Posts Tagged value based purchasing

What is the Fair Market Value of an Emergency Physician’s Services?

What is the Fair Market Value of an Emergency Physician's Service?

Trying to define the market value of someone’s professional services is difficult when those services are typically paid at vastly different rates, depending on the payer, especially when the party paying is usually not the direct recipient of the service.  So when an emergency physician provides clinical services to a patient, how are those services valued by different payers, and what does that say about the reasonable market value of those services?

For example, let’s say that you come to the emergency department with an acute asthma attack:  you can’t breath well, and your inhaler hasn’t helped to break the attack.  A pretty straight-forward case, really:  your ER doc does a history and physical exam, orders up some oxygen and a few respiratory therapy treatments, some steroids, perhaps an IV to rehydrate you and get access in case your condition worsens and you need IV meds, and returns to re-evaluate you every 15 minuets to make sure the treatments are working.  Two hours later, you are able to go home with a script for three days of Prednisone and a refill for your Ventolin inhaler as the one you have is running low.  You get instructions on how to care for yourself at home, when to see your primary care doctor, and what you should do if the wheezing comes on again despite the treatment.  Chances are, you will likely get a charge for this service from the physician for 99284 level care for around $320, give or take, if you live, let’s say, in central California.

If you didn’t have insurance, you would be expected to pay the full charge.  Unfortunately, many patients can’t afford to pay; or could afford to pay but are just irresponsible, and don’t pay anything.  If the patient pays nothing, the emergency physician may be able to recover about $45 from California’s EMS Fund, a tobacco settlement funded program that pays on average about 15% of the emergency physician’s fee.

However, if you were uninsured with a family income at or below 350% of the federal poverty level; or you are insured and have incurred high medical costs (greater than 10% of family income over the prior 12 months) with a family income at or below 350% of federal poverty, and you submitted a request for a discount; you would (by virtue of California law) only have to pay 50% of median billed charges of a nationally recognized database of physician charges, probably around $150.

If you were covered by your County’s new Low Income Health Program (a family of 4 making less than $41,000/year), the county may pay the emergency physician about 30% of the Medicaid rate, or a whopping $21.

If you were covered by California’s Medi-Cal program, one of the lowest paying Medicaid programs in the country:  $68.

If you were covered by Medicare: the federal program would pay about $125.

If you had HMO coverage, but had to go to a closer out-of-network ER, your HMO would pay the ER doc between $140 and $250.

If you had PPO coverage, the plan would pay between $175 and $240, minus any co-insurance payment, and you would have to pay the rest up to the $320 charge.

So, for a $320 emergency physician service, the emergency physician might receive anywhere from the full $320 down to $21, and about 10% of the time – nothing.  The average emergency physician in California provides about $140,000 a year in unreimbursed care.

Of course, in order to provide these services, the emergency physician has to spend $10 to pay for malpractice insurance, $30 for billing services, and additional costs for other overhead amounting to a total of about $55 for every ED patient treated (even if the payment is $0)

So, what’s the real market value for an emergency physician’s services?  I would argue that it is the full amount that the emergency physician charges, as long as these charges aren’t significantly higher than what other emergency physicians in the same area charge, but then I just paid a heating technician $175 for 10 minutes of maintenance on our furnace.  Others would argue differently, but their estimate would be based on their particular agenda:  protecting those living in poverty, reducing costs for the employer, dealing with government budget deficits, or making higher profits for the insurer.  Unfortunately, none of these advocates actually provides emergency care to anyone.

By the way, if you were suffering from a heart attack or serious injury, and the emergency physician (and his team) actually saved your life (it happens hundreds of times every day), the emergency physician’s charge would be around $800 to (rarely) $2000.  So, what’s the real market value of YOUR life?

This post also appears on the blog The Fickle Finger


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Value Based Purchasing of Emergency Care – Part 2 Recommendations for Providers

This is Part 2, outlining suggested strategies (dos and don’ts) for providers of emergency care who want to prepare for value based purchasing under health reform.  It is primarily aimed at emergency physicians and other hospital-based providers, but also applies to specialists providing on-call backup services to ER patients.

