Although some may argue that academic gastroenterologists should simply accept a pay cut, lower salaries may drive many away from academia. To hire enough new (or even maintain enough existing) faculty members to maintain and grow volume, academic gastroenterology practices must find ways to supplement declining professional fees. One option is for academic practices to open their own ASCs, either alone or jointly with their health care system. But this assumes, often erroneously, that the health care system is willing to share facility fees. A second option is to develop incentive programs that transfer revenue from the health care system to the physicians. Importantly, these must be at fair market value and for nonemployed physicians cannot be linked to volume.10 Examples include medical directorships and non–volume-based performance bonuses. A third option is to consider alternative payment models, such as bundled payments that include a single lump sum payment for both professional and facility fees. The practice and health system then negotiates how the bundle is shared. Bundles should motivate hospitals and academic practices to work together to improve care and reduce overall expenses. Along these lines, CMS recently announced the CJR program under which hospitals and physicians in 75 locations will be required to participate. Although AGA recently published a bundled payment framework for screening and surveillance colonoscopy,11 bundles for other endoscopic procedures remain to be defined. But, a clearly defined, attractively priced, and skillfully negotiated bundle could be a means for redistributing revenue in ways that are more favorable to academic practices. No matter the approach, it is critical for academic gastroenterology practices and their health care systems to align their goals and integrate their services. But this is easier said than done.
Impact on private gastroenterology practices
The impact of these professional and facility fee changes on private practice depends on the practice’s payer mix, and whether it owns an ASC and directly provides anesthesia and pathology services. Consider Texas Digestive Disease Consultants (TDDC), an 80-gastroenterologist practice that provides GI care and endoscopic procedures throughout north and central Texas. TDDC revenue comes solely from professional fees generated by gastroenterologists and the pathologists that the practice employs. TDDC operating expenses include employee salaries and benefits, rent, and taxes. Based on an expected work-year of 2,080 hours, each TDDC gastroenterologist must generate $219 per hour to cover practice expenses. Physicians receive income only after practice revenue exceeds $219 per hour.
In the 2016 Medicare Physician Fee Schedule, colonoscopy code 45387 is assigned 3.36 RVUs, based on 67 minutes in total time. Based on this information, 2016 CMS payment for a screening colonoscopy ($200) will result in a loss of $45 in practice revenue over expenses. Across the TDDC practices in 2015, CMS patients represented 29% of all colonoscopies performed, but only 11% of revenue from those procedures. In aggregate, assuming no change in volume, the 2016 fee schedule cuts will translate into $5,472 less physician income for each gastroenterologist. If all other payers follow with identical cuts then each gastroenterologist would forfeit $50,896 of income.
For pathology services, code 88305 reimburses a global service per specimen. The average number of specimens per outpatient GI procedure at TDDC is 1.5. Based on CMS’ per specimen payment of $73 (down from $107 in 2012), average pathology reimbursement per a CMS endoscopic procedure is $110.
What about facility fees? Many TDDC physicians separately own and operate ASCs and anesthesia practices. Because the physician owners of these facilities funded, developed, and operate these facilities on their own, any revenue over expenses from these facilities flow directly to the ASC, rather than to TDDC. Since 2008, when ASC payments were severely reduced, ASC revenue over expenses for a Medicare colonoscopy has ranged from $0 to $70. For anesthesia services, the ASC receives approximately $159 per screening colonoscopy, which is not enough to actually cover the costs of providing anesthesia services. In sum, when TDDC gastroenterologists perform colonoscopies on Medicare patients at an HOPD the physician loses money. When the same procedure is performed at an ASC the physician barely break even.
How can private practice gastroenterologists respond to these fee cuts? First, some gastroenterologists may be forced to accept lower salaries. Second, practices can offset fee cuts by improving efficiency and reducing overall cost of care, assuming they are not already maximally efficient. Third, some private practices can increase Medicare professional payments by reclassifying as nonparticipating with Medicare. Nonparticipating status allows practices to charge the patient up to approximately 109.25% of the Medicare approved rate, with the patient submitting the claim directly to Medicare (“balance billing”). The downside is that patients shoulder the additional cost and may potentially decide to seek care elsewhere. Fourth, private practices should explore alternative payment models, such as bundled payment as described previously, either on their own or by partnering with local health systems to share risk. Finally, some practices may sell equity to and become employees of local health systems.
