Why Have's and Why Not's

 Over the last several weeks, we have received numerous questions in reactions to many of our posts, presentations, and comments.  The increasing frustration of private practice PT’s who are being cut across the country by large payors has been the biggest contributor to the questions.

In this first part of a 2 part series, we will attempt to address the most common questions that we have been getting lately.

Ques #1  Why do insurance company’s pay hospital based providers more than freestanding?

Hospital’s (the Have’s) provide a bundle of other services that are important to payors that freestanding providers do not (the “not’s”).  In essence, hospitals are either monopolistic or oligopy's in their respective geographic areas.  Largely protected by regulations giving them exclusitivity (e.g. CON laws), they have the ability to negotiate rates as part of their “bigger picture” in their relationship to payors.  AND hospital CFO’s are not genetically coded with peace corps genes like PT’s-they know how to say “NO”.

Ques #2  Why do insurance companies offer rates to PT’s that are well below their costs and roughly 30% of medicare rates?

Payors believe that PT is a “black hole”.  They don’t know what they pay for and they are not sure what they get and they are not sure what determines when a patient has reached medical improvement.  Therefore, treat them all like plankton and pay low rates.  The more simple answer is that “the can” because they realize most markets are oversaturated with therapy providers and many are willing to take rates below their costs.

Ques #3.  Why do PT practices take rates below their costs?

This is not as simple question as it appears.  History would reveal that PT’s and their natural predisposition towards doing good things for patients (part of that genetic thing) have unwittingly not charged for all of their service time which has resulted in a natural undervaluing of services from an economic and pricing standpoint.  When one set of “physical therapy” is charging and receiving substantially less than another set of “physical therapy”, data analysis and pricing naturally falls to the lowest denominator. 

This phenomenon has traditionally caused PT practices to just  continue to take falling rates.  PT is also a referral oriented business where we count on receiving patients from sources.  Practices don’t like to confuse the referral train by making their referral sources decide based on reimbursement where to send patients.  Of course, their is always the mistaken belief that taking rates below costs gives you an edge in the marketplace.  Lastly, PT’s just don’t know how to say “NO”.

 

Ques #4.  What about all this talk from payors about evidence-based practice, outcomes, P4P, and patient satisfaction?

These are all euphemisms for “we want you to do more but pay you less”.  When the difference between performance and underperformance is undetermined, rates fall to their lowest common denominator.

Ques. #5.  Why do insurance companies pick on PT?

Great question, glad you asked.  PT represents at best 2–3% of the health care premium.  However, musculoskeletal costs are rising and soon to be higher than cardiac and oncology  (for some payors they may be already).  Part of musculoskeletal costs include PT (along with imaging and pharmacy but we won’t go there right now).  Because of the nebulous nature of PT (the “black hole” thing), it is an easy captive market to pick on.  A more simpler answer is “they can”.

 

More to come in Part II.  Thoughts?

Larry

Comments

[Stephanie]

Larry...where does this come from? "PT represents at best 2–3% of the health care premium."

I'm pretty sure these are Medicare numbers but is this correct for private insurers too? Here's some info. I found:

"Upper extremity disorders accounted for 4.4% of workers compensation claims in the federal workforce from October 1993-September 1994. Mononeuritis and enthesopathy accounted for 43% and 31% of these claims respectively. Physical therapy accounted for 12% and 25% of all health care costs for each of the diagnoses. Two shoulder diagnoses (rotator cuff syndrome and adhesive capsulitis) accounted for 22% of combined mononeuritis and enthesopathy-related health care costs (~$2.64 million)." Taken from: Feuerstein, M., Miller, V.L., Burrell, L.M., Berger, R. (1998). Occupational upper extremity disorders in the federal workforce. Journal of Occupational and Environmental Medicine, 40 (6); 546-555.

Are we undervaluing our services (once again) by reporting the 2-3%?

Stephanie

[Larry Benz]

Stephanie:

We are talking about completely different numbers. The health care premium dollar is the dollar spent for purchasing your health insurance. For example, if your health insurance was $100 per month (that would be nice wouldn't it!), the amount allocated or reserved for PT expenditures would be 2-4 bucks. I believe that inpatient care and pharmacy hover around 22% each for the premium dollar.

