Submitted by the CWMA and LIMC

You may have seen a petition circulating around Lopez that proposes putting a measure on the April 2018 ballot to form a public hospital district. If passed, Lopez property owners would begin paying taxes to provide support for our clinic.

Many people are asking why this will be needed. Unfortunately, the answer is complicated, so we have prepared several short articles on this topic that will be shared with you in “Islands Weekly” over the next few weeks. We are also planning a public forum later in January. In this article, we focus on Medicare, which pays for almost 50 percent of the care provided to Lopez Clinic patients.

Lopez Clinic is designated by Medicare as a rural health clinic. It is paid a special rate per visit that is higher than the standard rate because it is the sole local provider of medical services and because it has more comprehensive services than those provided by most family practice clinics. On top of that, the clinic’s partner, Island Hospital, also receives special consideration as a rural hospital with fewer than 50 beds.

Every year, Medicare reviews the costs of the clinic and the services that Island Hospital provides the clinic. The amount the clinic is paid is based on those combined costs. Because of these arrangements, Lopez Clinic enjoys higher than normal reimbursement from Medicare, allowing it to break even or have a small positive margin over the past decade.

As the clinic looks for new partners, it is obviously preferable that this reimbursement method be maintained. This is possible with some potential partners, but not with others. If the clinic does not align with a rural hospital, the reduction in payments could be up to $400,000 per year. This represents approximately 1/3 of its total operating revenue. It would be extremely challenging to cut costs by a third without a major reduction in services, which is why the taxing district is being discussed.

Unfortunately, it is even more complicated than that because Congress passed a new Medicare law in 2015 that changes the way that clinics are paid. The federal government wants to move away from paying clinicians based on how many services they provide, and pay them instead based upon the value they provide to the patient.

For example, they want to compensate clinicians for keeping diabetic patients out of the hospital, or keeping cardiac patients from having to be readmitted, or assuring that patients with chronic illness are taking their medications. Beginning in 2018, a portion of Medicare payments will be based on these kinds of strategies, and it will increase with each passing year.

In the short term, rural health clinics – such as Lopez – are not subject to these new rules. It is challenging for rural clinics to access resources like home care, rehabilitation and sophisticated medical data bases that are available in urban and suburban areas. Still, Medicare has signaled that rural health clinics must also move to this payment strategy within three years.

Private companies will provide free education and services to help rural health clinics adapt to the new system. So, even though Lopez Clinic may continue to have cost-based reimbursement in the short run, it needs to begin changing its infrastructure now to prepare for the new payment methods in 2020. Some of our potential partners are much farther along than others in understanding how rural clinics can adapt to these changes.

Finally, with the new federal administration and Congress, we don’t know whether the Medicare law enacted in 2015 will be altered. We do know that the proposed cabinet member charged with implementing Medicare is a physician who is unhappy with the recent changes. He has said he may ask that they be revised. This uncertainty makes it challenging to know how much time and money our clinic should invest in changing current practices. It is doubtful that any changes will result in higher reimbursements.

In negotiating with potential partners, the Catherine Washburn Medical Association and clinic clinicians emphasize the desirability of maintaining the current Medicare payment system as long as possible, while also initiating the adoption of new clinical coordination practices when possible. This helps us prepare for future changes and potentially enhances patient care. Nonetheless, new systems cost money and time, and our clinic will need funds to implement those systems when revenues may be lower than they have been in the past.