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Sliding economy leaves physicians wary about collections

An MGMA survey finds the biggest challenges for practices are covering expenses and getting paid by patients.

By Pamela Lewis Dolan — Posted Aug. 31, 2009

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Physicians who were already concerned with the financial success of their practices last year are getting even more worried this year, according to a survey released in August by the Medical Group Management Assn.

One growing concern is that patients are having to foot more of their medical bills at the same time many of them are feeling financial strains from the recession.

The "Medical Practice Today: What Members Have to Say," MGMA survey found, for the second year, that the top two challenges for physician practices are rising operating costs and declining revenue, and maintaining compensation levels in the face of declining reimbursement rates.

However, those categories switched places this year. Concern about operating costs and declining revenue was cited by 73% of practices, up from 68% last year. Concern about compensation and reimbursement dropped slightly, to 69% from 70% in 2008.

The switch comes in part because of the fastest-growing concern expressed in the survey: collecting from patients.

The number of physicians who said they were concerned with collecting from self-pay patients and those with high-deductible plans and/or health savings accounts rose from 50% a year ago to 60% this year.

William Jessee, MD, president and CEO of MGMA said he was surprised that at the time of the survey, conducted in February, respondents were already feeling the impact of the recession and worried about their patients' ability to pay. Dr. Jessee said many practices were reporting a large number of patients out of work. While many patients were forgoing or postponing care, others were concerned they couldn't afford insurance.

Even those with insurance are facing higher costs while practices are becoming increasingly reliant on the patient portion for revenue.

For several years data have been showing a steady increase in the age and amounts of accounts receivable, Dr. Jessee said. The rise is partially due to the increase in out-of-pocket expenses.

A study conducted by Watson Wyatt Worldwide for The Commonwealth Fund, published in June, found out-of-pocket expenses for adults with employer coverage increased 34% from an average of $545 per year in 2004 to $729 in 2007.

Studies have found practices can improve cash flow by collecting at the time of service. But many have found that is nearly impossible because they can't determine what is owed. Physicians are left mailing bills which, many times, can be a losing proposition.

"Once you drop the bill you're in that never-ending saga of the patient getting the first bill, then the second bill and then the third bill. When they finally get the bill saying this account is being turned over to collections, they may finally pay it," Dr. Jessee said.

Another item quickly becoming a bigger worry for doctors is selecting and implementing an electronic health records system. This year, 68% of physicians said selecting and implementing an EHR was a major challenge, up from 62% in 2008. It remained the third-greatest worry in the survey.

MGMA attributed the rise to the increasing focus on technology. The American Recovery and Reinvestment Act, signed into law before the survey was conducted, put aside money and tax credits for health information technology use. Medicare and others offered the promise of bonuses for technology use -- with the Centers for Medicare & Medicaid Services noting that eventually physicians could face penalties for not using it. That has led to physicians looking to buy -- or wondering whether they should wait to buy.

"It's a very exciting time in the sense that we've got some pretty significant incentives on the table, but there are some strings attached," said Robert Tennant, senior policy adviser with MGMA.

Many practices are also putting off health IT adoption until they find out what the government will do with Medicare reimbursement rates to ensure they don't get a "$40,000 gift and a $50,000 cut," Dr. Jessee said.

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ADDITIONAL INFORMATION

Money, technology woes

Financial concerns and adopting an electronic health records system topped the Medical Group Management Assn.'s annual survey on challenges practices face.

Challenges 2008 percentage 2008 rank2009 percentage 2009 rank
Operating costs rising more rapidly than revenues 68% 2 73% 1
Maintaining compensation levels with declining reimbursements 70% 1 69% 2
Selecting, implementing EHR 68% 3 62% 3
Collecting from self-pay, high-deductible health plans and/or health savings accounts 50% 9 60% 4
Uncertainty of Medicare rates 57% 5 56% 5
Recruiting physicians 61% 4 56% 6
Negotiating contracts with payers 54% 6 54% 7
Modifying compensation methodology 53% 7 51% 8
Participating in Medicare quality reporting initiative 49% 10 45% 9
Participating in commercial pay-for-performance program 46% 11 40% 10

Source: Medical Group Management Assn. survey, "Medical Practice Today: What Members Have to Say" (link)

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