Maintaining a financial equilibrium will be the goal for most physicians who face decreased Medicare reimbursements, increased compliance mandates and new consumer directions. If Congress does not intervene before year-end, cuts to 2008 Medicare payments are slated to average nearly 10 percent reductions and include almost all physician specialty groups. There are few winners.

Another 5 percent reduction is slated for 2009 and if physician payment reductions proceed as planned, by 2016 the total reduction will be 40 percent, according to a 2007 Medicare trustees report. If there is no relief from the anticipated cuts in the Medicare payments next year, as many as 60 percent of physicians responding to a recent American Medical Association poll say they are considering reducing their participation in Medicare. Some have already done so.

But the implications exceed simply declining to include less-profitable Medicare patients on patient rolls. Consultant and author Elizabeth Woodcock of Atlanta-based Woodcock & Associates foresees an overall decline in profitability for physician groups. More than half of non-governmental payers follow Medicare resource-based relative values, she told a recent webinar audience, and as expenses continue to rise, the best-case scenario is that reimbursements will remain stable.

The trend to consumer-directed healthcare adds layers of complexity beginning with the cost for which the patient is responsible. And since 60 percent of collections are never recovered after the patient leaves the office, real-time eligibility systems become absolutely essential. Yet only one-third of the healthcare providers surveyed for “Trends in Healthcare Financial Systems” say their organization can identify some patient and insurance coverage in real-time. Only “some.”

In addition, alternative service providers are beginning to erode traditional physician office-based services as cost-conscious consumers select less expensive — and often more convenient — services. Telehealth services and retail-based clinics are the big winners here. (Nationwide, more than one retail-based clinic opens every day.)

A bright spot is pay-for-performance (P4P) programs, which offer extra payments for quality, efficiency and clinical IT adoption. Since the Centers for Medicare and Medicaid Services' introduction of Medicare's Physician Quality Reporting Initiative (PQRI), P4P achieved national awareness. Look for expansion. “Commercial payers across the country are moving aggressively toward P4P,” Woodcock says, putting their own tweaks on what they will pay for and what they won't. (P4P) will be a part of 2008 and likely in future years.”

Although the current impact of P4P on physicians' finances is inconclusive, the future looks promising. But P4P has some major challenges, one of which is compliance. According to “Trends in Healthcare Financial Systems,” healthcare providers rate compliance with P4P mandates second only to privacy mandates. The challenges are likely to become even more complex as Woodcock predicts the future will include mandatory participation in P4P programs.

Information systems and services are essential tools, whether for managing the revenue cycle and optimizing reimbursements or meeting consumer demands for higher efficiency or payer demands for quality mandates including P4P.

Access the free, archived webinar, “Get Paid in '08,” led by Elizabeth Woodcock at http://www.vendomegrp.com/events_archive.html. More information about “Trends in Healthcare Financial Systems” is available from Vendome Group, LLC at http://www.vendomegrp.com/research or by calling (212) 812-8439.