Why it's getting harder to provide care and stay in business
Reading Time - 4 min
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:
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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)
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A shift in risk for patient outcomes which can be found in bundling payments, capitated contracts etc. (you can learn more on risk here)
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Larger players in the provider and drug space draining a disproportionate amount of insurance premiums.
There are ways to combat your top-line compression, we will continually be adding articles / playbooks to do that here.
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:
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Cost of living is increasing and with that the wages of your employees, rent etc.
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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)
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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. (learn more here)
There are ways to combat your increasing cost structure, we will continually be adding articles / playbooks to do that here.
Decreased revenues by encounter and increased cost structures could erode at your bottom line 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 (green solid line) to this sample location. (Robbie, I would think about eliminating the trend line. I don't think it adds to your story and it confuses the reader if they are not analytical)
This specialty has seen volatility in their rates. This volatility could wipe you out on a bad year but overall, their Medicare allowable is flat. Remember, the cost of living typically increases over time due to inflation. (Maybe you have a second chart with the trend line in it now, where you make this point about "overall, as a trend their Medicare allowable is flat)
Here's the inflation-adjusted reimbursement rate (blue line) if we adjust for inflation.
You can clearly see the compression (downwards trend) here in the blue line. (This chart with the blue and the green line is powerful. I wonder if you should use red for the inflation one as there would be more contrast of the colors and red is the color of losses - bleeding)
If we then look at the compounded growth rate for the Medicare allowable adjusted for inflation to zoom in on the impact here's what we get: (This chart I don't really get- what does compounded growth rate mean? Is that a term that someone in medicine would know - like we use comp sales in the restaurant world? You may want to put your conclusion up here before they try to understand the graph - For every year, the impact to the adjusted reimbursement was negative... )
For every year, the impact to the adjusted reimbursement was negative and its trending between negative 2-3%.
If you have a 10% net income margin today, that could be wiped up 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 to take the right action for your unique challenge.
If you'd like to understand how you've been impacted make sure to fill out the form below and we can work on that.
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