Podiatry Coding & Billing Alert

Here’s how to crunch the numbers that forecast MIPS’ effects.

To take the penalty, or to not take the penalty? That is the question, or at least it is for many podiatry practices considering future payment models that incorporate MIPS — the Merit-Based Incentive Payment System.

While the final MACRA rule removes the threat of SGR cuts, it presents a new set of challenges that have some providers considering just eating the penalties as they did with Meaningful Use and PQRS. Let’s consider the potential effects to help you choose the best financial option for your practice.

The Challenge of Early Adoption

It will take a degree of adaptability and agility from your practice to be an early adopter. This isn’t a new Apple product: it’s a comprehensive shift in payment models. But before you consider just eating the penalty in order to keep your practice running as it has been, consider the benefits of adopting MIPS early on. (The requirements for 2017 are easy.) It also presents a bonus, and the skills and capabilities developed under MIPS can help prepare groups for future success under the APM track.

However, MIPS has upside and downside risk starting at as much as 4 percent in 2019 and increasing to as much as 9 percent by 2022. MIPS is budget-neutral and graded on a curve, so there will be winners and losers depending upon your peers’ performance.

Examining the Best- and Worst-Case Scenarios

MIPS offers higher-performing groups a chance to attain significant financial incentives while also carrying a risk of payment reductions. Success under MIPS will require strategic and operational changes, and change can be difficult to implement and even more difficult to maintain.

As it stands now, the worst-case scenario for not participating in MIPS by 2022 will be a 9 percent penalty, and the potential bonus is 9 percent. Considering that the penalty and bonuses will only affect your net revenue (your costs will, of course, stay the same), this is actually a pretty substantial range.

The Math in the Short Term

Take, for example, a podiatry practice that earns $1 million in revenue with a fairly standard 60 percent overhead and bills Medicare for a third of its patients. Right now, that’s $600,000 in expenses and a net of $400,000.

Because that 9 percent penalty or bonus is calculated off of your revenue, we’re talking about a roughly $30,000 bonus or penalty to your net income, making it range from $370,000 to $430,000. For the practice in this example, the difference and cost of failing to adopt MIPS versus maxing out the bonus is roughly $60,000:

0.09 x ($1,000,000 x 1/3) = $29,700

That’s approximately a 15 percent revenue difference. But for any practice, all you have to do is multiply the percentage of your revenue from Medicare by .09 to see what the impact is.

Consider the Possibility of Widespread Adoption

As of right now, only Medicare is adopting this payment model. But what if private payers adopt similar standards and hold you to them? This is often the case with healthcare regulations, and if they do, the math changes dramatically.

“We always use Medicare as a benchmark, because it’s verifiable and accepted in the entire industry as a benchmark,” says Penny Noyes, president, CEO and founder of Health Business Navigators in Bowling Green, Ky.

“Medicare serves as a predictable indicator of where other carriers are going to go and how they establish relative value,” explains Noyes, who works with practice managers to renegotiate payer contracts. She advises practices to acquire all payer agreements to prepare for an eventual and potentially abrupt change.

Take the practice from the previous example, with $1 million in revenue and $600,000 in overheard. If you apply the 9 percent penalty or bonus to the revenue, that becomes $90,000. With $400,000 in profit, the same practice could find itself looking at a new net revenue range of $310,000 to $490,000, a whopping 22.5 percent difference in either direction.

Get on Board or Leave Money on the Table

MIPS is coming, and if your practice or group is in position to begin making the change, you should. But if you plan to hold out, you should at least run the numbers to see what resistance will do to your revenue. As Noyes pointed out, you can expect other carriers to begin trending in the same direction by the time MIPS matures.