Article Date: 11/1/2011

Practice Impact

Practice Impact

Research is stimulating new approaches in this critical area of practice. Find out what your colleagues are planning.

By Pravin U. Dugel, MD

Just as we could not have planned for the rapid proliferation of office visits and intravitreal injections during the past 5 years, we cannot precisely anticipate future changes that will challenge our practices with equal swiftness and certainty. However, we can be confident that those new challenges will surface — probably sooner, rather than later. Here are important factors to keep in mind.

KEY STUDIES

Globally evaluating the changes that are sweeping our profession is difficult. To gain insights at a microcosmic level, I participated in two studies, one that conducted an activitybased cost analysis at a large single-specialty, referral-based retinal practice, Retinal Consultants of Arizona, Phoenix, Arizona1 and another, led by Timothy Murray, MD, that conducted the same type of analysis at an academic retinal service (Bascom Palmer Eye Institute, University of Miami Miller School of Medicine) and a community-based retinal practice (Tornambe Eye Institute).2

In both studies, seven distinct revenue-generating activities for retinal physicians were considered, including nonlaser surgery, laser surgery, evaluation and management (OCT), non-OCT diagnostics, intravitreal injections and research. The study of the large subspecialty practice, Retinal Consultants of Arizona, evaluating data for the calendar years of 2005 to 2007, showed that the practice was able to accommodate increased patient volume, medical retina services and medical imaging brought on by the advent of anti-VEGF therapy. However, a seismic shift in operating costs unfolded. Although the practice achieved a 42% increase in practice collections, it also absorbed a net profit margin decline of 14%.

Vitrectomy can be therapeutic for patients with significant epiretinal proliferation and traction. Dr. Dugel performs the procedure (left). At right, Dr. Dugel is shown using a laser on a retinal tear in surgery.

A LOT OF EFFORT FOR LITTLE GAIN

The other study, which evaluated calendar years 2005 through 2008, revealed similar increases in utilization, revenue and — most significantly — costs that offset revenue gains. For example, in the academic setting, 68% of the revenue of one physician who primarily provided medical care was associated with injections and office visits. However, 66% of his costs were also associated with injections and office visits. In fact, the overall profit margin for injections performed by all retinal specialists in the academic setting was only 1% during this time of tremendous growth in anti-VEGF therapy.

The findings were even more eye-opening when we evaluated the community-based subspecialty practice, which increased injections by 236% and injection-based revenue by 304% during the 3-year study period. OCT imaging increased by 40% and revenue from OCT imaging increased by 79%. However, half of the practice's costs are associated with injections and office visits. Although the profit margin on injections was 26%, it was significant to note that 66% of practice expenses were earmarked for salaries and benefits, which are increased substantially by the larger infrastructure needed to provide a much greater volume of injections.

EXTRA VOLUME TOLERABLE?

These data tell us that higher volume doesn't translate to higher net revenue. In fact, increasing efficiency to accommodate increased patient demand expands our overhead to a level that's difficult to manage, especially as we head into the uncertain future. We have increased follow-up intervals from twice a year to once a month for many diseases, shifted from the use of laser/observation to the routine administration of intravitreal injections and moved more from fluorescein ngiography to OCT. We now need more space, more equipment, more administrative staff, specialized staff for injections and, in some cases, additional physicians.

Responding to ever-increasing volume, we're forced to perform work that doesn't pay as much. It's important to state very clearly at this point that economics DO NOT dictate our patient care, but I believe we must sustain a healthy business model to provide good patient care. As my friend, Dr. Paul Tornambe says, “to do good, you must do well.” We can't stop taking care of these patients, but the volume is cumulative, not just additive.

EFFECTS OF MEDICARE CUTS

With these factors in mind, consider the effects of the new Medicare reimbursement for an intravitreal injection, which has been reduced from $159 in 2010 to $107 in 2011, and for OCT imaging, which has essentially been halved to a range of $44.51 to $47.25 (under CPT Codes 92133/4 for optic nerve and retina, respectively).

The study focusing on the academic setting provides helpful insights. Pro forma modeling, based on activity between 2005 and 2008, used activity-based costing to determine the impact of 2011 reimbursement changes on clinical care provision, overhead and reimbursement.

The results? All retinal specialists, including those with a focus on medical care, surgery, and a combination of medical care and surgery, were expected to lose 4% in total revenue.

The projected effects of 2011 cuts on the small practice were not evaluated. However, detailed analysis isn't needed to appreciate the significance of cuts of 33% for intravitreal injections (for which the practice had earned a 304% increase in revenue during 2005-2007) and 50% for OCT imaging (for which the practice had earned an increase of 79% in revenue during 2005-2007).

SOURCES OF PRACTICE GROWTH

According to our analysis, the Centers for Medicare and Medicaid Services (CMS) approved 1.29 million intravitreal injections in 2009 — 33 times more than were approved in 2003. The 7.68 million approved OCT imaging procedures in 2009 represented a 350% increase over the number approved in 2003. As we saw with cataract surgery and other high-volume procedures, these areas of practice growth will be the targets of federal budgetary cuts in the years ahead.

Obviously, we must continue to provide care for all of our patients with neovascular AMD, retinal vein occlusion, and diabetic macular edema, using the most effective and latest therapies. Unfortunately, we will need to deal with this massive flow of patients by providing anti-VEGF therapy on a repeated basis, especially for wet AMD.

THE BUBBLE

Despite the aging of the patient population, our current treatment burden wasn't on the radar even a few years ago. Now we must be aware that we sit on a bubble as we grow our practices. Just as quickly as anti-VEGF therapy occupied a central focus in our offices, a new drug, or combination, is bound to replace it, reducing treatment burden.

The next significant change will occur with the anticipated FDA approval of aflibercept (Eylea, Regeneron). Formerly known as VEGF Trap-Eye, it offers increased therapeutic durability and the prospect of decreased treatment frequency. It may also be used as an off-label treatment for vein occlusion and diabetic macular edema.

As additional therapeutic options materialize, our practices will change drastically. Instead of patients visiting us every month, we'll likely have a treatment that requires visits twice a year. We may need to lay off significant numbers of staff, reducing costs by 25%.

AVOID A BLOATED INFRASTRUCTURE

With these factors in mind, be very careful not to overextend yourself. Once that bubble bursts, you don't want to be caught with a burdensome infrastructure.

My recommendation is to avoid irresponsible growth. Make sure that growth only occurs in a sustainable fashion. Maintain a careful balance between accommodating your cumulative patient load and having too much overhead. Young specialists who can find work easily now need to project ahead to assess what the contraction of retinal practice will have on future employment opportunities.

We all need to develop a plan B and be ready to implement it when technologies and reimbursements change. A major change in our practice patterns will happen. It's just a matter of when it will happen. ■

References

1. Dugel PU, Tong KB. Development of an activity-based costing model to evaluate physician office practice profitability. Ophthalmology. 2011;118(1):203-208.
2. Murray TG, Tornambe P, Dugel P, Tong KB. Evaluation of economic efficiencies in clinical retina practice: activity-based cost analysis and modeling to determine impacts of changes in patient management. Clin Ophthalmol. 2011;5:913-925.


Dr. Dugel is managing partner at Retinal Consultants of Arizona in Phoenix.

Retinal Physician, Issue: November 2011