Flat-fee contracts have led to a degradation of acuity of urgent care services. The future success of urgent care depends upon its ability to demonstrate a higher acuity of service requiring a higher level of reimbursement.
Good afternoon! This is Alan Ayers and I am Just Checking In from the Southwest Urgent Care Conference here at the Westin Galleria in Houston, Texas. So today I am going to be speaking with you about reimbursement trends in urgent care. So urgent care – I would say our current iteration of urgent care – started around twelve to fourteen years ago, and originally was driven primarily by emergency medicine physicians who saw an opportunity to get out of the 365-day, 24-hour grind of the ED, start and own their own businesses, and in effect, these ED doctors could open urgent care centers in communities, provide a service that was needed. Consumers really loved the convenience of a neighborhood location, walk-in service, extended evening/weekend hours, and with prices clearly less than the ED. Well, these original urgent care centers contracted as fee-for-service, which meant that they could be paid for most of the services they provided, and in effect, they would cherry pick – or pick – pull patients from the community where they operated which were primarily the affluent suburbs of major cities.
Well, urgent care saw a wide range of patients. So these ED docs did procedures, they sewed up lacerations, they would set ortho-type injuries, but a lot of what was coming through urgent care was fairly low level – head and chest, sinusitis-type – visits.
Well, the insurance companies, starting around eight years ago, went to urgent care and said, “Tell you what – we are paying you, say, $300 for a procedure. We’re paying you $75 for a head and chest visit. Why don’t we just set a case rate or a flat fee? We’ll pay you between $125 and maybe $160 regardless of the visit type for all the services you do related to that patient.” So, in medical terminology, it was really a form of a bundle payment for urgent care that manifested through this flat fee or case rate.
Well, the urgent care physicians aren’t stupid, so they started to look at this reimbursement and it started to change the practice of urgent care medicine. So, if the waiting room was busy, and as a provider I see that that patient has a cut on their head that’s going to take forty minutes to sew up, the same amount of time I can knock out these four sinusitis visits, and it’s going to take the exact same amount of time for all the patients, where am I going to place my priorities? I’m going to treat these four patients, and then this guy is probably going to end up going to the emergency room.
Over time urgent care started looking at the cost of emergency medicine physicians and realized well, is an ED doc really necessary? We saw a migration from emergency medicine to a greater emphasis on family medicine, bringing in family practice docs into urgent care. And then we saw a shift from physicians to NP’s and PA’s. As we saw this occur, decisions were also being made; do we really need an x-ray tech on Sunday night? Or do we even need an x-ray? So, what we saw, due to case rate because the insurance company set a flat fee reimbursement, we saw a degradation in the acuity of urgent care. Well, this degradation in acuity leads to several issues for the urgent care industry, and the first goes to differentiation.
So where urgent care really initiated as a true alternative to the emergency room – because it could handle minor procedures that previously required a trip to the ER – then we started seeing this big emphasis on head and chest and very low acuity visits. Well that led to a crisis – I would consider – where urgent care’s not really differentiated from a retail clinic in Walgreen’s or even telemedicine – other channels that could treat these low acuity type cases. Now, as an example of how the payers drove this degradation of acuity; if you take the payer out of the equation, and look at Kaiser for instance. Kaiser is a fully integrated health system, which means they’re an insurance company, a physician group, and a hospital that is all combined under one umbrella. Well Kaiser is a closed network. They serve their own insured members. They sell their own insurance. In California, Kaiser historically has built 250-bed hospitals that have an emergency room. I call them the “Kaiser Compound.” But you get outside of California, Kaiser is not building hospitals. They’re building large multi-specialty facilities in which they contract with hospitals to provide in-patient services. Well, it’s very important to Kaiser to keep patients – keep their members – out of non-Kaiser facilities, in particularly non-Kaiser emergency rooms. So Kaiser runs a facility in California – it’s a call center – that whenever a Kaiser member hits a non-Kaiser emergency room out-of-network, Kaiser begins a process they call repatriation; but effectively it’s doctors and nurses staffed at this call center working to get the patient out of the out-of-network facility into Kaiser. Well, Kaiser’s solution to urgent care in California is primarily an ED FastTrack, but outside of California where they’re building these large multi-specialty facilities – these facilities are anchored by urgent care typically on the first floor, but it’s not just any urgent care. It’s a high acuity, 24-hour facility, has IV hydration, has cardiac observation capabilities; essentially just short of a licensed ED, but not licensed though. It’s considered urgent care for Kaiser members. So, the significance of this is if you take the payer out of the equation, as in a closed system like Kaiser, we see the acuity of urgent care go up, where you have the payer drive reimbursement and then the payer, when services are delivered according to that reimbursement, we see the acuity go down.
There’s certain challenges, as I mentioned, with the degradation in acuity for urgent care. So as an industry, we really need to demonstrate our value proposition to payers to seek higher reimbursement for a higher level of care that can be delivered through urgent care.
So, if you’re looking for insights on urgent care reimbursement, contracting, credentialing, billing, or any other issue related to your urgent care center, we at Urgent Care Consultants and Practice Velocity would be very happy to speak with you. You can contact us using the information on your screen. Once again, this is Alan Ayers Just Checking In.