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MAKING THE MEDICARE PARTICIPATION DECISION

DON SELF & ASSOCIATES

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Much of this decision depends on the patient mix of your practice, what percentage of your practice is hospitalized or nursing facility patients (where you would probably accept assignment anyway), your collection percentage in your practice on patient responsiblity balances and marketing:

PATIENT MIX

If the majority of your patients are Medicare, then you have to look closely at the economic conditions of the majority of your Medicare patients. If your patients are most affluent, and you do not have a high incidence or percentage of Medicare/Medicaid crossover patients, you may elect to NOT enroll as participating. A Non-participating physician may pick and choose which claims they wish to accept assignment on. Of course, when you choose to not accept assignment, you are limited by law to charging no more than 115% of the Medicare Non-participating approved amount (which is 5% less than the Medicare Participating Approved Amount) on Medicare claims, which is referred to as the Limiting Charge.
On assigned claims, you are not restricted to a Limiting Charge, since your income will be determined by the Non-Participating Approved Amount.
Medicare, HCFA and the Health & Human Services administration have rewarded physicians for enrolling as participating, by increasing the Medicare approved amount for participating physicians 5% over that of non-participating physicians. So, in effect, instead of getting 15% more income as a non-participating physician, the maximum (based on 100% collections in your practice) difference can only be about 8% to 10%. In actual reality though, most practices will make more money as a participating practice than they would make as non-participating. After reading over the following subsections, you may see why that is so.

OUT OF OFFICE PATIENT PERCENTAGE
This area is important in your decision because the services rendered out of your office are usually assigned. The reason for the assignment is because of the increased likelihood of getting paid. Assuming you have an office patient that has been notified in advance that payment is expected at the time of service, you can generally collect from that patient by asking for cash, check, credit card, post-dated check, etc... You do not have this option on patients in the hospital or nursing home, unless you wish to rummage through their nightstand for their checkbook. Consequently, if you do not accept assignment on these claims, the check will go from Medicare to the patient and you are taking a big chance on the patient paying you with THAT money. Keep in mind that the patient is getting bills after a hospital stay from you, the hospital, the lab, the radiologist, the anesthesiologist (if applicable), etc..., as well as prescriptions and other supplies they need at home. My belief is that it is better to get the 80% of the approved amount directly from Medicare than taking a chance on not getting anything at all from the patient. This is one of those places where the old adage "A bird in the hand is worth two in the bush" applies.

YOUR COLLECTION PERCENTAGE

Your success at collections is indicated by your collection percentage. Most offices are doing extremely well at collections if they can keep this ADJUSTED percentage above 87%. Now, there are two ways of looking at your collection percentage: ADJUSTED and UN-ADJUSTED. Adjusted collection percentage means that you have already taken out the amounts you never expected to collect, before calculating your collection percentage. As an example, if you charge $100 for an office visit, but you know that Medicare only allows $35.00, then you have $65 that you never expected to collect. Consequently, at the end of the month, you should reduce the "Excess Charge" totals from the total production (charges) prior to calculating your collection percentage. Don't misunderstand, because I am a FIRM believer that most participating medical offices should charge their Medicare and Medicaid patients the same amount as they charge the private or commerical patients, which is explained in much further detail in the article about SETTING YOUR FEES. Regardless, you should deduct the Excess Charge totals from the production prior to calculating the collection percentage if you want a true indication of your collections.

The UNADJUSTED collection percentage is simply where you take your total collections for the month and divide this amount by your total charges (production), which gives you a FALSE figure. This is a unethical tactic successfully used by many collection agencies, billing services and consultants around the nation to sell you on their service by reflecting a lower collection percentage than you actually have. As an example:

You have charges this month totalling $40,000 You have collected $30,000 this month You have Excess Charges of $6,000 An Adjusted collection ratio would be: 88% An Un-Adjusted collection ratio would be: 75%

By using this tactic an unscrupulous agency can, many times, convince a physician they have increased the doctors collection percentages, making themselves look invaluable. Be careful of this ploy.
So - taking into effect the ADJUSTED collection percentage, what is realistic? Let's assume that your office is better than most and you have a 90% adjusted collection percentage. You charge for an office visit, and let's say that visit has a Par Medicare approved of $35.00, a non-par approved of $33.25 and a Limiting Charge of $38.24. If you have a collection percentage of 90%, your average NON-ASSIGNED income on this service will be 34.42. If you accept assignment on this claim, Medicare will send you 80% of the non-par approved, or $26.60. You will then bill the patient for the other 20% or $6.65 and (based on your collection percentage) you will get $5.99, MEANING that your total income will be $32.59 by accepting assignment as a NON-PAR physician. Compare this to your income as a PAR physician: Medicare pays you 80% of the par approved, or $28.00. Based on your 90% percentage, you bill the patient for the other $7.00 and get $6.30, giving you a total income as PARTICIPATING on this claim of $34.30.

NOT-ACCEPTING ASSIGNMENT: INCOME = $34.42
ACCEPT ASSIGNMENT - NON-PAR: INCOME = $32.59 PARTICIPATING PHYSICIAN: INCOME = $34.30

Based on a 90% collection ratio, which is a good collection average, you would make only 12 cents more on the claim by not participating and not accepting assignment on the claim.
Something else to think about though, is your percentage of Medicare and Medicaid patient mix. On those, usually (depending on your state), Medicaid pays the full co-pay amount, which increases your collection ratio on those claims to 100% instead of 90%. An important fact is that Medicaid (in most states) only pays if the physician accepts assignment on the claim, so you are now back to accepting assignment again. In some states (Texas as an example), your Medicaid approved amount is also 5% higher if you participate with Medicare, and that needs to be weighed in your decision also!

GENERALLY, YOU WILL MAKE MORE MONEY BY PARTICIPATING, UNLESS YOUR COLLECTION RATIO IN YOUR OFFICE CONSISTENTLY STAYS ABOVE 94%

MARKETING ASPECTS OF PARTICIPATING

The government publishes a book at the social security office of physicians participating with Medicare, to the beneficiaries, upon request. Also, most states have adopted a statement stating that the beneficiary's out-of-pocket expense is reduced by they are being seen by a PARTICIPATING physician, which constantly prompts them to find a Par doctor. On top of that, Medicare is required by law to forward secondary Medigap claims to the Medigap carriers for PAR physicians, whereby they are not required to do so for NON-PAR physicians.

SUMMARY

In 1992, we advised only 34% of our clients to enroll as participating. In 1993, that figure jumped to 46%. In 1994, we recommended participation to 77% of our retainer clients and since 1995, we have suggested that 98% of our clients enroll as participating. The reason is that every office needs to be evaluated individually and in a very few cases, did we suggest they remain non-participating. These were offices consistently hitting over 96% collection ratios and very little or no hospital, nursing home or Medicaid patients.