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Why it's getting harder to provide care and stay in business

Reading Time - 4 min


Why you should spend 4 minutes to read this:

if you have a net income of 10% today, you may see that go 0% in the next 3-5 years.



Nothing here is new, the news reads “healthcare costs at all-time high”.


With the USA’s sights on an increasingly aging population, the government is working to decrease the spend for each medical encounter. Lower spend per encounter, may in-turn, help slow down the acceleration in healthcare spend.


The decrease to your reimbursement will likely emerge through three vehicles:

  1. A decrease in Medicare Allowable reimbursement rates set by the CMS for your services rendered. This, in turn, impacts your contracts as they are typically pegged to CMS rates. (you can find more on Medicare Allowable rates here)

  2. A shift in risk for patient outcomes which can be found in bundling payments, capitated contracts etc.

  3. Larger players in the provider and drug space draining a disproportionate amount of insurance premiums.


The second and less talked about force impacting your practice is its cost structure. There are more forces at play but here are three primary ones:


  1. Cost of living is increasing and with that the wages of your employees, rent etc.

  2. Doctors will be in continually lower supply due to the aging population and limited residency spots creating upward pressure on their salaries. (See War for Physicians for more info)

  3. The increased complexities of your revenue cycle and other back-office functions will increase your staff or force you to outsource given functions, potentially at a premium. 


Decreased revenues by encounter and increased cost structures could erode at your bottom line in upwards of 2%+ per year if you don’t take action.


For example, if we take a sample of procedures rendered in 2016 and then use that same caseload across 2003-2018, here's the estimated reimbursement (blue line) to this sample location.


Overall their Medicare allowable is flat.


Remember,  the cost of living typically increases over time due to inflation. 


Here's the inflation-adjusted reimbursement rate (red line).


You can clearly see the compression (downwards trend) here in the inflation-adjusted line (red) vs. the non-adjusted line (blue).


If the current trends continue...


If you have a 10% net income margin today, that could be wiped out in the next 3-5 years due to inflation alone.


Taking the right actions could help reverse some of the negative impacts to your bottom line and keep your clinic or practice running for the years to come.


Our aim is to empower you with data and strategies to take the right action for your unique challenge.


If you'd like to understand how you've been impacted by reimbursement changes make sure to fill out the form below and we can work on that. 


High-level actions you can take based on this article:

1. Develop a roadmap of projects to increase your revenue by encounter

2. Develop a roadmap of projects to decrease your cost of care by encounter

3. Understand how your practice/clinic has been impacted by reimbursement rates in the past

4. Prepare annually for changes in reimbursement rates


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