Medicare Opt-Out for Physical Therapists

Representative Vern Buchanan
Washington D.C. Office
2104 Rayburn HOB
Washington, D.C. 20515
Phone: (202) 225-5015
Fax: (202) 226-0828

February 4th, 2013

Tim Richardson, PT

Re: A non-regulatory solution that will save Medicare $957,600 per year

Dear Rep. Buchanan,

Thank you for the opportunity to describe this proposal for a non-regulatory solution that may save Medicare hundreds of thousands and, perhaps, millions of dollars per year.

Medicare beneficiaries currently are not allowed to privately contract with physical therapists for the provision of physical therapy services in the United States. According to the American Physical Therapy Association (APTA):

“If a physical therapist accepts payment directly from a patient for a covered service under Medicare, he or she could be subject to federal investigation and financial and other penalties.”

However, Medicare beneficiaries are demanding more physical therapy services every year. Private practice physical therapy is growing faster even than the overall growth rate of the Medicare program (~8%).

From 2004 to 2009 private practice physical therapy grew at an average annual growth rate of 10%.3

However, many private practice physical therapists would prefer to see these patients without the administrative burden associated with the Medicare program. Title 42, Part 405 of the Code of Federal Regulations lists the regulations that permit a physician or practitioner to opt out of Medicare and enter into private contracts with Medicare beneficiaries, if specific requirements of these instructions are met.

Physical Therapists are not included on this list of physicians and non-physician practitioners who may opt-out of the Medicare program:

• Physician assistant
• Nurse practitioner
• Clinical nurse specialist
• Certified registered nurse anesthetist
• Certified nurse midwife
• Clinical psychologist
• Clinical social worker
• Registered dietitian
• Nutrition professional

Spending on therapy services, specifically physical therapy, is growing at an alarming rate from the perspective of government payment policy experts. Medicare spent nearly $6 billion dollars on all outpatient therapy in 2012 or about $1,173 for each Medicare beneficiary treated.

Reimbursement to physical therapists, however, is the opposite side of the spending coin. Many private practice owners see Medicare reimbursements as flat or declining and, with the uncertainty of the outcome of the Congress’ eminent Fiscal Cliff deliberations, would like to explore alternative business arrangements with their patients.

There are over 177,000 licensed physical therapists in the United States and an estimated 65,000 work in private practice settings. Private practices physical therapists are small businesspeople who would be the most likely practicioners to opt-out of the Medicare program. Many would prefer to seek private contracting arrangements with Medicare beneficiaries, if allowed to do so.

Recent, anecdotal reports of physical therapists in private, cash-pay practice place their annual revenues at about $150,000 for a full-time therapist treating non-Medicare patients. In contrast, a typical collections experience for a Medicare Physical Therapist in Private Practice (PTPP) is about $250,000 per year. However, much of this Medicare revenue goes to support administrative overhead, not to pay the therapist.

We can estimate Medicare’s cost savings if physical therapists are allowed to contract privately with Medicare beneficiaries. The aggregate Medicare spending for the PTPP outpatient setting in 2011 was $228 million. 

According to the Private Practice Section of the American Physical Therapy Association:

“...very few physicians have exercised this opt out affidavit. From 1998-2002, 2839 physicians, clinical psychologists, and other providers chose to opt-out. This represents 0.42 percent of the physicians and other providers eligible to opt-out.”

A conservative estimate of Medicare savings is $957,600 per year.

We understand this amount may seem trivial in the face of the enormous challenge before the Congress. However, there should be essentially no opposition or special interest group against a request from Representative Buchanan to the Centers for Medicare and Medicaid Services to include physical therapists in the list of physicians and non-physician practitioners who may opt-out of the Medicare program in Title 42, Part 405 of the Code of Federal Regulations.

To accomplish this change, we recommend that Section 1802(b)(5)(B) of the Social Security Act be amended as follows: Section 1802(b)(5)(B) (42 U.S.C. 1395a(b)(5)(C)) is amended by striking ``the term practitioner has the meaning given such term by section 1842(b)(18)(C)” and inserting “In this subparagraph, the term “practitioner” means an individual defined at section 1842(b)(18)(C) or an individual who is qualified as a physical therapist.”

The ultimate solution, or solutions, to our nation’s fiscal challenge may include multiple, moderate money-saving strategies. We hope that this proposal for saving Medicare money is one that Representative Buchanan can consider.

Thank you for your time and attention,

Tim Richardson, PT

Medicare Advantage Plan Wastes 8 Billion Dollars

A new Office of the Inspector General (OIG) report recommends ending the Medicare Advantage bonus program, saying it will waste the $8.3 billion earmarked over the next ten years.