The useage in medicare beneficiaries that you report is correct and is derived by the reported data.
Larry

[James Glinn Jr]

My thoughts on the issues would lean more towards first identifying what the challenges and potential changes are and then looking for solutions. A recent editorial from PPS (Private Practice Section) stated this well: "Acknowledge the roadblocks and frustrations, but then regroup and find a way to persist." Thanks Steve Anderson for the insightful words!

As it relates to the reimbursement climate currently in physical therapy, what have we learned from the past? We have had pressures like this in the early through late 90's with the increase in managed care. What worked and did not work in the past? What is our plan as individuals and as a profession to "regroup and persist?"

So lets break it down:

Ques #1: If we are "have nots" what can we do to get closer to being "haves?"

Ques #2: Agreed, they pay us less because as Larry states "they can." How do we stop making it so easy for them to reduce our reimbursement?

Ques #3: How do we educate PT's to say "No?" To understand (or at least entertain) the "use it or lose it" theory which states if we give away services that is how they will be valued. We have to stop giving away services as it ultimately decreases the "value" of those services, how do we accomplish that goal?

Ques #4: This one seems to be easier to answer from my perspective. We need to continue to embrace the evidence available and encourage the publication of more quality evidence to support what we do. The real question is what is the most effective and efficient way of getting this to spread through our profession?

Ques #5 Insurance companies pick on all providers, it's just that some groups have more consistency and more solidarity as a profession. We need to stop being the "victim" and find ways to create more value in what we do. Value for patients, insurance companies and our profession.

Thanks for the forum guys!

Curious to hear of any solutions others may have......

[Selena Horner]

Out of curiosity, what is the percentage of subscribers in a private health insurance plan in which the health insurance plan does not pay out more than $1,000, $2,000 or up to $6,000/year? And then, what is the percentage of subscribers that the health insurance company pays out more than $12,000/year? For the health insurance companies to make billions indicates that 1)for some reason the risk that is taken in providing insurance wasn't as great as would be expected or 2) premiums are set so high and deductibles/copays set so high that the health insurance company is guaranteed to generate revenue or 3) reduced risk by controlling the cost of the services?

[Britt Smith]

Larry,
You hit the ol' nail on the head with each question/response. With regard to the health care, dollar...I've been looking at Medicare spending in the US: Now $1 billion for surgery in LBP. I thought 'wow, that's a bundle', but then I saw that the pharmacy spending was something like $47 billion dollars. PT is a drop in the bucket.
Weiner et al looked at the spending AND changes with chronic lbp in one Medicare geographic region (Pennsylvia), over a 2 yr period (2000-2002). Background: In the US (1991-2002), there was a 42% increase in Medicare patients (aging baby boomers), 131% increase in LBP (hurting, aging baby boomers) & a 387% increase in Medicare charges. Pennsylvania had a 5.5% increase in LBP (2 yrs), 34% increase in charges: 59% increase injections, 42% increase in MRI imaging, 19% increase in X-ray....0.2% increase in PT charges!!!!! None of the persons in the survey had RED FLAGS...61% had an MRI (24% failed back surgery syndrome).
Wienter et al. titled their little piece 'low back pain in older adults: are we utilizing healthcare resources wisely? (Pain Medcine.2006;7(2):143-150).
We're a blip on the radar screen and patients are being sent for far more expensive services of little or therapeutic utility.
What are WE to do about it?
Britt

[Sean]

Britt,
Obviously we need to stop RFP in Hospital and physician offices; a topic which has been discussed in great detail here.
But also, in the current, non-direct access environment I'm in, we need to let the FP's know that it is "their job to try all conservative treatment prior to referring to a surgeon" as a neurosurgeon once told me.
And my opinion is that it just comes down to diligent, effective marketing. Thoughts?