• Don”t assume that because your hospital’s business model is predicated on exploiting the fee-for-service payment system, and avoiding at all costs going ‘at risk’ for the care of managed care enrollees; you should avoid talking to your hospital CEO about future payment models predicated on value based purchasing of hospital and physician services.  They all know it’s coming, and they will appreciate that you are thinking about it as well.

Do consider doing your homework, reading up on VBP and payment reform and how it may affect hospital-based providers, and anticipating how you and your group will respond when your hospital begins to align its business model (and its medical staff) to the new reimbursement paradigm.

• Don’t expect to be carved out of bundled payments, utilization risk-pools, and other incentive programs to constrain costs, just because you provide non-elective services.  Once payers get a handle on how to bundle payments for more predictable services like knee replacements and cholecystectomys, they will then begin to target episodic unscheduled care for strokes, MIs, and even acute abdominal pain.

Do prepare for these payment reform eventualities by tackling one of the thorniest problems emergency care providers face in the ‘open practice’ of the ED – attribution.  Whatever system you use to order up tests, treatments, and services in the ED, you need to be able to identify, and track, whose decision it was to spend that money, and provide that care.

• Don’t assume that, just because your hospital is not involved in an integrated provider network, the CFO isn’t concerned about resource utilization.  Just about every hospital depends upon the provision of cost-effective care in order to profit from services to seniors on Medicare, which is paid on a DRG basis.

Do begin, if you haven’t already, to address your approach to the care of the elderly in your department, with particular emphasis on co-ordination of care, reducing re-admissions, communicating with nursing homes, facilitating review of complex medical records during the evaluation phase of care, and other strategies for reducing unnecessary utilization and improving the efficiency of care.

• Don’t wait for health plans or hospital medical directors to tell you how to spend less and give more and better care.  They don’t know your patients, your department, or your business as well as you do, and they will likely be less willing to invest in your success than you are.

Do consider developing some strategies for cost-effective care for current or future implementation, so that when you are asked to participate in shared savings programs and other incentives to provide quality care at less cost, you and your hospital can both profit from the opportunity.

Again, If any of you have additional do and don’t suggestions, please comment through the link below.    The Fickle Finger


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Value Based Purchasing of Emergency Care – Part 1 Recommendations for Payers

Value based purchasing is a strategy for health care financing that attempts to hold the provider accountable for both quality and cost, through a combination of reductions in inappropriate or ineffective care and rewards for those providers that are ‘the best performers’. 1 Unfortunately, most insurance plans, and employer purchasers of health care, are simply looking to reduce payments to providers, and they all but ignoring the issue of quality or even cost-effectiveness. When it comes to the purchase of emergency care, the payers really seem to have taken a wrong turn, predicated on a lot of misconceptions about the role of the emergency department and the value equation for emergency care services.

This blog is aimed at the primary purchasers of health care: the plans, employers, and government programs that purportedly aim to adopt value based purchasing as an adjunct to, or replacement for, fee for service medicine. For every ‘don’t do that’ I will include a ‘consider doing this’, because up until now many emergency care advocates have either advocated some sort of carve-out for emergency medicine, or focused on the defense of the emergency care value proposition (like ACEP’s ‘just 2% campaign‘). Emergency care providers have to become part of the solution to the cost-of-care conundrum if they hope to retain any credibility with insurers and legislators. In Part II, I will outline some do’s and don’ts for providers under value based purchasing. So, I suggest that the purchasers:

• Don”t expect emergency physicians to act as ‘gatekeepers for acute care’. Emergency physicians are trained and motivated to provide care, not deny care. Coercing emergency physicians to ‘defer ER care’ for so-called non-urgent patients by down-coding claims or denying coverage is a low-gain, moderately high risk strategy that is a distraction from pursuing more cost-effective strategies (see:

Do encourage and incent primary care physicians and clinics to provide more after hours and next-day appointments. It is better to pull patients who do not need to go to the ED into other venues than to insist that ED physicians push them out.

