Special to OWM: Wound Care Reimbursement: Things Are A-Changing!

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Kathleen D. Schaum, MS

Nearly 50 years ago, this author took her first job involving health care reimbursement as the Nutrition Services Payment Specialist for The Ohio State University Hospitals. That job laid the foundation for all future work in medical sales and sales management, medical device reimbursement, and reimbursement strategy consultation for wound care professionals and provider-based outpatient wound care departments (PBDs). Although my half-century of work may not matter to you, the reimbursement changes I have experienced with wound care professionals and manufacturers in the last quarter century and the reimbursement changes we will experience together in the foreseeable future must matter to all of us.  

First, let’s reminisce about wound care reimbursement from 1968 to 1993: the major providers of wound care were hospitals, physician offices, home health agencies (HHAs), and nursing homes. These providers were paid based on volume: the more services/procedures/products they provided for patients, the more they were paid. When this volume-driven payment program got out of control in the hospital setting, Medicare implemented the diagnostic related group (DRG) payment system. The DRG system paid a lump sum of money to hospitals for each patient’s entire length of stay based on the diagnosis of the patient. 

Developing Medicare coverage policies and processing claims was handled by different insurance companies in each state. Each state had a Medicare contractor (carriers) for physicians and a different Medicare contractor (fiscal intermediary) for facilities such as hospitals, nursing homes, and HHAs. The numerous Medicare contractors released their manuals (regulations and claims processing) and medical policies (called Local Medical Review Policies [LMRPs]) by mail. The Medicare contractors only sent the pages that changed on a quarterly basis to people who requested them; providers had to throw out the old pages and replace the new pages into loose-leaf manuals. Surgical dressings were not separately paid for use in the home until 1993, when the first surgical dressing LMRP was released.  

Next, let’s reflect on wound care reimbursement from 1993 to the present: The country is now divided into 10 Medicare Part A and Part B jurisdictions. Contracts are awarded to insurance companies to assume the role of Medicare Administrative Contractor (MAC) for each jurisdiction. That MAC writes medical policies (called Local Coverage Determinations [LCDs]) and processes the claims for both physicians and facilities in that jurisdiction. 

Similarly, the country is divided into 4 HHA jurisdictions and into 4 Durable Medical Equipment (DME) jurisdictions. Each of the 4 HHA MACs writes the LCDs and processes the claims for the HHAs, and each of the 4 DME MACs writes the LCDs and processes the claims for the DME suppliers. All of the MACS’ LCDs and attached articles are published in the Medicare Coverage Database and are available for all to access via the Internet. Wound care professionals should personally download the LCDs and articles that pertain to their work: debridement, compression, wound care cellular and/or tissue-based products (CTPs), hyperbaric oxygen therapy (HBOT), and negative pressure wound therapy (both DME and disposable), and so on.  

Many sites of care developed after the DRG payment system incentivized hospitals to discharge patients as quickly as possible. Long-term acute care hospitals (LTCHs), skilled nursing facilities (SNFs), PBDs, and HHAs performing skilled care became important providers of wound care. At first, all new providers of care were paid for each product/service/procedure provided. Then in 2000, the mandates of the Balanced Budget Act of 1997 were implemented by Medicare. All wound care providers (except physicians) were placed on some type of prospective payment system (PPS). For example: 

  • The LTCHs were paid an all-inclusive payment similar to the hospital DRG payment system. 
  • The SNFs were placed on a program that paid them different all-inclusive daily rates per patient based on the resources required for particular patients.
  • The PBDs were paid an all-inclusive payment based on a program that grouped the procedures performed in PBDs into Ambulatory Payment Classification (APC) groups by the resources required to perform the procedures. 
  • The HHAs were paid an all-inclusive lump sum to care for each patient for a 60-day episode of care. The lump sum was based on the resources needed to care for each patient. 

Over time, hospitals, LTCHs, SNFs, PBDs, and HHAs learned exactly how much care they could afford to provide with their PPS payment. Patients often were discharged from a site of care too soon. Patients often received more services than were required just because the providers could charge for them. Providers often selected products and procedures based on their reimbursement rather than on their clinical evidence and on the actual medical needs of the patients. One site of care did not always communicate with another site of care; this caused product waste, duplicate diagnostic tests, and the like. Most importantly, physicians were not paid via a PPS. Because physicians’ orders drive 85% of all US medical expenditures, all sites of care continued to focus on volume of care. 

Several years ago, the goal of governmental and private payers became the “Triple Aim,” which included 1) improving the patient experience of care (including quality and satisfaction); 2) improving the health of populations; and 3) reducing the per capita cost of health care.

On January 1, 2017, a new payment system for physicians was implemented. Rather than receiving payment changes based on the country’s economic growth, physicians will no longer receive Medicare Physician Fee Schedule increases/decreases at the end of 2018; their Medicare allowable rates will remain flat starting in 2019. The new Quality Payment Program will either provide physicians with bonuses or deductions from their flat payment rates based on 4 performance categories:

  • Quality
  • Advancing Care Information
  • Clinical Practice Improvement Activities
  • Total cost of care (not just the cost of an item or a procedure).

As such, physicians now will place more focus on quality of care and total cost of care based on clinical practice guidelines and will make better use of electronic health records to communicate across the continuum of care. Physicians will develop wound care plans based on their 4 performance categories, which will focus on value-based care rather than the volume-based care that is currently practiced by wound care providers throughout the care continuum. For example, do not be surprised when physicians start to focus on evaluation and management and de-emphasize procedures; focus on early diagnostics and de-emphasize multiple surgical debridement procedures; focus on debridement products the patient can use themselves and de-emphasize debridement procedures performed by physicians; order vascular procedures to improve blood flow early in the patient’s care; order products and procedures with proven clinical efficacy; order low-cost CTPs and de-emphasize high-cost CTPs that increase the cost to the payer and to the patient; use HBOT only when absolutely necessary and de-emphasize keeping the HBOT chamber full all day; select surgical dressings based on the wound’s needs rather than on the DME supplier’s Medicare payment; use compression and total contact casting when needed even though not separately paid; select the products and procedures needed by the patient and de-emphasize the ones that have the highest reimbursement to the provider and/or the facility; and focus on the total cost of care that might cost your site of care more but will cost the patient and the payer less over the episode of care.

By now, you probably realize wound care professionals will have to adjust their volume-based wound care business models to align with the value-based focus of the physicians, patients, and payers. As a member of the Association for the Advancement of Wound Care (AAWC), speaker-panel member, author in Today’s Wound Clinic and Advances in Skin and Wound Care, co-speaker at Wound Clinic Business, and president of my own wound care strategy consulting firm, you can be sure my wound care presentations, articles, and consultations are shifting focus. I still must address reimbursement for wound care professionals in volume-based businesses, but I also must educate wound care professionals to adjust their business models to accommodate value-based reimbursement. 

In my nearly 50-year reimbursement career, no 6 months of reimbursement regulations and policies have been the same as the 6 months before. I am accustomed to change and will continue to educate colleagues on how to balance the volume-based coding, payment, and coverage regulations and business models with the new value-based regulations and business models. One thing is certain: wound care professionals cannot continue in their current business models; they are not sustainable in the future. Wound care professionals know how to manage wounds from beginning to end and must use that knowledge to care for the patients wherever they are, not just in one site of care.