In this episode, Coach JPMD discusses how physicians can better understand how revenue is generated. He discusses the inspiration for his new Money Tree Series and how this understanding might better prepare you as physicians to ultimately increase profits and to accelerate growth.
At the root of it all, he details three things that providers should know about Center of Medicare Services (CMS) and how revenue to providers of care is generated, how its monies are distributed to the insurance companies, and what can drive an increase in CMS funding. You will not want to miss the beginning of this financial mind blow!
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Welcome to the practice impossible podcast where your host Jude A., Pierre MD, also known as Coach JPMD discusses medical practice topics that will guide you through the maze that is the business of medicine, and teach you how to increase profits and help populations live long. Your mission should you choose to accept is to listen and be transformed. Now here's your host, Coach JPMD.
Coach JPMD 0:25
So I remember hearing that sound where I was selling things on eBay and offer up now actually uses that Cha-Ching sound too, and I wanted to do something different and kind of catch your attention on this new money tree series that I'm starting. So money tree, as I was trying to figure out what I was going to call this series, I thought of payment tree or money tree and, and I did some research on money tree, and I realized that there is actually a money tree. I felt a little silly because I feel like I should have known this after 50 years of being on this earth that there is actually something called the money tree. And the actual name of that tree is the pachira aquatica tree. So for those who don't know, it's a popular evergreen foliage plant, which promises great fortune and financial prosperity and positive energy. According to some Asian folklore and, and masters of the art of functuay, so I thought it was telling to actually named this series the money tree series and have it be the series that details how physicians get paid how physicians receive monies from the government or an insurance company to their bank accounts.
So in this series, I'm going to detail and break down each aspect of the payments that we receive as providers from the center for Medicare and Medicaid Services. Insurance companies receive this money from the government to pay providers. So in this episode, I'm going to cover three things that providers should know, as they run their practice, see patients in the hospital, and just practice medicine in general. So I know that some people are visual. So I also created a sheet, a two page sheet that details the money tree, what we call the payment tree in the Llama course. And that money tree will depict every aspect of the payments that are distributed from the insurance company to the providers, you can go to www.Coachjpmd.com/moneytree to download that two page sheet. So you can download that for your reference.
So why am I doing this? So I'm doing this because I got a lot of feedback from those who've been listening to the episode, The Practice Impossible episodes, and they've told me that they wanted to hear more about the finances and financial aspect of practicing medicine. And I thought it would be great to help you understand a little bit of what I didn't understand 20 years ago when I first started. So to begin this series, I wanted to start at the root, the root of all payments in a Medicare Advantage program to providers, and that is the Center for Medicare and Medicaid Services, or CMS. So there's three things I wanted to cover in this introduction to the monetary series. And that is a CMS funding. So how does the Center for Medicare Medicaid services receive its money? Where does it come from? How is that money distributed to the insurance companies. And number three, what can increase or decrease payments from CMS.
So I'm going to try not to get into the weeds here and give you a basic overview of how Medicare is funded. For those that are interested in the weeds, I'll put some links in the show notes to guide you as to where you can get the details of how Medicare is funded, but the main aspect is through a Medicare trust fund. And this fund is paid for and held by the US Treasury. The first Trust Fund is the hospital insurance Trust Fund. And that's paid for by payroll taxes, paid for by employees, employers, and people who are self employed. And then there's also some sources of income based on Social Security benefits, or income tax paid on Social Security benefits and interest earned on trust fund investments, as well as people who can't afford the Part A premiums or the hospital benefits who pay a premium to have that coverage. Now there's a second Trust Fund is a supplementary medical insurance trust fund or the SMI. It's funds authorized by Congress, and it's premiums from people who were enrolled in Medicare Part B, which is the part that covers non hospital related expenses and premiums paid for people who are covered in Part D which is the Pharmacy Benefits. And of course, the other sources that interest earned on those trust fund investments.