According to the Associated Press

"Medicare Advantage is a popular private insurance alternative to the traditional health care program for seniors. More than 3,000 private plans serve nearly 12 million beneficiaries, about one-fourth of Medicare recipients. They offer lower out-of-pocket costs, usually in exchange for some limitations on choice."

Patients may find that they are excluded from seeing their physical therapist in private practice, as one common limitation on their choice.

According to the New York Times...

"In the 2010 health care law, Congress cut Medicare payments to managed care plans, known as Medicare Advantage, and authorized $8.3 billion in bonus payments to those that provide high-quality care. OIG investigators found that most of the money paid under the demonstration program went to “average-performing plans” rated lower than the benchmarks set by Congress."

Rather than paying bonuses to profitable insurance companies why not put that money into providers, like physicians and physical therapists, with modern tools for imroving quality of care like improved access to hospitals' Electronic Medical Records?

Three reasons why POPTs will give way to PTPP in 2010

Just this week three things have happened that lead me to question the survivability of the physician-owned physical therapy (POPT) model in 2010.

By the way, none of this seems to be directly affected by the direction of the health care reform debates - whichever way reform goes the POPT outcome seems destined to happen.

ONE

A Medicare Payment Advisory Commission (MedPAC) meeting October 8th listened to APTA testimony on physician ownership of physical therapy clinics. MedPAC addressed concerns about Medicare PT volume growth and ownership of PT.

Physicians who own services, like PT, to which they refer have a conflict of interests (their interests vs. their patients' best interests).

MedPAC outlined these concerns in a PowerPoint presentation by staffer Ariel Winter whose concerns are the following:

1. Could lead to higher overall volume through greater capacity and financial incentives.
   
   
2. Several studies find that physician self-referral is associated with higher volume.
   
   
3. Unclear whether additional services are appropriate or contribute to improved outcomes.

TWO

Jim Needham, former CEO of a Florida POPT, predicts a sell-off due to difficulty with compliance and transparency requirements especially small physician practices that employ physical therapists.

Jim does suggest that costs (the subject of the current debate) are the primary driver of new physician compliance legislation.

You can sign up to hear Jim's presentation in Palmetto, Florida on November 7th or November 21st at BulletproofPT.com.

THREE

My phone has been ringing off the hook from business brokers and 'principals' (guys and gals with money) who all of a sudden want to invest in outpatient physical therapy practices.

My phone rings because I sold two clinics in two separate transactions in the last two years so I'm on a list somewhere. Lucky me.

Do they know something we don't?

Maybe it's just a thaw in the frozen credit markets but physical therapy business sales are getting hot once more.

The other consideration is that investors perceive increased future expected cash flows to Physical Therapists in Private Practice (PTPP) and they see PTPPs selling for all-time historically low valuations and they want a bargain.

Maybe 2010 will be the year of the PTPP.

My advice to PTPP owners - hang tight, this may be your year.

Physical therapists prepare for Medicare RACs

It's a shame that our Federal government now sees health care providers as a revenue source - (tongue-planted-firmly-in-cheek) - this may be our contribution to balancing the federal budget!

Holland and Knight attorneys have penned this helpful 25-point list for providers to consider when you consider Recovery Audit Contractors (RACs). Note that most of the audit protection measures are aimed at inpatient hospitals - that's because most of the money is in inpatient hospitals not in small, private practice physical therapy clinics.

Nevertheless, PTs may want to familiarize themselves with audit risk in general and with small practice compliance specifically. Get the small practice compliance template here.

This blog has previously commented on our experience with the RAC demonstration project in Florida (2005-2008) and the amount of the adverse impact on PTPP, on average.

We have included a chart that describes the average repayment amount from physicians (PTs are lumped in with physicians).

	RECOVERED AMOUNT	NUMBER OF PROVIDERS	TOTAL PHYSICIANS AUDITED BY RACS: 2005-2008
My experience: 2005-2008	~$80/year	7
Average Florida Provider: 2006	$135	21,927
Average California Provider: 2006	$216		50,054

Note, I have revealed my own clinics' individual repayment experience.

Nationally, over the three-year demonstration period private practice physicians and physical therapists groups have repaid only $19 million from a total over- and under-payment determination of over $1 billion dollars.

Consider the circumstances in the demonstration project - if an overpayment determination reached the third level of the appeals process (Administrative Law Judge) then the RAC was not paid for the overpayment.

Now, in the permanent RAC (2009 going forward), if an overpayment is appealed at any level (1st, 2nd or 3rd) then the RAC will not be paid - this is a HUGE incentive for the RAC to avoid cases which seem likely to appeal, at any level.

