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The “ABCDs” Of Medicare And The Impact On Our Practices

When I first started my practice over 25 years ago, I only needed to understand that Medicare patients either had Part A and or Part B insurance. Now the alphabet has grown significantly when it comes to Medicare coverage. I have added new staff members and a new provider in my practice in the past month. While training them, I realized that both those new in practice and seasoned clinicians might benefit from a review of Medicare’s ever evolving structure. 

I always thought of Medicare Part A as hospital insurance. Simply put, it was insurance coverage that paid when a patient was admitted to the hospital. In fact, it covers care in a variety of settings. Inpatient hospital care, short-term acute care, long-term acute care, critical access hospitals, skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs), hospice, and home health (HH) services all fall under the Medicare Part A umbrella. 

From the hospital’s perspective, Medicare Part A provides reimbursement using the Prospective Payment System (PPS). This means the institution is reimbursed based on a predetermined fixed rate for a specified unit of service, such as a hospital stay or episode of care. The rate of reimbursement is determined by the diagnostic-related grouping (DRG). Medicare Part A uses DRGs to categorize patients and bases reimbursement on the applied diagnoses and procedures within that patient category.

Medicare will adjust the payment rate by factoring in clinical complexity and other factors, such as cost of living based on locality, case mix, and wage index. As a result, hospitals look at factors that will maximize their reimbursement. They do this specifically by focusing on key metrics such as infection, readmission and mortality rates, cost per case, and, of course, quality outcomes. 

Currently, most providers are typically paid for inpatient carethrough a fee-for-service structure. When we see patients in the hospital, we bill each service individually. As the Centers for Medicare and Medicaid Services (CMS) gradually shifts away from traditional fee-for-service payments and toward payments based on quality and cost performance, we should all examine how we participate in cost containment and quality initiatives. By doing so, we can remain competitive and profitable as individual providers, and as providers within the hospital system. 

What Providers Need To Know About Medicare Part B

Medicare Part B is most notably known as Medicare outpatient insurance. It covers a range of outpatient services furnished at a multitude of settings including doctors’ offices, ambulatory surgical centers, outpatient dialysis facilities and clinical laboratories. Medicare Part B may also apply when a traditionally inpatient facility or organization provides outpatient services. Medicare Part B enrollees must pay a monthly premium and are subject to an annual deductible and a coinsurance rate (typically around 20 percent).

Medicare reimburses based on an annual fee schedule, which is updated each year. The passage of the Medicare Access and CHIP Reauthorization Act (MACRA) changed the previous formula for calculating the fee payment rate. Traditionally providers were reimbursed by Medicare on a fee-for-service (FFS) basis. Now most but not all Part B providers are subject to new reporting requirements through the Quality Payment Program (QPP). The goal of this program is to promote and incentivize quality and cost-efficiency in care. 

As CMS moves toward a value-based care payment model and places increased focus on costs of delivery of care, we providers must in turn demonstrate positive clinical outcomes and scrutinize the cost and effectiveness of items covered under Part B. These “items” include durable medical equipment, pharmaceuticals and outpatient supplies.

Pertinent Insights On Medicare Part C And Medicare Part D 

Medicare Part C, better termed Medicare Advantage, is an insurance plan funded by CMS but administered by a private payer (United Healthcare for example). Medicare Advantage plans cover all traditional Medicare benefits (Parts A and B) and many include prescription drug benefits (Part D) as well. Sometimes, these plans cover services not traditionally covered by Medicare. In my area, some Medicare Advantage plans cover “Routine Foot Care” for non-at-risk patients up to four to six services per year regardless of diagnosis. 

The Medicare Advantage administrator organizations receive a capitated payment from CMS and are then responsible for managing the services and covering any costs exceeding the target amount. Therefore, Medicare Advantage sponsoring commercial insurers are looking to negotiate risk-based contracts with providers to incentivize cost containment.

Medicare Advantage uses CMS’s Star Ratings program, a five-star scale, to determine the eligibility of health plan organizationsfor bonus payments. These five categories of this scare are: outcomes, intermediate outcomes, patient experience, access, and process. In turn, Medicare Advantage evaluates providers on whether they were able to keep enrollees healthy through preventive services such as yearly comprehensive diabetic foot screening for those with diabetes. These preventive services are usually managed by the primary care provider but Medicare Advantage also monitors specialists for their respective roles in meeting these guidelines.

Medicare Part D, also known as the Medicare prescription drug benefit, is voluntary to the beneficiary. CMS then subsidizes the costs of outpatient prescription drugs and prescription drug insurance premiums for Medicare patients. There are two types of Part D plans: a Prescription Drug Plan (PDP) and a Medicare Advantage Prescription Drug Plan (MA-PD). The Prescription Drug Plan is a stand-alone program that enrollees can add to their traditional Medicare coverage.The Medicare Advantage Prescription Drug Plan also includes coverage for prescription drugs. Most but not all Medicare Advantage plans include the coverage for prescription drugs.

How Does The CMS Five-Star System Impact Health Plans And Providers?

Remember the CMS Five-Star Quality Rating System? This scores Medicare Advantage organizations and ties a plan’s ratings with quality bonus payments.   CMS publishes the Five-Star Quality Rating scores (five equals excellent and one equals poor) so Medicare patients can compare health plans before enrolling. That is why we see so many plans advertise for enrollees. As more sign up, the plans get more capitated dollars and there is more potential for bonus payments. Some health plans have begun rewarding top-performing physicians and pharmacists through Pay for Performance (P4P) models. As specialty drug costs grow exponentially, we may need to modify the medications we prescribe. For example, if we favor generic medications, this could cut patients’ out-of-pocket expenditures and would be favorable as we are monitored and rated on outcomes and costs associated with delivery of care. 

I hope this review was helpful to see how each program offered by CMS can impact our practices. With a more comprehensive understanding of this ever growing system, we can best position ourselves for success both clinically and financially. 

Author’s note: On August 20, 2019, the American Podiatric Medical Assocoation (APMA) will host an installment of its MACRA Made Easy Webinar Series "Proposed Changes for MIPS Year 4 (2020 Performance Year)." This content is available to APMA members only. For more information,

Dr. Aung is the President of Aung Foot Health Clinics, in Tucson Ariz. She is Chief of the Division of Podiatry within the Department of Surgery at Carondelet St. Joseph’s Hospital in Tucson, Ariz. Dr. Aung is a member of the APMA Coding Committee, a Certified Wound Specialist and a professional coder/auditor.


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