Sequestration Reduced Your Medicare Pay? You Have Four Options

It’s no April Fools’ Day joke. Your Medicare revenue cut begins on the first of next month.

Healthcare providers, pinched between limited resources and rising overhead, will see Medicare payments reduced by two percent. This adds up to a projected $11 billion less for doctors, hospitals and other providers in 2013.

Sequestration will automatically trim the reimbursement by the Centers for Medicare and Medicaid Services (CMS) for care of senior patients with Medicare coverage.

Sequestration: mandatory, permanent, across-the-board reduction of budgetary resources—typically by a uniform percentage—in the face of annual budget deficits.

And when that happens, providers will have four options. They can:

see more Medicare patients to offset the reimbursement reduction;
increase census and overall percentage of Medicaid patients and/or pre-Medicare age patients with health insurance plans that reimburse better than Medicare patients;
do both options 1 and 2; or they can
do nothing and simply accept the reduced revenue.

Here’s how these options are likely to shake out:

Option 4 (do nothing): The problem here is obvious. Inaction is not really a plan, but for anyone where “acceptance” is acceptable, there’s no reason to read further.

Options 1 and 3 (increase volume): The challenge here is that increased patient volume also increases operating costs for scheduling and providing more Medicare patient encounters. The added costs offset potential benefits at the lower CMS rate.

What’s more, increasing patient volume will inevitably draw down on provider and staff morale, and increase stress. Patient experience and patient satisfaction suffers. The inevitable reduction in Pay-for-Performance (P4P) incentive payments by commercial health plans to doctor in private practice, and the P4P value-based incentive payments to hospital value-based purchasing programs based on reduced HCAHPS scores would also negatively impact the bottom line.

Option 2 (change the mix): A better payor mix can offset reduced Medicare reimbursements, at least theoretically. But other issues also come into play. Increasing Medicaid census in private-practice or hospital-owned healthcare clinics can create internal stresses and demographic dynamics in the clinic reception areas between Medicaid and non-Medicaid patients

Growing the census and percentage of pre-Medicare patients with better-reimbursing commercial health plans is increasingly an objective for more healthcare providers. Even as commercial plan payers often take their cues from the CMS, the reimbursement rates from the more attractive commercial health plans are still typically better than payments from the CMS.

Your only realistic option requires a new plan and tactics…

So, if the objective is to increase the number and percentage of pre-Medicare patients, how can a provider devise a successful strategy to achieve this goal?

The answer is to create a successful marketing plan that specifically targets those patients as well as employers with significant pre-Medicare employee populations. (This includes either employers that are self-insured for employee healthcare expenses or where the employer provides access to better paying commercial health plans for their employees.)

There are numerous tactics for marketing effectively to pre-Medicare patients with commercial health insurance and their employers. It begins by segmenting the pre-Medicare adults in the market by geographic, demographic and psychographic criteria.

In simpler terms, it is a matter of understanding how each audience perceives their wants, needs, fears and frustrations in the context of health and healthcare. Next is a matter of refining the targeting and the unique brand messaging to each pre-Medicare market segment.

The final step is to determine the best and most cost-effective combination of marketing communications channels to deliver your compelling, differentiating messages powerfully and consistently.

The revenue reductions begin automatically under sequestration. In the few remaining days in March, Congress could attempt to change this plan (for now).

But in the long term, Medicare reimbursements are not likely to be increased. The only realistic option is to implement a marketing plan that contends with these kinds of changes and proactively attracts the right mix of target audience.