The second thing I wanted to talk about in this series or in this intro to the series is how the funds that CMS has in there trust funds are distributed. And so there's two main ways there's either a fee for service or you pay a provider for services rendered for the insured. So those that have Medicare, typically those that are 65 and older or disabled or on dialysis, those payments are made directly from the government to the entity or to the providers of care. So that would include physicians, hospitals, radiology centers, durable medical equipment companies, pharmacies, and so these payments are or these payments flow from CMS to the provider directly. What I do in my practice is contract with a managed care organization. And those managed care organizations receive payments from CMS. And then they distribute the funds to the primary care providers, the specialists, the radiology centers, the hospitals, the pharmacies, and those are typically private entities. So monies flow from CMS to the insurance companies via a direct route.
So Medicare pays that physician directly or a managed care route or a Medicare Advantage company. And those companies are usually private entities. And there's a third way, and I just thought about this somewhat like a direct route. And that's through the Accountable Care organization. So there are ACOs that can also manage monies coming from CMS, to the providers, and that is the entity in between CMS and the providers of care. So really, there's three main ways but the the majority of payments flow via the direct way, fee for service, or managed care. Now the third thing I wanted to cover is was how can a provider increase or decrease payments from CMS. So in a direct route, it's really, really not possible because CMS has a fee schedule for providers that provide care for their patients or the patients enrolled in Medicare. And there's really not much room for an increase in payment or a decrease in payment as well unless Congress authorizes an increase in payment to the providers. Now, that's in a direct route.
So in the managed care branch of the tree, if payments are made to a Medicare Advantage company, those payments are typically in a pool that's distributed annually based on the government's formula of distributing payments to managed care organizations. So if a managed care organization does well by providing quality care, and increasing their quality scores, and you'll hear me talk about HEDIS scores in future episodes, those HEDIS scores can help managed care organizations receive more money from CMS. And the other way is to have a patient population that's sicker than another managed care organization. So sicker patients tend to cost the government or any insurance company more money, and the government is aware of that and payments can be increased if patients are coated with certain chronic conditions, that will end up triggering the increase in payment. So the two main ways to increase payments is by coding in a compliant manner, chronic conditions and also making sure your quality measures are met. And preventative measures are scheduled for the patient, like screening mammograms, bone densities, colon cancer screening tests, and those are things that can increase payments to the managed care organization.
At the same token, if you don't do well and your quality is poor, then the government will decrease payments to that organization which could lead to less payments in your bank account. So I hope I didn't get too far in the weeds here but I wanted to kind of summarize what I've discussed in this intro to the money tree series. That is the three things that every provider should know about the root of the payment that they receive from the government. And that is, CMS receives it's funding by way of two trust funds that were set up, one being funded by payroll taxes, and the other by Congress. Number two, distribution of CMS funding to managed care organizations and fee for service contracted organizations or providers are the two main ways for physicians to receive payments from CMS. And there's two main ways you can either increase or decrease payments from CMS and thats through improving your quality scores, as well as improving documentation of chronic conditions. So when you look at that payment tree, or that money tree, you'll see that there are different entities in each branch of that tree that we'll be talking about in this series.
So future episodes are going to be about different branches of that tree. So we started with the root, then we're going to go to the trunk and the trunk is going to be the HMO or the Medicare Advantage company, or even the private payer, if you're not dealing with the government. And the next is going to be the IPA MSO, or intermediary company that interfaces in between the provider and the insurance company. And then the next several series is going to be about the each individual provider and how monies flow to them. So I'm going to try to make it fun, I'm going to try to make it relatable to you because these are things that I didn't know when I started, and I wish that I had someone guiding me because that probably would have accelerated my growth.
So I'll also try to have some guests on the show to discuss the different aspects of the of the money tree. In the meantime, download the money tree diagram that I created for you guys at www.Coachjpmd.com/money tree. So I know there's some of you out there are pretty stressed out about finances and, and stress and and really not really knowing where to go. In the practice of medicine. I want to give you an opportunity to book a call with me for 30 minutes if you if you want to learn how I've managed to navigate this world of the business of medicine. And I want to be able to help you and help you avoid the pitfalls that I've that I've gone through and feel free to schedule a call with me, the link will be in the show notes. As you know, my objective is to help you practice impossible. And I think learning the tools and learning things that I've learned over the past couple of years will help you do that. So click on the show notes, schedule the call and hope to hear from you soon. Thank you so much for listening and we'll see you next week.