• The patient is a 50 year old male with a 60 pack year history of
smoking, poorly controlled DM Type 2, HTN, Hyperlipidemia,
COPD and CAD s/p MI 2 years ago who presents to the ED with a 3
day history of progressively worsening angina symptoms. He has
retrosternal chest pain, rated 5/10 with minimal activity that is
relieved after 5 minutes of rest. His angina symptoms lasted
seconds to minutes 3 days ago, but are now lasting 5-10 minutes
and are accompanied by dyspnea, diaphoresis and radiation of
pain to his left arm. He was taking a beta
beta-blocker
blocker and an ACE
ACE-
inhibitor until 2 months ago when he lost his insurance benefits.
• An EKG performed in the ED shows . . .
• In the ED the patient received . . .
 Created by Martha Burk, MD

Review of Systems
Constitutional Symptoms
Eyes Problem Pertinent
Ears, Nose, Mouth, Throat Responses to the system directly
Cardiovascular related to the presenting problem
Respiratory Extended
Gastrointestinal Positive and negative responses to
Musculoskeletal 2-9
9 systems
syste s related
e ated to tthee p
problem
ob e
Integumentary (Skin,
(Ski Breast))
Neurological Complete
Psychiatric All positive and negative responses
Endocrine
Endocrine to systems
y related to the p
presenting
g
Hematologic/Lymphatic problem AND all other systems (10
Allergy/Immunologic or more total)
 Created by Martha Burk, MD

Past Family and Social History

• Past Medical History • Family Medical History
• Illnesses • Include heritable diseases &
• Operations those that place the patient at
• Injuries increased risk
• Treatments • Social History
• Medications • A i
An age appropriate i off
review
• Allergies past and current activities

Pertinent
Document at least 1 item from ANY of the 3 areas
It must be directly related to the problems identified in the HPI
Complete
All initial inpatient services require a Complete PFSH
Document at least 1 item from EACH of the 3 areas
 Created by Martha Burk, MD

Summary of History
• A Chief Complaint is Essential to Every Note
• The HPI should contain at least 4 descriptors
Location, Quality, Severity, Duration, Timing, Context,
Modifying factors, Associated Signs and Symptoms
• Past Medical,, Family,
y, Social Historyy
▫ Medications
▫ Allergies
▫ Medical diagnoses,
g surgeries
g and treatments
▫ Social History/Risk factors
 (i.e., smoking, substance abuse, ADLs, Occupational exposures)
▫ Family Illnesses that may be relevant
 Created by Martha Burk, MD

History
 Created by Martha Burk, MD

The Exam
Single Organ Systems recognized by CMS

 Cardiovascular  Musculoskeletal
 Ears, Nose, Mouth, Throat  Neurologic
g
 Eyes  Psychiatric
 Genitourinary (Female)  Respiratory
 Genitourinary (Male)  Skin
 H t l i /L h ti /I l i
Hematologic/Lymphatic/Immunologic

Detailed Comprehensive
An extended
d d exam off the
h affected
ff d A generall multi-system
lti t exam
body area or organs/organ system A complete exam of an organ system and
and another symptomatic or related other related body areas or organ
area systems
Most levels require a minimum of a Detailed Exam
 Created by Martha Burk, MD

M l i Organ
Multi O System
S E
Exam
• Detailed
• 3 vital signs
• BP, sitting or standing
• BP, supine
• Pulse,
P l rate t andd regularity
l it
• Respirations
• Temperature
• Height
• Weight
• 2 elements* of at least 6 organ systems or body areas examined
• OR 1 element of at least 12 organ systems

• Comprehensive
• 2 elements* in at least 9 organ systems or body areas

*Refer to 1997 Guidelines for Evaluation & Management Services

 Created by Martha Burk, MD

Elements of Individual Organ Systems

Constitutional •Gastrointestinal
Eyes •Lymphatic
•Ears Nose,
•Ears, Nose Mouth,
Mouth Throat •Musculoskeletal
•Neck •Skin
•Respiratory •Neurologic
•Cardiovascular •Psychiatric
y
•Chest (Breasts) •Genitourinary

*Refer to 1997 Guidelines for Evaluation & Management Services

 Created by Martha Burk, MD

Constitutional
• Vital signs • General appearance of
• 3 vital signs patient
• BP, sitting or standing • Nutritional
N ii l status
• BP, supine • Body habitus
• Pulse, rate and • Development
regularity • Deformities
• Respirations • Grooming level
• Temperature
• Height
• Weighti h
 Created by Martha Burk, MD

Eyes
y
• Inspection of conjunctivae and lids
a of
• Exam o pup
pupilss a
and
d irises
ses
• Ophthalmoscopic exam of optic discs
 Created by Martha Burk, MD

Ear, Nose, Mouth and Throat

• Ears and nose
• External inspection
p
• Otoscopic exam
• External canal
y p
• Tympanic membrane
• Fluid
• Assessment of hearing
• Inspect nasal mucosa
mucosa, septum
septum, and turbinates
• Inspect lips, teeth and gums
• Exam of oropharynx
 Created by Martha Burk, MD

Neck
• Exam of neck
• Visual findings
g
• Scarring
• Masses
• Palpation findings
• Thyroid
Th id
• Palpation
• Bruits
• Nodules
• Firmness
 Created by Martha Burk, MD

