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The Murkiness of Medicaid and Medicare

The guessing game of how much will be reimbursed and the timeline for it to appear can run physicians out of business


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In its most basic form, success in business is simply making more money than you spend. When applied to the business of medicine, the lines of success become murky. Success or profitability in any modern American health-care business is challenging because money is typically not exchanged at the time of service provided; it’s reimbursed by insurance - private or Medicaid/Medicare, at a later date.

Experience with both private and government health insurance reimbursements have introduced a wide variety of issues.

Medicaid/Medicare presents complexity – In our case, the growth of “covered lives” since the expansion of Medicaid through Obamacare created a significant uptick in patient volumes at some locations. However, because of the one-sided payer mix, any hiccup to the system is quickly felt.

In March 2017, Colorado Medicaid introduced a new computer software to manage physician reimbursement with the goal of reducing uncompensated claims. The software required providers to re-enroll their credentials with a new third-party provider, DXC Technology. It was not a smooth transition, and the experience has been riddled with problems, glitches, delays and excuses.

Countless Colorado medical clinics, hospitals, physicians and health-care businesses still await reimbursement for claims submitted when the system first went online. In our case, after seven months of sporadic small payments or nothing at all, we opened a line of credit to cover gaps in payroll and other business expenses. We were offered an interest-free loan by Medicaid for our hardship amounting to about 6 percent of the total due to our practice – suffice it to say, it wasn’t enough. More complaining led to a second offer, closer to the amount owed, but vastly short of the requirements of running a healthy business.

After tightening our budget from top to bottom, we faced our last resort. Last week, we eliminated four jobs in our management team. While we keep up our mission to provide the best care to all patients, the failure of our state system resulted in four individuals without jobs and four families without an income.

So, what went wrong?

Here’s an example of just one glitch: The most-used code that covered regular office visits and evaluations was erroneously disallowed by the system upon launch. This issue resulted in millions of dollars in late or non-payment to providers around our state. The system was modified at the start of the Colorado fiscal year, as coders end-dated codes effective June 30, causing the system to no longer recognize the code, and thereby halting payments for such services. Colorado Medicaid says the goal is reimbursing up to 80 percent of backlogged claims by December 2017.

Even hospitals are suffering.

The Colorado Hospital Association, including 100 hospitals and health systems, filed a lawsuit last March against the State of Colorado on behalf of its members, citing the department did not follow proper procedure.

With private insurance, patients must be pre-authorized and coverage estimates clearly explained upfront so the patient can best prepare for any out-of-pocket expenses. Among colleagues in a spectrum of medical specialties, there is a fair share of resubmittals related to incomplete documentation, erroneous documentation or challenges to medical need with commercial insurance.

For the most efficient reimbursement, it’s essential to continually touch base with third-party commercial insurers to validate the physicians that are providing services are appropriately credentialed in their systems, and that all new physicians are credentialed prior to providing any reimbursable services. If all documentation is complete and adequately documented, claims themselves tend to be paid within four to six weeks after submission. Large insurance companies may take longer to reimburse, but the amount is typically larger than Medicaid or Medicare, which pays very little until as of late, paid fast.

Without reliable income, many health-care providers and medical businesses are forced to borrow money just to get by, meet payroll, purchase supplies and keep seeing patients. Our bank and advisors recommended that we stop accepting Medicaid patients altogether. Despite this recommendation, we still accept Medicaid and Medicare. We feel this is “right,” although perhaps not “good.”

Unfortunately, the guessing game of how much will be reimbursed and the timeline for it to appear can mercilessly run some physicians out of business. It’s a cash flow reality that must be factored when opening or running any size medical operation. We will survive and we are nimble enough to adjust and thrive. But it’s disheartening to watch our respected colleagues and even competition succumb to such financial pressures. 

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Erin Gibbs
Erin Reilly Gibbs is CEO, founder and owner of American Vein & Vascular Institute Practice Management . The company oversees American Vein & Vascular Institute — a network of vein and vascular clinics owned and founded by her husband, Dr. Gordon Gibbs.  The companies have more than 50 employees, operating in Pueblo, Parker, Canon City, Vail Valley, Littleton and Colorado Springs in Colorado and in Arlington, Texas. The management headquarters are located in the heart of downtown Colorado Springs. Recently, Erin’s team was selected for ColoradoBiz Magazine’s Top 100 Women-Owned Companies and the entire organization was a 2014 winner for Colorado Companies to Watch. She can be reached at eringibbs@americanvein.com or 719.242.8650.

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