I’ve said repeatedly that focusing on cheap surgeries is a flawed strategy, but now the U.S. government through the Center for Medicare and Medicaid Services has taken the next step to prove me right and through a wrench into the strategy of many nations that believe that offering cheap surgery is a viable medical tourism sales strategy. In an attempt to better align Medicare’s payment systems, the CMS plans to implement new, more inclusive bundled outpatient codes akin to inpatient diagnosis-related groups.
The current basic payment unit in Medicare’s outpatient prospective payment system is the ambulatory payment classification, or APC. Hospitals and other providers are paid based on the individual outpatient services they bill, which are assigned to APCs.
Under the CMS’ proposed outpatient payment rule, released late last week, the government will begin using “comprehensive APCs” starting Jan. 1, 2015. Some experts have said comprehensive APCs are like “mini-DRGs.” They represent a specific outpatient service, like a hip replacement or pacemaker procedure, and incorporate all other related ancillary services into a lump-sum payment.
People that really don’t understand the contracting implications of this move are showing their ignorance all over the industry, from trade publications to law firms on Capitol Hill.
The CMS originally pitched comprehensive APCs in its 2014 rule, but decided to delay the rollout until it received feedback from providers. Now, the agency is ready to move forward with 28 “device-dependent” comprehensive APCs. These classifications cover procedures that include costly devices, such as implantable cardioverter-defibrillators, stents and orthopedic implants. It’s really unfair (and seems somewhat unethical to me) to wait for feedback from folks that don’t know what they don’t know to implement this.
For those in India, Mexico and other countries that have been touting “cheap” surgeries to Americans… that ship has sailed.
Proposed payment rates vary for each bundle. More complex ICD procedures will fetch the largest payments, at more than $32,000. Pacemaker procedures will pay anywhere from $7,000 to $17,000, depending on the level of resources required. Reimbursement for intensive orthopedic surgeries, excluding those on the hands and feet, will pay about $11,000. The two newest comprehensive APCs are intraocular telescope implantation ($21,000) and single-session cranial stereotactic radiosurgery (about $10,000), the CMS said. It simply won’t pay to travel abroad for these cases, especially those in orthopedics. Why? Because these case rates include 90 days of post-operative care and management, and the medical tourism cases don’t cover that and must add the cost of travel.
If the (bundled) payment rate is appropriate for all those itemized things sitting on the claim, people will feel okay with the notion of a comprehensive APC. But how will they know? What if it isn’t? Will providers refuse to treat Medicare patients over this? It wouldn’t surprise me if they did.
Merritt Hawkins, the leading physician recruitment firm in the nation already did a survey of physicians involved in direct patient care and found that 10% of all physicians, not just those in primary care, plan to leave traditional medical practice and take up some model of concierge medicine. This could push orthopedics, cardiology, general surgery and others right over the edge! They will join the ranks of the plastic surgeons, many of whom have been working “without a Medicare net” for decades.
As with most rules, there are some exceptions to the comprehensive APC policy. Medicare will still make separate payments for select outpatient claims. These include ambulance services, pass-through drugs and devices, preventive services like cancer screening tests and diabetes tests, and self-administered drugs, among others.
But the push for bundled outpatient services is not likely to relent soon. CMS officials have said as much, writing in the rule: “We may extend comprehensive payments to other procedures in future years as part of a broader packaging initiative.”
Without a doubt, commercial payers across the USA will also want the same reimbursement method for non-Medicare contracts. There, American healthcare providers will have the right to negotiate. To prepare for this, please read my tip sheet on How to Develop and Quote Outpatient Case Rates. It includes a step-by-step checklist and worksheet you can use to start structuring your most critical surgical procedures.
Once these rates come down first as a handful of highly reimbursed cases, and then as others are added to the list, the medical tourism business both in the USA and abroad will find there’s very little interest in the product if the only differentiation is price.
I’ve always said that ACCESS, not price will be the driver of medical tourism business to destinations further from home that one normally shops for care.
Access to:
- faster treatment/intervention
- a renowned surgeon or diagnostician
- a physician with time on his or her schedule
- procedures not otherwise available for legal or registration reasons
- to clinical trials
- care where supportive family or friends are nearby
- recuperation in a desirable location
- price arbitrage
Let the branding and destination battles begin!