Respiratory
p y
• Assessment of effort • Auscultation
• Effort • Normal
• Normal, Increased or • Wheezes
Decreased (Impending • Rales
respiratory Failure) • Breath sounds
• Intracostal retractions • Increased or Decreased
• Percussion of chest • Egophony
• Normal • Palpation of chest
• Dull • Chest wall expansion
• Hyperresonant
H • Symmetric or Asymmetric
• Masses present or absent
• Scoliosis or Kyphosis
• Ribs
• Normal or broken
 Created by Martha Burk, MD

Cardiovascular
• Palpation of heart
• Point of maximal impulse
p
• Auscultation
• Heart sounds
• Carotid artery exam
• Abdominal aorta exam Mostly looking for
bruits and masses
• Femoral arteries exam
• Pedal
P d l pulses
l exam
• Palpable, Bruits
• Extremities for edema or varicosities
 Created by Martha Burk, MD

Chest and Breasts

• Inspection
• Scarring
g
• Trauma
• Surgeries
• Deformities
• Pectus excavatum
• Pectus carinatum
• Palpation
 Created by Martha Burk, MD

Gastrointestinal
• Abdominal exam
▫ Masses
▫ Scars
▫ Bowel sounds
• Liver and spleen exam
▫ Organomegaly
▫ Bruits
• Hernia, presence or absence
• Anus,, perineum,
p , rectum exam
• Stool for occult blood
 Created by Martha Burk, MD

Lymphatic
y p
• Document the examination at least 3 lymph
node regions
▫ Neck
▫ Axilla
▫ Groin
▫ Other
 Created by Martha Burk, MD

Musculoskeletal
• Gait and station
• Inspection and palpation of digits and nails
• Examination of bones, joints, muscles AND 1 or
more
▫ Inspection or palpation
▫ g of motion and p
Range presence or absence of p
pain
▫ Stability
▫ Muscle strength and tone
 Created by Martha Burk, MD

Skin
• Inspection
▫ Lesions
▫ Rashes
h
▫ Masses
▫ Petechiae
▫ P p a
Purpura
▫ Bullae
▫ Pressure ulcers
▫ Transdermal patches
▫ Scarring
 Surgeries
 Intradermal or intravenous drug
g abuse
• Palpation
 Created by Martha Burk, MD

Neurologic
g
• Cranial nerves
• Deep tendon reflexes
• Sensation
 Created by Martha Burk, MD

Psychiatric
This exam takes effort! Many patients who are mildly or moderately
demented can carry on a pleasant conversation

• Judgment and insight

• Orientation to person, time and place
• Memory, recent and remote
▫ Can they remember their medications, recent
meals
l that
h they
h hhad,
d bi
birthdays?
hd ?
• Mood and affect
 Created by Martha Burk, MD

Genitourinaryy
• Male • Female
▫ Scrotal contents ▫ External genitalia
▫ Penis ▫ Urethra
▫ Digital rectal exam of ▫ Bladder exam
prostate gland ▫ Cervix
▫ Uterus
▫ Adnexa/parametria
 Created by Martha Burk, MD

Summaryy of Exam Documentation

• Always document at least 3 vitals
• For every organ system documented
▫ Always document all the pertinent positive and
negative findings

*Refer to 1997 Guidelines for Evaluation & Management Services

 Created by Martha Burk, MD

Exam
 Created by Martha Burk, MD

Complexity of Medical Decision Making

• Is categorized as
▫ Straightforward
▫ Low
▫ Moderate
▫ High
• Based on
▫ Number of diagnoses or Management options
▫ Amount or complexity of data reviewed
p
▫ Risk of complications, morbidityy or mortalityy
Created by Martha Burk, MD

Complexity
of Medical
Decision
Making
 Created by Martha Burk, MD

Determining Level of Service

Inpatient Encounter
 Created by Martha Burk, MD

S
Summary
• Medicine is a complex business
• Economic pressures are mounting exponentially
• Inherent conflicts of interest
▫ Physician salaries are “rigged” by MGMA data
 Physicians often expected to work at 90% MGMA standards
 Physicians often paid at 25-50% of MGMA standards
▫ Physician reimbursement models are designed to shift healthcare costs
to individual physicians
• Imperative that physicians learn how to
▫ Maneuver the reimbursement system
▫ Understand business, revenue cycle, accounts receivable, etc.
▫ Understand billing and coding requirements and the roadblocks to
receiving payment
▫ How physician salaries are determined
▫ How physician bonuses are really calculated
▫ How the government and medical societies may be working in ways that
detract from your profits
• When
Wh negotiating
ti ti physician
h i i contracts
t t
▫ If it sounds too good to be true , it usually is!
 Created by Martha Burk, MD

S
Successful
f l Business
B i Practices
P i
• Focus on profitable services
• Limit unprofitable services (because they lose money!)
• Emphasize
p customer service
• Recognize
▫ Reputation = Brand Name = Success
• Focus on
▫ Innovation
▫ Efficiency
▫ Effectiveness
• Recognize that it is not enough to just survive
▫ A profitable business must thrive
 Created by Martha Burk, MD

Interesting
g Data To Review
• Side-By-Side Comparison of Major Health Care
Reform Proposals
▫ http://www.kff.org/healthreform/sidebyside.cfm