A recent article in Health Leaders Media by Philip Betbeze, discusses the need for hospitals to be profitable based on Medicare reimbursement. We passionately feel that the same should be said of Wound Centers. For over ten years, I have believed that a wound center must be able to provide a strong margin on Medicare rates alone. Since I founded WCA, our proformas, annual projections and daily estimated collections have been based on Medicare Allowable rates (wage index factor adjusted) only. We have often been challenged by financial teams at hospitals concerned that we were not taking private payors and strong PPO contracts into account. Our stance on this has remained consistent: “If we can show a margin with only Medicare Allowable Rates, then anything else you receive will be gravy!”
Nationally, over 67% of our patients are insured by Medicare as their primary insurance. Since we have been using an Electronic Medical Record at all of our centers for over a decade, we have been able to track the trends of both reimbursement and of payor mix. The verdict: though there has been many changes in relation to PPO, HMO, and IPA payors, Medicare has remained steady at around 65%-68% of our patient load for over ten years. (Interestingly enough however, we have seen a steady decrease in the average age of our patients which we have attributed to the high incidence of diabetes in younger populations.)
This approach to Medicare viability is not simply a focus on profitability, rather it speaks directly to our 4th rule, “We Must Do Well in Order To Do Good”. Without a focus on Medicare rates, both now and in the near future as we watch dramatic changes in our healthcare system take place, wound centers will not be around to assist the next generation of patients. Our centers average a positive margin within less than 12 months, and usually retain that profitability throughout our agreement. This is based on careful attention to collections, expenses, documentation, regulation changes, and clinical outcomes.
It is not impossible to be profitable on Medicare rates alone, however, I think in the future, it will be impossible to survive without being profitable on Medicare rates alone.