By: Tim Coan, Founder, Chief Executive Officer, ALN Medical Management

November 11, 2015 9:06 am EST

Thrifting is on the rise and is downright trendy. I am Renaissance man and know these things.

Maybe it is from consumers pushing back against the bland ‘me, too’ stylistic copying that produces look alike products that have no soul. Thrifters, especially if they are young and hip, wear their unique consignment fashion finds with pride. In case there is any doubt, the preceding was not an autobiographical statement. Nothing young, hip or fashionable from your humble author. The Renaissance was a long time ago, so I am old.

Some of the craze is economic. Young Millennials looking to stretch their barista pay, for which they went to four years of private college to become qualified, find thrifting easy on the wallet.

But for the true thrifter, the ultimate joy comes in finding some highly valuable hidden treasure buried in a pile somewhere. They are looking to pay $5 for a Picasso at a garage sale.

Well, lucky thrifters we all were last week. There at the 2016 Budget Bizarre, we found a nugget in the pile of legislative cra—stuff.

There in Section 603 was a provision that said, ‘From now on, new hospital outpatient departments not located on the hospital campus, or within 250 yards of it, will no longer be paid a site of service differential. Instead, they will be paid from the standard Medicare Physician or ASC fee schedule.’

Like a lot of thrifting stuff, you might not immediately recognize the value of something when you first pick it up, so let’s get this into better light for a closer look.

Going forward, when a hospital system buys a physician practice, they won’t be able to bill for the services of those employed physicians at the higher ‘hospital outpatient department’ rate, but instead will be paid at the same rate as independent practices.

This is ‘find a Picasso’ huge.

Often, the degree to which a health policy makes economic sense is inversely proportional to the level of fuming it elicits from the AHA. Based on this cut from their press release, Section 603 is the type of economic brilliance that would make Adam Smith smile:

“This untested idea may endanger patient access to care, especially among patients who are sicker, the poor, minorities and seniors who often receive care in hospital outpatient departments. Congress and the administration should not balance the budget on the backs of patients.”

Oh, cry me a river, build a bridge and get over it.

The American Hospital Association (AHA) is just not accustomed to losing and they lost big here. Finally, the bully got popped in the mouth.

We’ve long argued that the ‘site of service differential’ gives health systems a misplaced economic incentive to acquire practices which is not in the best interest of society. And we’ve pointed out that momentum has been gathering in Washington to stop this silliness.

This is a first step. It is limited as practices already acquired and employed get grandfathered and will continue to be able to bill at the artificially higher price. But it is a clear proclamation that this needs to go.

Without this pricing distortion, the incentive for health systems to acquire practices declines. This also means that smaller independent practices looking for a life raft may be more open to discuss joining your group as their offer from the hospital likely just got worse, if it did not evaporate entirely.

Continue to fight the good fight. Truth wins in the end.

The views and opinions expressed herein are those of the author(s). Core Compass’s Terms Of Use applies.

About the author

Tim Coan is one of the founders of ALN Medical Management, a company that provides outsourced revenue cycle management and information technology services to physicians. He has served as Chief Executive Officer since inception in 2000.  Tim can be contacted through his website form or by phone at 866-611-5132.

independent physicianssite of service differential
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