MedPac Report: Physician Practice Expenses Far Exceed Medicare Rates

A report by the Medicare Payment Advisory Commission indicates that the cost of operating a practice over the past decade increased at a rate that significantly exceeds Medicare reimbursement raises during the same period, according to a FiercePracticeManagement report.

The cost of operating a practice is measured by the Medicare Economic Index, which includes a wide range of expenses such as physician and staff compensation, rent, equipment and technology, according to a Medscape report. MedPac reported that the MEI indicated an increase in operating costs of 27 percent from 2002-2012. During the same period, Medicare payment rate updates increased reimbursement (Medicare fee-for-service rates) by just 9 percent.

Physicians are facing additional financial challenges. Over that same 10-year period, overall inflation increased 33 percent and Medicare spending for physician services per beneficiary increased more than 70 percent.

One way practices can reduce their expenses while increasing reimbursement dollars captured is to outsource their medical billing. Outsourcing medical billing will allow a practice to reduce its staff — one of the highest expenses for a practice — or at least assign staff members who were performing medical billing to other responsibilities. In addition, an experienced medical billing company will help increase a practice's revenue by boosting collection rates while reducing denials and delays in payment.

The MedPac findings appear in its 2013 data book titled "Health Care Spending and the Medicare Program" (pdf).


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