It appears that New Jersey’s largest health insurance company is also changing its approach to reimbursing physicians. Horizon Blue Cross Blue Shield of New Jersey (BCBCNJ) — the state’s largest health insurer covering nearly 33% of the state’s residents — is making big changes.
As of November 2022, the company also was granted state approval to enter the for-profit healthcare business, evolving from a nonprofit company to a not-for-profit mutual holding company.
What does this corporate change mean, exactly? Its leadership says this status change will empower it to invest more in prescription drug plans, social programs, and behavioral health.
Horizon gains access to $300 million which it can use to create for-profit subsidiaries, invest in new technology, and purchase physician practices. Additionally, because the company will increase its business portfolio and reduce its tax burden, it will pay New Jersey about $50 million per year for 25 years (totaling $1.25 billion).
Currently, about 33% of the insurance company’s policyholders use Medicaid. Its plans include:
- Maintaining provider networks for individual and small group policy holders.
- Continuing to offer service in all 21 of the state’s counties.
- Expanding availability of its Medicare Advantage Plans.
- Lowering prescription drug costs.
- Increasing treatment options for mental health and substance use.
The Physician Fee Schedule (PFS)
The 2023 Medicare Physician Payment Schedule (PFS) is bringing many changes to the program, including telehealth and evaluation-and-management (E/M) services and payment cuts.
The PFS under Medicare reimburses physicians, technical service suppliers and other billing professionals in many different settings including:
- Ambulatory surgical centers (ASCs)
- Beneficiaries’ homes
- Clinical laboratories
- Post-acute care settings
- Physician offices
- Skilled nursing facilities
Generally, Medicare uses a single rate — based on full range of resources used to provide the service — to pay physicians and other professionals in the physician’s office. The PFS rates paid to those in facility settings like an ASC or hospital outpatient department typically reflect only a portion of services the practitioner provides.
PFS pays separately for diagnostic tests and other services. Suppliers frequently bill the technical component — think independent diagnostic testing, radiation treatment, etc. — whereas physicians bill the professional component. Reimbursement bases payments on resources used to treat the patients, and PFS applies relative value units (RUVs) to each practice or malpractice expense and all services provided. To adjust variants in costs based on geography, PFS relies on geographic adjusters, calculating rates with this conversion factor.
So what does this mean for doctors? It’s anticipated they’ll see a 4.4% reduction in Medicare reimbursements — possibly cuts of up to 8.4% after other cuts are factored — in 2023.
Physician’s groups — everyone from surgeons and chiropractors to physical therapists and others — have expressed strong opposition. Dr. Jack Resneck, Jr., president of the American Medical Association said, “The rate cuts would create immediate financial instability in the Medicare physician payment system and threaten patient access to Medicare-participating physicians… physician Medicare payments are planned to be cut by nearly 8.5% in 2023…which would severely impede patient access to care due to the forced closure of physician practices and put further strain on those that remained open during the pandemic.”
President of the American Academy of Family Physicians, Tochi Iroku-Malize, MD, FAAFP, agreed, saying the Rule will “result in unsustainable Medicare payment cuts for family physicians and put patients’ timely access to essential primary care at risk.”
The National Association of ACOs, however, disagrees. Its president and CEO, Clif Gaus, Sc.D., said, “On balance, we believe this final rule will grow participation in accountable care organizations, which have already generated billions of dollars of savings for our health system.”
Select Updates Proposed by Centers for Medicare & Medicaid Services
In July 2022, CMS issued proposed rule updates designed to create a more equitable healthcare system reflecting improved accessibility, affordability, innovation and quality.
CY 2023 PFS Ratesetting and Conversion Factor
The first series of standard technical proposals include practice expense as well as implementation of year two of the clinical labor pricing rate. The proposal includes:
- The required statutory update to the conversion factor of 0%
- Expiration of the 3% increase in PFS payments (from CY 2022)
- A $1.53 decrease in the conversion factor to $33.08, which was $34.61 in CY 2022
Updated Medicare Economic Index (MEI) for CY 2023
CMS has also proposed revising the MEI cost share rates for next year, recommending leveraging data from the U.S. Census Bureau NAICS 6211 Offices of Physicians to estimate base year expenses. Instead of only reflecting costs for self-employed physicians, this approach will generate data insights more reflective of current market conditions of physician ownership practices. It also enables more regular updates to the MEI.
For additional information on the proposed updates, refer to this fact sheet.
Challenges to Horizon’s Changes
New Jersey’s largest insurance company, which has nearly 4 million members, attributes the Affordable Care Act and its rules restricting how much it can invest in data analysis, technology and other partners for accelerating its decision to update its status.
Its leadership cites a 2015 investment in a virtual behavioral health care company which it couldn’t further invest in because of these restrictions. A competitor acquired the company instead.
Some physicians worry that the company isn’t prioritizing patient health. One provider says he has had reimbursement rates at the same level since 2005 — creating challenges, especially the amount of time he can spend with each patient. He believes that decreasing reimbursement rates will only decrease quality.
Horizon Healthcare Services Inc., — parent company of Horizon BCBSNJ — has already begun to back new companies, including NovaWell, a new behavioral health company offering solutions for health systems and plans to treat substance use and mental health disorders.