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    Affordable Care Act affects reimbursements

    While Medicaid rates go up, payers pull away from fee-for-service model

    For primary care physicians (PCPs), the Supreme Court's decision mostly upholding the Affordable Care Act (ACA) has made their reimbursement picture clearer—but only slightly. Most PCPs will still find themselves juggling their patient mix to attain a balance between patients who are covered by Medicare and Medicaid and those covered by private insurers, who generally reimburse at higher rates.

    What is certain is that the law makes many more Americans eligible for some kind of health insurance, either through expanded Medicaid coverage, health insurance exchanges and their accompanying tax credits, or the individual mandate. Using data from the Congressional Budget Office, the Commonwealth Fund, a think tank focused on healthcare delivery, estimates that by 2016 about 32 million additional nonelderly Americans will have healthcare coverage as a result of the ACA.

    Probably the most significant part of the ACA where PCPs are concerned, experts say, is the millions of previously uninsured adults who will be eligible for Medicaid coverage. Recognizing the financial burden that increase could pose for many physicians, beginning in 2013 the law increases Medicaid reimbursement rates to make them equal with Medicare rates—but only for 2 years.

    Complicating the Medicaid picture is the part of the Supreme Court's ruling that effectively neutralizes the federal government's authority to financially penalize states that choose not to expand Medicaid coverage to their residents. When and to what extent you feel the full effect of the ACA ruling, in other words, may depend on where you live.


    When it comes to Medicare, the picture is a little brighter. The Commonwealth Fund estimates that ACA includes a 10% Medicare payment bonus for practices in which at least 60% of the charges are reimbursed under primary care codes recognized by the Medicare physician fee schedule. The bonus went into effect at the beginning of 2011 and is scheduled to expire at the end of 2015. But hanging like a sword over the heads of PCPs is the threat of a 32% reduction in Medicare reimbursements scheduled to go into effect January 1 under the sustainable growth rate (SGR) formula.

    Robert Zirkelbach, vice president of strategic communications for America's Health Insurance Plans (AHIP), the trade association representing the health insurance industry, says implementation of the ACA will accelerate two trends already under way in healthcare delivery. The first is a push toward greater cooperation and coordination of care among providers.

    The ACA contains several provisions encouraging the formation of accountable care organizations to provide care for Medicare patients. ACOs offer the potential of financial rewards to physicians who are able to hold costs down while meeting quality metrics.


    "What we're seeing is an effort to move the healthcare system away from the fee-for-service model and toward one that pays for value, quality, and desired health outcomes, Zirkelbach says. "The ACA does take some important steps to try and build on what's been working in the private [payer] system, so that's certainly a plus."

    The second trend AHIP sees is towards provider consolidation, including hospitals and integrated health systems purchasing primary care practices. By reducing competition in a market, consolidation could enable remaining independent physicians to raise their fees. That would benefit individual physicians but might negate some of the larger gains the ACA was designed to bring about.

    "One of the concerns we've raised is that the ACO program could be an incentive for further provider consolidation," he adds. "Were that to happen, it would cause price increases that would far exceed the potential cost savings of accountable care," he adds.

    The Medicare primary care payment bonus and the promise of Medicaid reimbursements that are on a par with those paid by Medicare—even if just for 2 years—are a welcome relief for practices with large numbers of Medicaid and Medicare patients, says Reid Blackwelder, MD, FAAFP, professor of family medicine at the James H. Quillen College of Medicine in Johnson City, Tennessee, and a board member of the American Academy of Family Physicians.

    In addition to seeing his own patients, Blackwelder directs Quillen's family residency clinics in Kingsport, Tennessee, one of three the college operates. About 72% of the patients treated in the residency clinics are covered either by Medicare or Medicaid.

    "Our clinics have already benefitted from the Medicare primary care bonus, and we estimate additional revenue of about $400,000 when the Medicaid-Medicare parity takes effect," he says. "For us, that's substantial money."

    Nevertheless, he says, the clinic is always seeking other sources of income, for instance by trying to attract more patients covered by private insurance. It is a situation similar to that faced by many independent primary care practices.


    "For regular physicians, the challenge is they are getting paid less for Medicaid [than by Medicare or private payers]. Why should they continue to serve a patient base that doesn't allow them to make ends meet financially? Many are wondering if they should continue taking Medicaid patients, and some are wondering about Medicare as well," Blackwelder says.

    "The physicians who are out there on the front lines, working hard to care for their patients, who don't turn anyone away regardless of ability to pay, they still have to pay overhead and their staff. The person who gets paid last is the owner-physician," he adds.

    Although PCPs are justifiably concerned about an influx of Medicaid patients, Blackwelder says, the new subsidies and the individual mandate will mean that many patients who had been getting free care now will have some form of insurance coverage. "The additional coverage will allow us to do the things [PCPs] do best, which is work with patients before they get into trouble and keep them out of the hospital and away from expensive care."

    Blackwelder says the AAFP, along with other organizations representing PCPs, has been pushing for legislation and rule changes that would raise PCP income and eliminate or modify the SGR formula. "The challenge is that none of these are quick fixes," he says. "You can't call your congressman and suddenly get higher payment. It takes a long time for things to change."