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.

 

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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.