• Don’t punish emergency care providers through non-payment and under-payment with the expectation that it will teach patients not to misuse the ED.

Do consider assisting EDs in identifying patients who use the ED repeatedly for acute exacerbations of chronic conditions, and who could benefit from active case management starting in the ED (and compensate providers for this case management – this is a strategy with an excellent ROI).

• Don’t assume that if a patient is admitted from the ED to an observation unit, and then subsequently admitted as an inpatient; this necessarily represents ‘double-dipping’ by the emergency physician. Payment for observation services is a cost-effective way to keep patients out of the hospital, and identify patients who, if discharged inappropriately, might return later for more expensive service.

Do provide feedback to emergency care providers about the population-based financial consequences of their use of chest pain centers and observation units, so that these services can be used more cost-effectively.

• Don’t use coercive contracting of EMTALA-obligated providers as a means of achieving cost-savings: it is abusive, and undermines the financial viability of the emergency care safety net. Commercially insured enrollees and their insurance plans depend on the availability of qualified emergency physicians and on-call specialists to SAVE them from unnecessary disability and higher costs down the road.

Do consider implementing shared-savings, utilization risk-pools, case-limit rates, and other contractual incentives (with appropriate guidelines and benchmarks) to encourage emergency physicians to adopt cost-effective care strategies in the ED, when the hospital is appropriately aligned with such strategies in their financial models.

• Don’t try to undermine, work around, or revoke the prudent layperson standard through the use of ‘non-emergency diagnoses’ lists or high ED visit co-pays. This standard ensures that enrollees will go to the ED when they should, reducing avoidable delays in care that result in unnecessary long-term disability and even greater long term costs to insurers. A single case of a missed opportunity to treat a stroke can cost insurers far more than it costs to treat fifty patients in the ED whose symptoms turn out to be non-serious.

• Do focus on where the ‘real money’ is spent, that is, where the major health care costs, on a population basis, are incurred, and the real opportunities for cost-savings and quality improvement exist. No doubt the ED is one place where such opportunities lie, but at only 3% of the health care dollar, the ED is by no means the target of opportunity that it is made out to be.

• Don’t automatically down-code ED physician claims, especially E&M level 4 and 5 claims, simply because these providers have to care for your enrollees whether they get paid appropriately or not. It is also abusive, and undermines your credibility as an insurer or payer.

Do, if you identify outliers who appear to be overcoding claims, utilize medical records audits by trained coders and recognized standards of coding, to explore these apparent overcoders in depth, and offer to adjudicate these claims in a fair and reasonable process.

If any of you have additional do and don’t suggestions, please reply below.

1. Theory and Reality of Value-Based Purchasing – AHRQ

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Emergency Medicine and Payment Reform – Becoming Part of the Solution PART III

Health care is bankrupting this country. The truth is, emergency physicians are as much a part of the problem as any other provider, health plan, or patient in this country. Many emergency physicians over-order scans and tests, practice defensive medicine, over-utilize consultants, don’t pay much attention to the cost of drugs and treatments we order or prescribe, and generally spend too much money for too little benefit. I could argue convincingly that we are more effective and efficient than most physicians, especially in light of the difficulties of practice in the ED; but our challenge is not just to dispel the mistaken assumption that ED services do not meet the value proposition. We must simultaneously participate in developing solutions to the cost-effective care conundrum, or the payers and politicians will focus on ways to work around us, or through us.

