It is often said that you cannot remember pain. Perhaps this is also true when talking about the stock market, bad business decisions, or poor money management decisions, but bring up the subject of physician reimbursements, and you'll see doctors physically wince. Table 1 illustrates the pain that ophthalmologists have experienced over the last 9 years.
REIMBURSEMENT DECLINE
Since 1993, there has been a whopping 42% decline in cataract surgery reimbursement, which has traditionally served as ophthalmologists' bread and butter. Several changes have occurred inside ophthalmology practices over the last 15 years to adjust for lower fees. Most practices were run inefficiently and had numerous operational problems. When the fee cuts first started back in 1987, their effects were masked. Ophthalmologists simply worked harder to offset those initial fee cuts. Technological and surgical advancements were introduced, allowing ophthalmologists to perform faster and safer cataract surgery. Phaco—then no-stitch, followed by topical anesthesia—allowed surgeons to perform more procedures in the same amount of blocked operating room time. And while these surgical advancements were being put to use, the business side of the ophthalmic practice began to improve. Practices merged and became generally larger, and professional administrators were hired. (This is not to be confused with practices that sold out to PPMCs. To clarify, the PPMC experiment did not result in any measurable reduction in overhead or increase in efficiency.) As a result of professional management, clinical time management improved. Patient scheduling and patient flow was streamlined. Delegation of duties between physicians, staff optometrists, and technicians also improved.
FEE CUTS
Improved surgical techniques and better professional management allowed practices to survive, and some well-managed practices even managed to thrive during the initial years of fee cuts. However, since around 2000, the reductions in fees have been greater than surgical techniques and operational efficiencies could offset, and the result has been that ophthalmologists' personal income has been directly reduced. Once the 5.4% across-the-board fee cut takes hold beginning in 2002, physicians' personal income will be about the only expense left to reduce in order to be able to pay overhead; most other expenses have been cut to the bone.
Another factor that will affect the profitability of ophthalmology practices is the macroeconomy. Recessions actually have very little effect on traditional ophthalmology practices. Obviously, however, recessions have a big effect on refractive practices. Most refractive practices have seen their case volumes decrease by at least 25% for the year ending December 31, 2001. On the other hand, inflation is a completely different phenomenon. We have not seen inflation in this country for more than 18 years. With the amount of economic stimulus currently injected into the economy, and the prime rate dropping from 9% to 4.75% in one year, inflation could be a factor within in 2 to 3 years. If inflation increases 5%, and we factor in the current reimbursement schedule, physicians' income will suffer a direct hit.
ASCs
Ophthalmologists who own their own ASCs have seen their profit margins evaporate as well. As Table 1 reflects, ASCs have received only a 1% annual increase in facility fees over the last 9 years. Inflation in medical supplies and salaries has averaged about 6%. The net effect has been a reduction in ASC profit margins by approximately 5% annually. The ASCs experienced the same gains in efficiencies that the practices did during this period. They have remained profitable over the last 9 years by performing more cases in the same amount of time. In 1993, the average cataract surgery took about 45 minutes. In 2002, the average cataract surgery time, as a result of the new techniques and technology, has been reduced to about 20 minutes. This represents a 66% reduction in surgery time over the last 9 years. In the next 9 years, it is unlikely that cataract surgery time will be reduced by another 66%. As a result, without a larger fee increase, ASCs will come under enormous financial pressure in the coming years.
Although Medicare is cutting its fees, the commercial insurance companies have all announced 5% to 15% increases to their reimbursements in 2002. Commercial insurance companies have come under pressure from doctors, hospitals, and ASCs to pay more because Medicare is paying less. To pay for this increase, the health insurance premiums that you pay in your practice have increased between 15% and 25% in 2001.These insurance premiums are expected to increase by at least that amount for the next 3 to 5 years. The increase from the commercial insurance companies is great news for subspecialties such as orthopedics, but will do very little for ophthalmology. Ophthalmology surgical revenues are about 90% Medicare and 10% commercial insurance. By contrast, orthopedic surgical revenues are about 25% Medicare and 75% commercial insurance. Ophthalmology is dependent on the Medicare system as a result of the age of the average patient.
HMOs
Another type of reimbursement plan, the Medicare + Choice HMOs, offers its own unique set of challenges to practice management. These are the commercial HMOs that contract with HCFA/CMS to offer an alternative to traditional-fee-for service Medicare. In many markets, these Medicare + Choice HMOs are not good for ophthalmology. In the markets where the Medicare + Choice HMOs are owned or heavily influenced by hospitals, ophthalmologists are normally paid less than the traditional-fee-for service Medicare. Many times these hospital-owned plans will carve out ophthalmology and capitate with a third party. Not only does this lower ophthalmology's payment from that of traditional Medicare, but it also adds another layer of complexity by requiring ophthalmology to file claims to a third party administrator. In the markets where the Medicare + Choice HMOs are controlled by the hospitals, the panels usually include every ophthalmologist in the market. This means every ophthalmologist receives less from these Medicare + Choice HMOs than they would from traditional fee-for-service Medicare. Not every market, however, is bad. Some markets with Medicare + Choice HMOs are helpful to ophthalmology. For example, Humana, headquartered in Louisville, Kentucky, normally teams up with a large ophthalmology group or large IPA to provide vision services for their Humana Gold Plus Medicare + Choice HMO. The panel is smaller, but the ophthalmologists are paid a better rate. In addition, under this arrangement, the billing and precertification hassles are eliminated.
RESOLUTION IS A LONG WAY OFF
Implementing solutions to the Medicare reimbursement problem will be a long process. Ophthalmology needs to begin an organized process to swing the pendulum back in its favor. On the political end, ophthalmologists need to support the efforts of the AAO and ASCRS to force Congress to correct the reimbursement methodology currently being used by HCFA/CMS to calculate fees. The current formula is full of problems, and it has never accounted for all practice expenses. HCFA/CMS continues to violate the mandates set out in the balanced budget acts of 1986 and 1997. On the grass roots end, we would do well to follow the lead of other proactive industries such as dentistry. Over the last 10 years, dental schools turned out only a trickle of new dentists. As a result, low reimbursements to dentists have almost disappeared. Over the past 5 years, medical school applications have dropped 26%, however, the number of ophthalmologists has actually increased by 2.6% during this same time, according to the Association of American Medical Colleges. This will only add to the problem of oversupply. According to the 1990 census, the Medicare population will remain flat until 2010. As a result, more and more ophthalmologists will be compelled to try to make a living seeing fewer patients and getting paid less at the same time. It is clear that ophthalmologists have a choice: they can either resign themselves to working for 10% less each year, or they can begin to make changes in the system that has created their predicament. The choice is clear: let's marshal our forces and spring into action now!
