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Three Topics Warranting Concern
By Randy McFarland, CPO I'd like to share some thoughts on my mind as a
facility owner.
Reimbursement for Custom Orthotic Work
 As the cost of doing business increases, the
Medicare freeze continues. Meanwhile, additional procedure codes
are being created which lower reimbursement for the growing
"prefabricated" portion of our business. At first glance,
prefabricated orthoses may seem to cost less, but we are still
expected to provide expedient turnaround while the fitting and
follow-up requirements may be greater. While the relative demand
for custom-fabricated orthotic services
decreases, we still need the highly skilled practitioners and
technicians for the more challenging cases. With less custom work
and lower reimbursement, we will see fewer and fewer qualified
people available, making it even more costly to offer. With the
prefabricated portion of our business not carrying its share of our
sales dollar, it's vital that reimbursement for customfabricated
services be increased.
Buy-Sell Agreements for Owners
A "buy-sell" agreement or "stock purchase" agreement between
owners of a business is a document that spells out what is to
happen if one of the owners were to die, become disabled, or to
retire before the other owner. The classic scenario presented in
favor of a buy-sell agreement is when the remaining owner is
suddenly equal partners with a deceased owner's spouse. The intent
of a buy-sell agreement is to assure that buyout payments are made
to the surviving spouse/estate without bringing the company down.
The terms of the agreement must be unambiguous to avoid a costly
legal battle.
There are many possible methods to value a company, many of
which won't reflect current market value of the business. In the
case of death of an owner, lifeinsurance policies (on the owners'
lives) are frequently the vehicle to fund the buyout. Consider
buying a policy for the case of "disability" to ease the financial
strain of a buyout. (This is different from a traditional
"disability" policy that continues monthly income of the disabled
person.)
One way to determine the buyout amount would be to simply agree
that the company purchase and maintain
disability and life insurance policies that will serve as, and
fund, the buyout payment amount.
Contracting
It used to be that patients could go almost anywhere with their
orthotic/prosthetic prescription. A Medicare beneficiary still can
do this provided that he/she hasn't signed up with a managed care
organization (MCO). Increasingly, the O&P provider must have a
contract/ authorization in place with the client's insurance
carrier/MCO to be reimbursed, so regardless of the size of your
operation, keeping up with contracts is crucial. If you let a
contracting group handle this for you, get a guarantee that
information about the number and type of referrals you receive is
kept strictly confidential, particularly if you contract with an
organization that has any affiliation with a competitor who might
like to know the quantity and type of work that is being done in
your area. (The same goes if you purchase goods from such a
company)
Building contractors have a creed that says, "If you win every
bid you make, you're bidding too low!" Be willing to refuse
contracts that don't fairly reimburse for the level of care you
provide. Many hospitals and MCOs feel it is wise to have more than
one provider in place, so don't give up if you're initially told
they already have a provider. Larger O&P providers have an
advantage over smaller providers when it comes to quantity
discounts for purchases, and they may save by consolidating their
advertising and contracting efforts, but they also have challenges
that smaller, locally-owned companies don't. When negotiating for
contracts, smaller providers can emphasize their responsiveness due
to their independent and local ownership.
Randy McFarland, CPO, is president of Sunny Hills Orthopedic
Services, Fullerton, California. He may be contacted at randy@sunnyhills.com
Table Of Contents - July 2005
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