Health Reform 101: Use this primer to navigate the changes ahead

The Patient Protection and Affordable Care Act of 2010 (ACA) is described as the most sweeping health care legislation passed in the U.S. since Medicare’s implementation in 1965. The health reform law is already changing the health care system, but the most profound modifications are yet to come. The law will affect otolaryngologists’ practices in many ways, both direct and indirect. Here are some areas of the law to consider.

Physician Quality

The law extends Medicare’s voluntary Physician Quality Reporting Initiative (PQRI), renamed the Physician Quality Reporting System (PQRS), setting incentive payments at 1 percent for 2011 and 0.5 percent from 2012 through 2014. Doctors who participate in qualified maintenance-of-certification programs could receive an additional 0.5 percent.

In 2015, physicians who do not successfully participate in the PQRI/PQRS will see their Medicare payments reduced. The penalty will be 1.5 percent in 2015 and 2 percent after that.

Many physician groups argue that the PQRS still has problems and shouldn’t become punitive unless and until it is run properly. A Medical Group Management Association survey released in January 2010 found that nearly 50 percent of physicians found it difficult or very difficult to capture and submit PQRS data, compared with 31 percent who found it easy or very easy. Another concern physicians have about making PQRS punitive is its lack of quality measures for some specialties, including otolaryngology.

The law includes some PQRS improvements: Medicare must establish an informal appeals process for physicians who believe they should have gotten a bonus, and participants must receive “timely feedback” on their performance.

The ACA also aims to improve physician quality by mandating the creation of a value-based payment modifier under the Medicare Physician Fee Schedule. The modifier will provide for differential payment to physicians or groups of physicians based on quality of care compared to cost during a performance period. Medicare will begin applying the modifier to some physicians’ pay in 2015 and to all physicians in 2017. Physician groups believe that because the fundamentals of this program are still under development, the initiative should not start in 2015.

Physician Gift Disclosure

Starting in 2013, physicians who receive gifts of $10 or more from a drug manufacturer, device maker or other medical industry firm will see their names and addresses listed on a publicly searchable website. Also listed will be a description of the type of payment. This will include consulting fees, honoraria, gifts, entertainment, food, travel, education, research, charitable contributions, royalties, speaking fees and grants.

Manufacturers will have to report the information to the Department of Health and Human Services (HHS) annually. Medical product makers won’t have to report gifts valued at less than $10 unless the aggregate amount exceeds $100 during a year. The same rules apply to gifts given to teaching hospitals.

Investment or ownership interest by physicians or their immediate family members in medical product manufacturers or in-group purchasing organizations will also have to be reported. The same goes for payments to doctors involved in product or research development. Research and development payments, however, won’t have to be publicly disclosed for four years or until the product receives U.S. Food and Drug Administration approval, whichever comes first.

The American Academy of Otolaryngology-Head and Neck Surgery code of ethics does not restrict legal trade practices. However, it states that “a physician’s commercial or financial interests should never be placed ahead of the interests and welfare of patients. Conflicts of interest undermine the trust that patients place in their physician. For this reason, physicians should endeavor to avoid any venture that creates a conflict of interest between personal financial interests and the best interests of the patient.”

Employer Requirement to Offer Coverage

Otolaryngologists, as employers, could be affected by parts of the ACA, including the mandate that employers offer health coverage. Starting in 2014, this provision will apply to businesses with 50 or more workers that do not offer coverage and that have at least one full-time employee who receives a premium tax credit under the law. The penalty will be $2,000 per full-time worker. The first 30 employees are excluded from the assessment. Businesses that offer coverage that is so costly that employees are eligible for premium tax credits also face penalties.

Most otolaryngologists, however, already provide coverage. A 2009 salary survey by the Association of Otolaryngology Administrators (AOA) found that 96.7 percent of responding practices offered health insurance, and that the mean percentage of the cost paid by the practice was nearly 84 percent. In addition, about 80 percent of AOA members are in one- or two-physician practices, which likely wouldn’t hit the 50-employee threshold for the employer mandate. About 15 percent of members are in practices of four to 10 doctors, and the remaining 5 percent of members’ practices have more than 10 doctors.

