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Adding a physician extender

By Susan F. Dubow, Esq.

As the local health care market continues to consolidate, health systems and medical offices alike are actively reengineering their practices to meet the demands of managed care. In response to the dramatic changes in the delivery of health care, both small practices and large networks are searching for cost-effective options to simultaneously maintain or increase profitability, afford a reasonable lifestyle for physicians and maintain the quality of care they deliver to their patients. Recent professional literature and financial data suggest that one cost-effective option to address these goals may be the addition of a “physician extender” to the practice’s patient care management team.

The terms “physician extender” (PE) and “mid-level provider” are interchangeable catchall phrases used to refer most often to physician’s assistants (PAs) and nurse practitioners, as well as to nurse-midwives and other allied health professionals. PEs have been involved in the delivery of health care for years. Until recently, physician practices generally have found few solid economic reasons to hire PEs. However, concern over the shortage of primary care physicians in underserved areas and the emphasis on cost control in managed care has focused and intensified industry, academic and third party payors’ attention to the roles of PEs in both private medical practices and managed care settings.

Economic Rationales

A review of the developing literature and statistics in this area offers sound economic rationales for incorporating PEs into many medical practices.

PEs can be cost-effective in both private practice and managed care settings. These professionals can be hired at salary ranges of one-third to one-half of starting physicians with lower malpractice insurance premiums and other benefits while generating substantial revenue for the practice. For example, the 1996 Medical Group Management Association (MGMA) Physician Compensation and Production Survey indicates that the mean PA’s compensation (excluding reimbursed expenses and fringe benefits) in a primary care setting (excluding obstetrics) is currently $56,383 compared to $137,754 for the average family practice physician (excluding obstetrics). Similarly, that same PA produces income of approximately $179,721 versus $321,683 for the family practice physician. Overall, these practices paid out 45 cents for each dollar generated by the physician but only paid out 34 cents per dollar generated by the PA (Compensation-to-Production Ratio). The MGMA statistics also indicate that as the percent of at risk managed care revenue increases, the compensation-to-production ratio is erratic for the same family practice physicians and actually increases at the 51 percent at-risk penetration level, but the compensation-to-production ratio decreases at the high managed care concentration level for the same PA.

PEs can also actually increase physician productivity in some instances. A recent AMA Center for Health Policy Research study reported that solo physicians who employ non-physician providers see more patients per hour, per week and per year and report higher net incomes than those who do not.

Patients are generally pleased with the quality of care delivered by PEs. For example, in January 1996, MGMA published the results of an information exchange survey regarding PAs which showed that 429 out of 663 practices surveyed employed PAs and that a higher percentage were satisfied with their performance. Two hundred of the 222 practices that responded to the question as to whether or not patients were satisfied stated that their patients were satisfied by the quality of care provided by a PA.

Some PEs can be utilized efficiently and effectively in both primary care and specialty practices. The range of services a particular PE can provide will depend upon the scope of her license under state laws, as well as the needs of the practice and the physician’s views of the PE role. In primary care practices, nurse practitioners (NPs) and PAs are often responsible for direct patient care, including performing routine examination and review of medical histories, and also will be increasingly involved in telephone triage, patient education, counseling and health awareness. In specialty practices NPs and PAs can be utilized for pre-operative and post-operative care, assisting at surgery, hospital rounds, in-office procedures, as well as patient education and awareness. In addition to their directly billable services, these PEs can increasingly be utilized to provide non-billable services, thereby freeing the physicians for the performance of remunerative activities.

Organized medicine has begun to advocate a multi-disciplinary team approach to the delivery of health care to assure the public maximum access and minimum cost for health care services for the public. The Pew Health Commission and the Institute of Medicine’s Committee on the Future of Primary Care both advocate this approach.

Statistics and Academic Recommendations do not tell the entire story. In order for PEs to be successfully incorporated into medical practices, physicians and PEs alike must develop a close, trusting and coordinated relationship. This may require some education and retraining, as well as the appropriate mix of personalities and skills.

Licensure and Reimbursement Parameters

Before hiring a PE, it is important to assure that the relationship is properly structured to comply with both state licensure regulations, as well as Medicare, Medicaid and other third party payor reimbursement criteria. These laws vary depending upon the type of PE, site of service and other variables. Furthermore, state licensure and reimbursement regulations can be contradictory and confusing. The Pennsylvania regulations regarding the licensure and supervision of PAs and the Medicare regulations governing reimbursement of their services are exemplary of this dilemma.

In Pennsylvania, a PA is permitted to perform a variety of functions under appropriate “physician direction and supervision.” These functions include, but are not limited to, the following: take patient histories; perform physical examinations; apply casts, splints, dressings and bandages; administer medications and IV fluids; do audio and visual screenings; and, provide counseling and instruction regarding patient problems. The regulations go on to describe in some detail what is meant by appropriate supervision. “Constant physical presence of the supervisor is not required so long as the PA Supervisor and the PA are or can easily be in contact with each other by radio, telephone or telecommunications.”

These rules are contrary to the criteria for reimbursement of PA services under the Medicare “incident to” provisions set forth below which require physical presence of the Supervisory Physician for reimbursement. A PA may not, under Pennsylvania law, provide medical services unless supervised by a Supervisory Physician in accordance with a written agreement signed by the PA and her registered PA Supervisor, and approved by the Board of Medicine. The regulations prescribe in detail the procedure for registration and the details of the written agreement required for approval of the registration. The PA likewise is not permitted under Pennsylvania law to maintain or manage a satellite office unless approved by the Board; independently bill patients for services provided; delegate an assigned task to another health care provider; advertise as an independent practitioner; pronounce a patient dead, or; perform medical service without a PA Supervisor.

Under Medicare regulations, services provided by a PA in most physicians’ offices are reimbursed as incident to a physician’s service and thus paid the same as if a physician had provided them. PA services will also be reimbursed under different criteria by Medicare in an office setting where the office is located in a designated rural health professional shortage area, or outside of the office setting such as in a Skilled Nursing Facility or as an assistant at surgery.

In order for Medicare to reimburse “incident to” services, they must be:

• Under the physician’s direct personal supervision.

• An integral, although not incidental, part of the physician’s professional service.

• Rendered by an “employee” of the physician or group (as opposed to an independent contractor).

In contradistinction to the Pennsylvania licensure requirements, telephone availability does not constitute “direct personal supervision”. Rather, the physician must be present in the office suite and immediately available to provide assistance and direction throughout the time that the PA is performing services.

Further, while the physician must be available while the PA performs the service, the physician does not have to render a personal professional service each time the PA renders a service. The physician must, however, perform the initial service and subsequent services frequently enough to reflect the physician’s active participation in the patient’s care.

Incorporating PEs into your practice can help you address some of the current challenges of practicing medicine. Those practices that are able to reap the benefits of a mixed array of providers and maximize the skills of these providers to ensure a coordinated system of medical care should be well positioned to delivery quality care profitably in a managed care environment. Even absent a predominantly managed care environment, the addition of a PE can be a sound business decision. However, the relationship with your newly-hired PE must be properly structured to meet state licensure requirements and to maximize the reimbursement for the services she renders.

Susan F. Dubow, Esq., is a shareholder and vice presidentof Kalogredis, Tsoules and Sweeney, Ltd., a regional health care law firm located in Suburban Philadelphia.

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