09.24.14

Health Care Group Newsletter – Fall 2014
D’Ann R. Meisenheimer, Laurence Sophian

How Health Insurance Marketplaces May Impact Your Practice
D’Ann Meisenheimer

Health Insurance Marketplaces created under the Affordable Care Act provide virtual marketplaces where consumers can shop for, compare and buy health plan coverage. They also place a handful of modest – yet significant – new responsibilities on physician practices. This blog explains that it is important to determine which payers are offering products, what new products a Marketplace may offer and its impact on one’s revenue cycle at specific points. A Sidebar cautions that Marketplaces can operate differently from one state to another.

Health Insurance Marketplaces created under the Affordable Care Act provide virtual marketplaces where consumers can shop for, compare and buy health plan coverage. They also place a handful of modest – yet significant – new responsibilities on physician practices.

Examining the Changes
The question that many physicians have is how these new plans differ from existing commercial insurance plans and how they may impact practice revenues. Depending on the plan, there may not be much difference. Most plans offered through the Marketplaces provide basic services such as:

  • Ambulatory care and emergency services;
  • Maternity and newborn care;
  • Prescription drugs;
  • Rehabilitation services and mental health;
  • Hospitalization;
  • Pediatric care and more.

Moreover, reimbursement levels vary among payers and plans just as they do now.

Determining Participation in State Marketplaces
The first step to take now is determining the participation status of your practice in your state’s Marketplace. Access the Marketplace’s website or healthcare.gov to learn which payers are offering products through the Marketplace. Does your practice participate with any of those payers? If so, decide whether you want to continue participating.

Another issue concerns specific products the Marketplace offers. The payers may have created new products specifically for the Marketplace. Ask them whether they are narrowing their provider networks for those products. If they are, find out if your practice is included. Also ask what other types of providers are also part of the network. If you are included, no immediate changes are necessary.

Your practice will receive this information from payers with Marketplace products through contract amendments or notices. You will need to send a written objection within 15 to 45 days if you do not wish to participate in a particular plan. Failure to object is an implied acceptance.

Understanding the Impact on Your Revenue Cycle
The next step is to determine the impact of the Marketplace on your revenue cycle at these points:

  • Registration — when patient demographic and insurance information is obtained;
  • Eligibility and benefit verification — set time prior to a visit;
  • Prior authorization — needed for required services in advance;
  • Time of service collections — copayments and outstanding balances from patients;
  • Charge entry — affects promptness of bill submission;
  • Electronic claim submittal — affects electronic data interchange denial and rejection rates;
  • Account follow-up — measured by number of days in accounts receivable (A/R);
  • Payment posting — when payments received are posted and balances are computed;
  • Denial management — overall denial rate stemming from timely filing limits;
  • Payment variances — review at regular intervals (for example, 30 days);
  • Patient collections — permit patient accounts to be reviewed with physicians; and
  • Management reporting — how promptly reports are provided to physicians.

Once you have basic information about payers participating in the Marketplaces, inquire further about the exact reimbursement rates for the codes billed by the practice, the effective date of the payers’ Marketplace plans, size of member enrollment anticipated and details of the plan features. Do not participate in Marketplace plans by default. Even if they look appealing, make only informed choices about participating.

Know the Risks and Rewards
The addition of millions of new insured patients through the Marketplaces has the potential to dramatically increase the number of patients seeking your practice. But it may take months or even years before the impact is known. For further information, contact D’Ann Meisenheimer at dmeisenheimer@orba.com or call her at 312.670.7444.


What’s Your Medical Practice Worth?
Larry Sophian, CPA

A physician thinking about selling his or her practice must begin with a fundamental question: What is the practice worth? This blog discusses four factors that valuators will use to estimate the value of a medical practice. Physicians often think about selling their practices. Perhaps a local hospital wants to draw some doctors into an ACO. Or the doctor is weary of day-to-day business chores and wants to sell out to another group of physicians. The obvious question is: What is my practice worth?

Four Factors
Generally, four factors will be used to estimate the value of a medical practice:

  1. Tangible Personal Property For most practices, the value of the furniture, equipment and other assets — minus the amount owed for loans and payroll taxes — is small and may amount to less than $25,000 per doctor. Supplies inventory may have significant value and should be valued at the historic cost of each item. Prepaid expenses and security deposits are considered assets, and prepaid malpractice insurance also may be significant.
  2. Patient A/R This is one of the largest assets of a practice, but it is often not fully collectible from either insurers or patients. To determine A/R collectible from insurers, multiply the number of services that have not been paid for patients covered by an insurance plan by the amount to be reimbursed (not necessarily the amount charged).
  3. Office Building If the doctors own their office building, it was likely appraised at the time of acquisition. If the appraisal is more than two years old, get a new one, as the value may have changed. Any mortgage balance should be subtracted from the building’s fair market value to arrive at the physician’s equity interest.
  4. Intangible Assets Practices have many intangible assets, including patient medical records, an established workforce and commercial potential. They are usually referred to as “goodwill,” which is the most subjective element of a valuation. Some factors that influence goodwill include the level of competition, patient types, third-party payer mix and fee schedules, and practice location. Goodwill may be zero or have very little value depending on whom it is being sold to.

The purchase or sale of a practice will be one of the largest and most complex transactions a doctor will ever undertake. Understanding the factors that go into pricing a practice can help ease the process, and ensure that both buyers and sellers feel they got a fair deal.

Appraisal and Assistance
Valuing a medical practice should be conducted only by a qualified expert. A sale to a hospital will be subject to laws such as Stark, whereas a sale to another physician group may not be subject to the same laws. Engage a professional that has dealt with both types of sales to guide you through the maze of rules and laws.

For more information on medical practice valuation, contact Larry Sophian at lsophian@orba.com or call him at 312.670.7444.


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