[Jeff Hathaway]

Thank you Larry for summarzing the current state very eloquently!!
I beleive we can effect change - of course it will not be easy but it can be done one step at a time. The first thing we have to do is get a unified voice/actions - this is why I beleive the leadership of the APTA needs to be one that can rally the troops behind a vision that moves people to say "no" and to become one voice. Maybe this (MyPTSpace) forum creates that grassroots effort to unify. We need to find "the Hundredth Monkey" or get to that Tipping Point!!
Second, I beleive we have to lose the victim mentality - are there injustices? - of course - but "we" (of course no reading this blog) in this profession have, in part, created the environment we find ourselves in (anecdotal Tx, overutilization, shake n bake, press n guess...).
Lastly, by indentifying the common interest and getting on the same side of the problem (EBP can be the conrnerstone of that) with the insurers that are in line with our interests, then we can start to affect change. This requires us to let go of our pre-determined solutions to the problems and engage in a process of solving the problem with the insurers, not fight them! Then maybe we can move on to the bigger players as we gain momentum. I know the realities are real, large and formidable. We will lose some, win some, get weary but it will be movement in the right direction. Without a movement toward positive action we will continue to wallow as we have for the past 10 years! Lets "defrag", take accountability and then take positve action to get our and the insurers interests met!!

[Selena Horner]

It's going to take way more than just saying no.

Kind of from a consulting viewpoint, we could be helpful in assisting third party payers, especially with a musculoskeletal view. For some reason, I don't believe an insurance company is going to want to reduce the profits that they make. The questions I orignially asked would at least give an overview on what percentage of patients are costing them the most money. Then, you'd want to know what diagnostic categories. Then, for musculoskeletal categories - when was the onset date versus the date services were intiated. (Onset dates are tagged to all our claims - it's going to be a bit skewed somewhat because I never, ever put in some onset date greater than a year - my documentation will reflect something that happened over a year ago, but there was an exacerbation.) Then, look at a collective kind of lumping of a timeline - what path is happening in their care (at 1 month from initiation of receiving services for the complaint what services were provided... at 2 months... at 3 months... and on to say 12 months.) We've seen the data published in the Wall Street Journal with Virginia Mason, is there any reason to believe that as a whole, the same type of care isn't going on all across the states? (Basically a high amount of MRI and a high amount of specialists being unneccessarily utlized particularly in patients with low back pain?) We could argue for a change or a shift in the location of where the charges do occur. It could be proposed that reducing the number of MRI and reducing the number of specialists involved would save money... but a shift to a higher frequency of physical therapy is going to cost money (additional dollars could be spent with an increased fee schedule because of savings at two ends - diagnostic testing and specialists at the front end and chronicity at the back end). To put a dollar amount on a chronic condition might be difficult because chronicity goes on for years... So, in other words, in the shifting of the costs, we want to be rewarded for the value of our services because of the savings that can potentially occur in the long run. Third party payers are still going to make their billions, but the change is just in where money that is spent goes.

We do have a problem though... we have variance in our practice, which means there is no guarantee that the money WILL be well spent and that patients will reach outcomes without requiring further diagnostic or specilist care. I'm a perfect example of "variance."

Using Evidence is great but also not always great. I was tracking my outcomes from 2002 to 2004. When I analyzed all the patients that I saw in that period of time with low back pain without radicular symptoms, I was really disheartened with my practice choices. I was averaging around 12-14 visits and patients were being discharged on the ODI with a 22-24% disability. My effect size was nice and large, but I wasn't happy with my actual end results. Those numbers sucked. If I use today's fee schedule with BCBSM, it was costing about $896. (and I wasn't happy with the end result)

I reflected on my clinical choices... recognized that I had a very hands off approach... realized that literature indicated that the combination of a manual approach and exercise would provide the best benefit... manipulation was being something hitting my radar level... so, I decided, what can I lose? Manipulation seems to be the manual aspect that maybe I should include with the right patient. So, yeah, I decided if I wanted to improve my outcomes that was the only literature out there that was concisely defining the outcomes acquired. So, I did it... okay, fast forward to now. The only major thing that I have changed in my approach with patients with low back pain is incorporating manipulation when indicated. I just looked at my numbers and sure enough, I'm pretty much where I mentally set my goals. The same type of patient now needs on average 7 visits and is discharged with a 12% disability. Now with the current fee schedule it only costs the insurance company around $448. Nice for them, but what about me? I need a higher volume of patients coming in my door and I provided a better product. It could be argued though that I should have been providing the higher level of care back in 2002 - 2004 too...

I guess a really long post and what it all really comes down to is an insurance company is always going to do anything that is going to reduce their financial risk. If we can prove where, how and to what degree our services can reduce their risk, I would be willing to bet that they would be all ears. It WILL cost them somewhat to reduce that risk though.