Many hospitals have pledged to appeal every overpayment determination based on this rationale. Holland and Knight attorney/blogger Greg Piche' advises against 'knee jerk' audit appeals - only appeal those findings that seem unwarranted and excessive.

Small PT practices may have limited resources (time and money) to automatically appeal every time but with "skin in the game" an owner is personally incentivized to appeal large overpayments based on "medical necessity" (the most prevalent audit finding).

Medically unneccesary physical therapy speaks to the "home court advantage" of small private practices - how well do you know your patient and how well do you document your evaluation findings?

Most practice owners do a very good job with the face-to-face interaction. It should be a simple matter to go one step further to use a standard documentation format to show medical necessity.

The OPTIMAL is one such format to create baseline self-report data that shows medical necessity (need) for physical therapy.

Other baseline formats include the following:

• performance measures (like TUG test, Single Leg Stance time, etc.)
• impairment measures (like Straight Leg Raise, hip internal/external rotation ROM, etc.)
• treatment-based classification measures (like traction, manipulation, stabilization, etc.

Standard baseline formats that are evidence-based are recognizable to Medicare RAC 'audit police' - especially those that are also physical therapists! If, upon reviewing your charts the auditor finds standard tests and measures they are likely to recommend 'moving on' to the next case - your case will be too likely to win on appeal.

RAC audits are an unlikely but persistent threat for small practice physical therapists. The federal governement's current budget difficulties have only increased the need for 'self-funding' programs like the RACs.

Therefore, RACs seem unlikely to go away in the near term.

United 'fired' by physical therapist

I 'fired' United Health Care today.

United is the lowest paying insurance company in America,  for many physical therapist private practices like mine.

We kept United for many years mainly because their members are my friends, neighbors and fellow small business persons in my community.

Two years ago United paid me $40 per patient per day.

I was able to keep my doors open because I "cross subsidized" (APTA-Members Only) my friends, neighbors and fellow small business persons who were on United with higher-paying Medicare patients.

I had to fire United because, since early 2008, my average payment per patient has declined even though my patient volumes are up (+7.6% February 2009).

The reason is Medicare Advantage.

Medicare Advantage pays just as poorly as United.

Medicare Advantage has, since 2008, decimated my high-margin, high-volume Medicare caseload by transferring these patients to insurance plans that pay, on average, about 60-65% of traditional Medicare.

Funny thing, the US government pays Medicare Advantage $1.30 for every dollar CMS spends on traditional Medicare.

Today, President Obama said that the US could not afford to continue to support the Medicare Advantage program in his Town Hall speech from Costa Mesa, California.

When I wrote United to opt-out of my contract they quickly called me back to offer $60 per visit because I do such a "good job controlling utilization".

Maybe you can try this tactic to your advantage - if you still haven't fired United.

Medicare RACs attack

As noted across the blogosphere the Medicare Recovery Audit Contractors are aiming their guns at health care providers after a 4-month hiatus.

Their primary target is inpatient hospitals.

That's where the money is.

Witch Hunt?

The federal government sees health care providers as a revenue source.

RACs bid for the right to audit and collect overpayments from providers. The RACs then keep a portion of those overpayments.

Some say the rewards to the RACs could lead to over-aggressive collection efforts.

Do you think RACS are unfairly incentivized to target and collect overpayments?

Do you think physical therapists in private practice need to worry?

$100 Lumbar MRI in the USA?

Get a lumbar magnetic resonance image (MRI) for less than $100?

Is that possible?

In Japan, it is.

If the United States imports this feature of Japan's model in these changing health care times what implication does that hold for physical therapy?

$25 visits in outpatient physical therapy clinics?

Japan's system is called social insurance.

Japan is the world's second richest economy and, arguably, one of its most capitalistic.

Some other features of the Japanese system include the following:

• everyone is covered (rich people cannot 'opt-out').
  
  
• most care (80%) is provided by private doctors (not 'socialized medicine' like in Canada and England).
  
  
• no gatekeeper (you can see an allergist or orthopedic surgeon on your own).
  
  
• costs half as much as in the USA
  1. 8% of GDP in Japan
  2. 16% of GDP in the USA
  .
  
• Japanese people visit their doctor 3x as often as Americans do for simple procedures like blood pressure checks.
  
  
• insurance companies are non-profit and aren't allowed to 'cherry pick' - if you have a history of cancer they still have to insure you.
  
  
• zero medical bankruptcies.
  
  
• $280 per month health insurance premiums - and the employer pays half of that!

Will the Japanese model happen in the USA?

Should it?

What do you think?