Policy makers have selected payment reform as the primary path to cost-effective care, and fee for service as the principle foil responsible for our health care financing predicament. I could argue that tacking ‘for profit’ in front of ‘health plans’ is equally responsible, but this is, after all, America. Health reform is in many respects predicated on the concept of risk sharing: sharing the financial risks of care (and the rewards of cost-effective care) between insurers, providers, and patients on the assumption that having ‘skin in the game’ will solve the problem. Bundled payments, episodes of care, ACOs, pay for performance: its all designed to restrain costs by sharing risk, which is presumed to motivate providers to adopt strategies and develop infrastructure designed to cut costs (first) and improve care (second). The most critical role that ACEP has in the next few years is to determine how EPs can participate in the context of payment reform while preserving our value and protecting our practices.
Let’s talk about ACOs first. To make a very complicated story short, ACOs are likely to be about full capitation, or about risk pools, or both; and they are also about consolidation of physician practices to facilitate this risk sharing. In my experience, one consequence of this consolidation is that the PHOs (physician hospital organizations – soon to morph into ACOs) tend to pay lower rates to EPs than health plans pay. EPs are going to have to find ways to share risk in ACOs as independent practitioners or as hospital employees without sacrificing significant income or undermining practice quality and autonomy. Half of ED physicians are either hospital employees or the employees of academic institutions, and the other half are partners or independent contractors (or employees) of groups contracted to staff the ED. What the former need to understand about the latter is that the independent practice of emergency medicine is key to defining the commercial value of EP services: anything that undermines the payment of claims from an EP who is engaged in the ‘independent practice’ of EM undermines the wages of the EP who is employed by a hospital, a university or an HMO. We are all part of a national market for EP services. If the mode of our participation in ACOs, either as contracted groups, or employees, turns EP services into a commodity, we, and perhaps our patients, will suffer. Thus, when ACEP talks about EP participation in ACOs, or contributes to the development of model contracts, or policies for revenue or risk-pool distribution, or strategies for coordination of care with other ACO-participating providers; these three different modes of EM practice (independent contractor, employee, educator) need to be factored into the equation, most likely in separate and distinct approaches.
Another set of strategies for cost-containment and payment reform is the concept of bundled payments and episodes of care. I liken this to carving off most of the meat before throwing the bone to the pack of hounds. I suspect it will not be easy to identify episodes of care or bundled payment categories that will accurately reflect the contribution of EPs to the overall effort expended on these patient groupings. The management of abdominal pain is s tree with so many branch points it makes knee replacement look like an asparagus stalk. To complicate matters further, the three modes of EM practice will also have to be addressed in defining the EP’s share of the bundled payment for these episodes of care. For example, the work-up and management of a patient with abdominal pain in an environment like Kaiser is likely to be quite different than for the same patient in a community ED or a university teaching hospital where access to consultants, follow-up, and coordination of care are organized on a different model; even if you assume that under ACOs, access to EMRs and diagnostic services were equivalent. Personally, I think even though most episodes of care and bundled payments will focus on the higher-cost conditions, these approaches to payment reform are not likely to cover more than a modest percentage of the work EPs do, or the compensation we earn. Mostly, I believe, independent EM practitioners will be carved out of these payment reform modules because our level of participation will be difficult to predict, and our ability to restrict our role is limited. We are, after all, one of the few players on the team that regularly plays just about every position. The danger of being carved out, however, is that we then stick out like a sore thumb, an expense item begging to be trimmed.
I think one of the most effective ways for EPs and ACEP to contribute to solving the cost of care conundrum, and thus demonstrate our value to patients and payers alike, is through cost-effective care protocols. It is through the use of such protocols that EPs can earn a piece of the cost-sharing incentives, especially in risk pools. If we get carved out of bundled payments, we can get integrated back in under the risk-sharing umbrella through risk pools. Even so, it will still be necessary to utilize cost-effective care protocols that take into consideration each of the three EM practice modes. For example, hearing hoofbeats, you are more likely to encounter zebras in the ED of a major university teaching and referral center than in a small community hospital. Likewise, we should also focus on the most costly patients and types of care first, use best evidence, and take great care to protect our integrity as professionals and care givers. This last is what I mean by preserving the quality of our practice. An emphasis on cost-effectiveness is an invitation to inappropriate deferral of care, denial of access to needed testing and consultation, inappropriate discrimination in service, avoidable delays, and excessive risk taking, all of which hurts our patients and ourselves. Development of these protocols will not be easy, but adoption of these protocols across the spectrum of EM practice will be the real challenge. As I mentioned in the very beginning of this three-part diatribe, one hospital’s welcome cost effective protocol is another’s inadvertent financial misstep. It will take time to align incentives across all our modes of practice, medical staffs, hospital administrations, payers, and patients. Patient education as well as resident and provider training will be an essential part of the process, and all of us need to be part of the solution.

