Unnatural Selection

Back Article Dec 1, 2011 By Christine Calvin

Steady shifts in patient demographics and insurance reimbursement rates are forcing some practitioners to re-evaluate their business models and the way in which they deliver care.

Burger Rehabilitation Systems Inc., a family-owned therapy provider with a dozen locations in the Capital Region, is one of them. Burger, which launched in 1978, has for decades provided numerous value-added services in addition to its bread-and-butter physical, occupational and speech therapy services. These secondary resources include pediatric services and one of the only training programs in the state for registered nurses. Nearly all the programs break even or lose money.

“We see it as a give-back to the community, and we’ve been able to justify the loss, but we’re getting to the point where losses in other areas are squeezing them out,” says Shawn Burger, vice president of operations.

Since 2000, Burger Rehabilitation’s market share has grown 30 percent by patient volume. “But it’s a dichotomy,” Burger says. Patients are more educated, demand certain paths of care and expect more results for their time and money. At the same time, insurance companies have continued to decrease reimbursement rates.

“Ten years ago the average course of care was about 12 visits per injury. “Now we are at about seven” because insurance providers have placed a cap on the number of allowable visits, Burger says. “Our challenge is finding more value in seven visits.”

Since 2000, the Medicare reimbursement rate for rehabilitation services has increased just 1 percent. Meanwhile, Burger says his operating costs have increased an average of 4 percent annually.

“Efficiency and accountable care will be the main focus of health care in the next two to three years,” he says. “We’re just going to have less one-on-one time because we’re going to have to see more patients. We are looking at doing away with these other service lines. … They’re not the core business.”

Burger’s Pediatric Therapy Center could be eliminated and, if so, would significantly affect the children it serves. The center receives more than 5,000 patient visits a year for physical, occupational and speech therapy. Such services for children have historically been paid for by the schools, but as education budgets have dwindled, the burden has been pushed to private insurance, “which is an industry very good at finding ways not to pay for things,” Burger says.

As a result, the pediatric center hasn’t turned a profit in roughly a decade and has been losing money for the past four years. Once federal health care reform kicks in, Burger anticipates an onslaught of new adult patients and an end to the time and money it takes to continue the children’s program.

Post-pregnancy therapy and aquatic therapy programs — with their thousands of patients — are also being considered for elimination.

All told, these value-added programs consume about 4 percent of Burger Rehab’s operating budget, a significant number considering the whole company functions on about a 4 percent margin.

In the face of decreasing insurance reimbursements and service cuts, Burger Rehabilitation is looking to fortify itself in the marketplace. As the largest provider of outpatient therapy in the region, Burger is well positioned for the changing market relationships that lie ahead for its industry. The same cannot be said for many smaller providers.

“We are undoubtedly going to have less choice in the marketplace; hospitals will control the pathway of care,” Burger says. “The providers that are going to be here over the next five or 10 years are going to be the ones with added value. You have to do more with less, so let’s not make it fluff.”

Enter the accountable care organization, or ACO. A provision of the Affordable Care Act of 2010, ACOs are networks of doctors and hospitals sharing responsibility for providing and billing patient care. They create massive networks by creating conglomerates of health care providers — primary care, specialists, hospitals, home health care and others — that currently operate piecemeal.

ACOs would make providers jointly accountable for the health of their patients, encouraging cooperation as a way to save money by avoiding duplicative tests and procedures. From the insurance side, ACOs streamline billing so the insurance company gets one network bill instead of numerous individual bills from the different service providers.

If successful, the U.S. Department of Health and Human Services estimates ACOs could save Medicare up to $960 million in the first three years. For reference, Medicare payments are expected to total $551 billion this year.

ACOs won’t launch until January, but insurance companies have for years pushed providers in that direction. It’s an effort that plays out in favor of large providers such as Burger, which has lots of clients, broad geographic reach and referral relationships with big players in the care arena.

But what about the little guys?

Mike Cicero and his business partner opened Cisero and Hendricks Physical Therapy in Land Park about 10 years ago. By all measures, the company was successful, boasting full schedules, strong referrals and adequate insurance reimbursement rates. Four years into the practice, at the request of a local physicians group, Cisero and Hendricks expanded to West Sacramento.

“At first things were great because we were getting their referrals, but two years into it we saw a paradigm shift,” Cicero says. “We started having insurance companies contacting us to say they couldn’t contract with us anymore because we were too small. They either wanted us to expand, or they didn’t want to … be a provider of the network.”

Cicero says the writing was on the wall. The company didn’t have the millions of dollars it would take to expand to an additional half dozen locations, so Cicero approached Burger Rehabilitation and offered his company for acquisition.

Cicero, now director of acute and outpatient operations at Burger Rehab, says the company is approached regularly by other small providers in situations similar to his.

“I don’t know anyone in my industry that can look (10 years) ahead anymore,” Burger says. “We can only look to five or three. The word we keep using is ‘flexible.’ We are part of a wave we cannot control, so we had better figure out how to ride it.”

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