Small Business Subsidies

Some small physician practices could be eligible for tax credits for small businesses to purchase coverage for their employees. To qualify, businesses must cover at least 50 percent of employees’ premium costs. The credits, which began last year, are only available to employers with fewer than 25 full-time equivalent employees (FTEs) earning average wages of less than $50,000 annually. The maximum credit of 35 percent of employers’ share of premiums is available to businesses with fewer than 10 FTEs with average wages of less than $25,000 a year. The size of the credit phases down from there.

The tax credit program lasts in this form through 2013. In 2014 and 2015, the size of the credit jumps to 50 percent of employers’ premium contributions. However, to qualify, businesses must buy coverage through the state health insurance exchanges slated to begin in 2014.

Many small otolaryngology practices would be eligible for the credit based on the number of employees, but the wage restriction could rule out some of them. Although physician owners’ salaries aren’t factored into the average wage calculation, employed physicians’ salaries are. Employed doctors make more than $50,000 a year and could put average employee wages above that mark. In addition, doctors often employ highly trained staff whose earnings are above the law’s limit.

Insurance Claims Streamlining

Physicians’ interactions with health insurers on routine matters should become easier thanks to some administrative simplification provisions in the reform law. HHS is required to develop national standards insurers must follow regarding patients’ insurance eligibility, claims status transactions, electronic fund transfers, payment and remittance advice, enrollment and disenrollment and premium payments.

“Physicians should benefit from the changes, which will make it easier to track claims and, in many cases, should improve physician revenue cycles and reduce overhead costs,” the American Medical Association (AMA) states in its booklet, “What Health System Reform Means to Physicians and Patients: The Patient Protection and Affordable Care Act” [http://www.ama-assn.org/ama1/pub/upload/mm/399/hsr-booklet.pdf]. HHS is supposed to finalize the first of the standards by mid-2011, and regulations are to be phased in between 2013 and 2016. Beginning in 2014, health plans that fail to meet the requirements will face fines.

New Care and Payment Models

The ACA creates several programs designed to test new models of care delivery and payment. These efforts include the voluntary Medicare Shared Savings Program, which promotes accountable care organizations (ACOs) and Medicare’s national physician-hospital payment bundling pilot program. The ACO project, set to begin in 2012, aims to create incentives for health care providers to work together to treat patients across care settings, including doctor’s offices, hospitals and long-term care facilities, according to HHS. Providers will be able to share savings with Medicare. HHS issued its proposed ACO rule in March 2011.

The bundled payment project, which is to begin in 2013, will involve eight acute conditions to be selected by HHS. Providers, including doctors and hospitals, will receive combined payment for care provided three days before admission through 30 days after discharge.

Otolaryngologists may want to monitor whether the hospitals at which they have privileges are considering participation in these programs. Physicians interested in participating should fully evaluate their capacity to join these programs beforehand, the AMA advises in its report, “New Payment and Delivery Reform Models” [http://www.ama-assn.org/ama1/pub/upload/mm/399/hsr-payment-reform-models…. Under these models, physicians will have to work collaboratively with other providers, and they may need to invest in tools and systems necessary to coordinate and measure performance, the AMA notes.

Patient Access

Physician practices should see a drop in the number of uninsured patients as the law’s health insurance access provisions take effect. Up to 32 million people could gain coverage, according to the Congressional Budget Office. Of that figure, about 16 million would get their coverage through Medicaid and the Children’s Health Insurance Program.

The biggest reforms start in 2014. That’s when the mandate for individuals to buy insurance, income-related tax credits to help individuals and families afford coverage and a Medicaid eligibility expansion kick in. At the same time, state-based health insurance exchanges, which aim to provide affordable coverage options, are supposed to launch.

The law also includes many insurance reforms that affect patients, including:

Elimination of pre-existing condition exclusions;
A requirement that health plans accept every employer or individual who applies;
Guaranteed renewability of coverage; and
Prohibition on premium rate differences, except those for rating area, age, tobacco use and whether the plan is for an individual or family.