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Value Based Purchasing and Emergency Care – Is It a Perception Problem? PART II

If the perception is that a visit to the ED represents a failure of the health care system, it sure makes it difficult for ACEP to assert that emergency physicians routinely provide valuable services to patients and insurers. Apparently, many policy makers hold this perception. It reflects the consequence of cost shifting (especially by hospitals) to cover the care of the under- and uninsured, which makes it appear that EPs are wasteful and inefficient. Health plans have aggressively promoted this mis-perception, using very distorted data. A good example is a recent study (“Many-ED Visits Could be Managed at Urgent Care Centers and Retail Clinics”) from the California Health Care Foundation , a very pro-managed care organization. Is it reasonable to compare the cost of treating strep throat in the ED versus the Urgent Care Center when the UCC turns away every patient with no money and no insurance?  The attitude of the Health Plans is: “the uninsured are not our problem”, and would prefer to ignore our service to the uninsured in calculations of the value based proposition. The uninsured are not going away with Health Reform, and emergency physicians need to make sure that, in the value based purchasing calculation, no one takes for granted our mission to provide care to everyone regardless of ability to pay .

Fortunately, it’s really not all that difficult to challenge mis-perceptions about the value of ED care. The continuing growth in ED visits every year is perhaps the best testimony of the value that our patients ascribe to the care and service they receive in the emergency department. There are innumerable examples of the failure of our health care system in this country. A visit to the ED for acute appendicitis does not represent a failure of managed care, whereas a ruptured appendix that results from a patient being encouraged to wait until the morning to see their primary care physician certainly might.

With the demise of the idea of a national emergency care patient registry, it may not be easy to prove the value proposition for emergency medicine; but we don’t really need to prove our value so much as we need to substantiate it. First, we need to make sure that in comparing care in the ED to care in the office based practice; apples are compared to apples. Would all those assertions about ED patients not meeting the prudent layperson standard hold up if, for example, we could show that the incidence of peri-tonsilar abscess in patients with sore throat was three times the incidence of this complication in the PCP’s office? I think ED physicians all believe that children with fever in the ED are different than children with fever in the UCC, but try convincing a pediatrician. This will take some studies directed specifically at the value-based proposition, and that is where we should put the Emergency Medicine Foundation’s contributions to work. We heard at this year’s Council meeting about a compilation of hundreds of studies showing the value of good ED care (early antibiotic treatment in pneumonia, ED physician activation of cath labs, etc). This compilation needs to be translated into an easily digested summary with bullet points for the media and policy makers.

Although I am not a great fan of public relations, when you are faced with a perception problem, you need a well-financed, highly organized campaign. The ED has become the premier provider of diagnostic services and acute care; and in some EDs, half the patients who are discharged from the ED were sent to the ED by their PCP for evaluation and treatment. ED physicians provide four times as much charity care as any other specialty. These types of factoids need to be widely disseminated, because they change perceptions, and re-frame the value proposition. ACEP needs to provide the science, the sound bites, and perhaps the professional PR team; but this is not just a challenge for ACEP’s D.C. office, it is a challenge for every state chapter, and every emergency physician in every ED and every state. The next time you hear someone say how expensive ED services are, take the time to explain cost shifting, talk about 24/7/365, remind them about all the patients we manage to keep out of the ICU.  With ACOs, bundled payments, and cost-containment, we are in a fight for the economic survival of our specialty.

