By Anastasia Gnezditskaia
The financial burden of regulations on medical practices is growing as the number of new policies continues to rise.
While there are regulatory elements such as prior authorization and the Medicare Quality Payment Program that presented a burden, there are also newer policies, such as the good faith estimates included in the No Surprises Act adopted last January that present hurdles for medical practices.
According the most recent MGMA study that explored regulatory burdens in detail, surprise billing, prior authorization, the Merit-Based Incentive Payment System (MIPS), audits and appeals, and Medicare advantage chart audits were among the top regulatory issues most burdensome for medical practices. Over 60% of respondents called them “extremely burdensome.”
Other regulations frequently mentioned by health practices included COVID-19 workplace mandates, the Medicare Quality Payment Program and reporting requirements for the COVID-19 Provider Relief Fund.
According to the study, the general impact of administrative requirements that follow from these regulations not only delay patient care but also increase provider costs.
We spoke with healthcare professionals and advisors about the specific outcomes of such administrative hurdles for medical practices, including the impact on their finances.
“Providing the right service at the right time”
These regulatory policies, along with the shifting environment with more services provided by outpatient-based and ambulatory surgery centers (ASC) are all causing a major adjustment for the health systems large and small.
One key outcome is that the changing healthcare landscape in terms of growing outpatient services, along with more administrative and regulatory tasks, means that hospitals have become more efficient and focused in terms of services they provide.
“The combination of regulations like MIPS, the continued growth in other value-based care/bundles are putting pressure on providers,” said Sean Hartzell, a principal at ECG Management Consultants. “Couple those with more procedures moving to outpatient-based, CMS paying for procedures being performed in Ambulatory Surgery Centers and payers revising benefit plans to drive volume to outpatient/ASCs, hospitals are seeing large volume changes.”
That, combined with changes that hospitals are facing on the expense side of their income statement, such as labor costs, and inflation, make hospitals work on “operational/performance transformation to ensure a higher level of efficiency in their operations trying to bend their cost curve,” said Hartzell.
“Providers are looking at becoming more flexible to provide the right service at the right time and not necessarily all services at all times. Not an easy change, but necessary given volume drops and increased cost pressures,” he added.
Difficulties for independent players
Regulatory burdens, along with other market shifts, are making it harder for smaller practices to adjust to new realities.
“I think the ever-increasing administrative burden from both government and payer-mandated initiatives is especially onerous on small/medium-sized practices that don’t have dedicated resources to manage those activities,” said Brandon Clark, chief strategy officer at Equality Health.
“This is causing the independent contingent of the market to seek the safety of scale – either via exit/consolidation or alignment with platforms – such as Equality Health – that ease the administrative burden and offload some of the work associated with these initiatives via incremental practice support and technology-enablement.”
Rising administrative burdens, including coding and prior authorization, were named as the number one reason for the closure of independent private practices, with doctors reporting that the weight of administrative burdens is frequently the main reason why the physician partners decide to sell a practice to a hospital system.
That said, administrative requirements, apart from having an impact on independent practices, also affect career satisfaction of doctors in large practices, and also those in practices owned by a hospital.
Making IT systems more complex
Apart from cost-related issues, administrative requirements affect technological demands making information systems more complex and multi-layered, ranging from patient portals to data analytics, automated appointment reminder systems, telehealth, check-in technologies and digital payment options.
“Federal reporting requirements definitely have affected the information systems used by practices as most organizations choose to participate in MIPS and similar quality reporting systems used by commercial insurers,” said David Gans, senior fellow for industry affairs at MGMA.
“This increases the complexity of the IT systems – meaning increased cost passed on to the practice – as well as increased staff and physician time needed to record information into the systems, thereby reducing productivity.”
Specifically for MIPS, MGMA expressed concerns that its cost measures “unfairly penalize clinicians and group practices for costs over which they have no control,” according to the study. “MGMA regularly hears from members that clinicians and group practices do not understand how CMS evaluates them on MIPS cost measures,” Gans said.
What is the ultimate impact on finances?
With the increasing complexity of IT systems comes increased pressure for clinicians to use them.
Both the complexity of new IT systems and increased staff and physician time needed to master them “have an indirect impact on practice finances, but practices really have little recourse,” says Gans. “In many instances the practice will receive a quality based bonus payment which will partially offset the costs.”
For example, Medicare pays a MIPS bonus as well as reducing payment if a practice does not participate. If the practice submits quality information to a commercial insurer or Medicare Advantage Plan, the commercial insurer will pay the bonus if there is one, said Gans.
Despite these offsetting options, enhancing IT systems will only increase capital costs and operating expenses, and create a lot of challenges for medical practices on ways to optimize costs, believes Hartzell.
“The efficiency improvements will probably increase operating expense that hopefully will reduce over time,” he added. “Hospitals, in order to realize any savings opportunity will need to work to optimize their capacity, their vendor contracts, and their ability to create savings from regulations in their favor, for example 340(b) pharmacy expense opportunity. It will also be critical that the hospital look on the revenue cycle side to ensure they are getting paid what they should be getting paid and collecting everything they should be collecting.”
Further, health systems have to engage staff in cost awareness. As Hartzell says, “Aligning with physicians who want to use the hospital and help the hospital achieve higher levels of efficiency and capacity utilization will be critical.”
