“If you are paid by Medicare, aren’t you already employed?”


“If you are paid by Medicare, aren’t you already employed?”

“If you are paid by Medicare, aren’t you already employed?”
When I first heard someone suggest this, it struck me as odd. How can independent gastroenterologists be employed by Medicare? 
Well, let’s consider that question. I looked at Medicare contribution for six different types of GI practices in Q1 2019.
Practice A (group in east coast): 29%
Practice B (solo GI in east coast): 19%
Practice C (group in mid-west): 19%
Practice D (solo GI in northeast): 16%
Practice E (group in west coast): 16%
Practice F (solo GI in east coast): 27%
Yes, one could make that argument. Medicare is an employer of these practices at least 16-29% of the time. Because they are paying doctors and doctors are dependent on that payment.
Would this ’employer’ ever give you a raise?
To answer this question, I wanted to review Medicare ‘allowed amounts’ for colonoscopy. Because those procedures are still the bread-and-butter for GI practices.
During the last 10+ years, here’s how Medicare paid for colonoscopies (approximately).

As you can see, Medicare pays less than what they did 10 years ago!
Here are the ‘allowed amounts’ from 2009 and 2019.
Diagnostic colonoscopy: $369 (2009), $331 (2019). -10.3%
Colonoscopy with biopsy: $442.90 (2009), $424.90 (2019). -4.06%
Lesion removal colonoscopy: $499.52 (2009), $446.16 (2019). -10.6%
Let me just say what you already know. It’s unlikely that you will ever get a meaningful raise from CMS.
In fact, Medicare will keep paying you less
Why? The simple answer is they won’t have money to pay.
Read: Medicare will run out of money in 2026, three years earlier than expected, government report says (Chicago Tribune)
We are looking at a pie that can’t keep up with its consumers anymore.
Look at this graph from Kaiser Foundation. Medicare Advantage enrollment has nearly doubled in the past decade. 6.9 million in 1999. 20.4 million in 2018.
There’s no stopping this trajectory.
People are living longer. By 2050, 83.7 million Americans will be over 65 years (double that of 2012 numbers).
Read: Why Medicare Advantage Is Marching Toward 70% Penetration (L.E.K. consulting)
There’s no stopping this trajectory.
Private insurance companies tend to model their payment strategy around Medicare. They will also pay less – especially for standard procedures like colonoscopies.
Airbnb for gastroenterology?
Many disrupting trends are quite clearly on the horizon. Declining Medicare reimbursements for colonoscopy is surely one. DNA testing is another.
As a business person, it’s easy for me to say cut your dependence on Medicare. But I know that it’s not an effortless path to navigate.
There is money in GI but not from traditional sources. Let me give you 10 IDEAS to consider.
1) Reduce your dependence on colonoscopy reimbursements by adding relevant procedures and ancillaries (e.g. is obesity a subspecialty of GI? Some of the largest GI groups make up to 50% of their money from ancillaries)
2) Diversify your patient volume and sources (e.g. a GI practice hired an Asian doctor to attract a new patient pool. Do you repeatedly see the same demographic?)
3) Outsource and reduce costs of basic operations (e.g. billing, accounting. What’s it costing you to hold onto these?)
4) Start clinical trials for upcoming biologics
5) Develop gastroenterology niches (e.g. infusion centers for Crohn’s. What’s different about your GI practice?)
6) Re-energize your hospital partnerships, establish new ones (How can you partner to help the hospitals succeed? Collaboration and negotiation vs competition)
7) Analyze your top and long-tail referral sources. Nurture new ones
8) Standardize and automate your workflow using technology (e.g. We use a variety of algorithms to bill certain claims, check status, check eligibility etc.)
9) Get asset-light to stay current with changes. Stop owning things (e.g. don’t buy servers). Start renting/subscribing (get on the cloud)
10) Build your brand. Make patient engagement as important an activity as seeing them. (Do your established patients hear from you other than the time of recalls?)
When Hilton needs more business, they go about building whole new properties. When Airbnb needs more business, they simply borrow your assets using a system that they’ve already built. At $31 billion, they are valued more than Hilton or American Airlines.
And here we are still talking about declining payments from Medicare. Even though, the same Medicare population (senior citizens) is Airbnb’s fastest growing demographic.
More on all this soon. But for now, it’s time to shape our mindset towards disruption. It’s time to think differently about gastroenterology.

_

By Praveen Suthrum, President & Co-Founder, NextServices.

Our new book Private Equity in Gastroenterology – Navigating the Next Wave is still available for download. Here was the best compliment we got to date: “I need my entire board to read this!”
downloadnow

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