Risk sharing is our third challenge. I will try to cover that in PART III.


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Practicing EM Under Health Reform – the New Paradigm PART I

Imagine that you are the medical director of an ED, and you decide to take to your hospital administrator a new set of cost-effective care policies that are designed to reduce the percent of admissions from your ED from 17% to 15%. In some hospitals, you might be met with incredulity: why would you do something like this when if would cost your hospital hundreds of thousands of dollars in revenue every month? You might be looking for another job. If you worked at a Kaiser hospital, you might be looking at a raise. If you worked at a hospital that was heavily involved in capitated managed care, your proposal might be welcome, but if the administrator of this hospital was particularly unscrupulous, you might be asked to apply these policies only to patients who are enrolled in the HMOs that had capitated the hospital for inpatient care, and not to those patients who were enrolled in a fee-for-service PPO. Is it any wonder, then, that here in Lost Vegas at the ACEP Council meeting, everyone seems to be having considerable difficulty figuring out how to define value based emergency care, or how to demonstrate to policy makers, insurance plans, regulators, legislators, hospital administrators, and patients that emergency physicians provide a valuable service and deserve to be fairly and generously compensated for this service?

With the Value Based Emergency Care Task Force’s report last year, it appeared that ACEP was taking some positive steps to prepare our specialty to respond to the value based reimbursement paradigm that was represented in health care reform legislation through Accountable Care Organization and pay for quality initiatives. Unfortunately, it would appear that the development of an Emergency Care Patient Registry database, which ACEP hoped to use to quantify the value we bring to our patients and our health care system, is impractical and too expensive. It also looks like those emergency medicine episodes of care, that would have allowed emergency physicians to participate appropriately in bundled payments, are likely to be pretty complicated and difficult to develop; and might unintentionally result in EP services being ‘classified as devoid of value’. Finally, the imperative to define how emergency physicians will integrate into the risk-sharing, pay for quality, accountable hospital-health plan-medical provider delivery models (the newly designated solution to our flawed health care system in this country) has been held hostage to the lack of clear indications as to how these organizations will actually work, and the variability that will evolve under different state regulations, different hospital systems, and different insurance plans. Given these problems and uncertainties, it is difficult indeed for ACEP to, as Gretzky once suggested, skate to where the puck is going to be.

I think part of the problem is that it’s really difficult to pin down the value-based concept. Is it more about the cost of care, or more about the effectiveness of care? For example (and I am making up these numbers), EPs could spend $10,000 a patient to generate a 55% survival from sepsis, or $30,000 a patient to generate a 65% survival rate. Which is the more ‘valuable’ protocol? You might think organizations like Kaiser have the answers, but Kaiser premiums are going up too. The perception out there is that EPs spend $35,000 per sepsis patient to achieve a 50% survival rate, and $500 to treat a strep throat when primary care docs spend $40. No wonder it seems like a nearly impossible task to identify the paths to emergency medicine participation in value based purchasing. ACEP will be turning to expert consultants to help define these approaches, but really, who knows our business better than our own members? I think the solution to this problem lies in the recognition that the question of quality or effectiveness of care is assumed to be a given; and that the expectation of legislators and regulators is that we need to provide high quality care at less cost, not the best possible outcomes at the least possible cost. This may seem like a nuance, but it is much easier to address the value proposition when value is defined by the real driver here. Let’s face it, as we are faced with looming national bankruptcy, the driver is cost, and where we need to focus is on the development of cost-effective care protocols, the identification of the best opportunities for cost savings, and the wide dissemination and adoption of these protocols so as to reduce the variability in emergency medicine practice that undermines cost-effective care. Whatever we are spending to achieve survival in sepsis, or treat the strep throat, it’s probably too much.

Another part of the problem we face with value based purchasing is a perception problem. More about that soon in PART II.


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