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For Zotec CEO, health care reform cuts both ways

August 10, 2009

In the eyes of Scott Law, Congress is heading in exactly the wrong direction on health care reform.

But the CEO of Zotec Partners predicts a big bump in sales for his physician-billing management company if current reform proposals become law.

That’s because he expects health reform to pinch reimbursement for at least some groups of physicians while adding extra billing complexity by creating a public insurance plan. Zotec can help on both fronts, he said.

“The opportunity is enormous for us,” Law said, sitting in his Carmel office, where he has arrayed six computer monitors behind his wooden desk.

But that opportunity is on hold now. Zotec’s string of signing up new clients has come to a screeching halt this year as doctors wait to see what Congress does.

“As happened when Bill and Hillary Clinton did this [in the early 1990s],” Law said, “this period of time has caused a pause in anybody making any decisions.”

Zotec has signed only one new client in the first half of the year, a performance Law called “concerning.” But he was quick to add that he foresees a “bolus” of sales activity occurring immediately after a health overhaul is signed—which he assumes will happen by the fourth quarter.

Law


The new client was a big one—Texas-based Radiology Associates of Tarrant County, which ranks as the 16th-largest radiology practice in the nation. But one client is a far cry from the string of clients Zotec signed the previous three years, leading to 438-percent growth in its revenue from 2006 to 2008.

Zotec is on pace this year for revenue of $65 million. Law has set a goal to hit $100 million by the end of 2011. To get there, he’ll need the health reform logjam to clear soon.

Law, who, with his wife, gave $2,300 to Republican presidential candidate John McCain last year, would prefer to see an expansion of health savings accounts so consumer choices would bring health care costs under control.

Instead, a bill in the U.S. House of Representatives would try to hold down costs by creating a government-funded health insurance plan.

The public plan is designed to reduce the number of uninsured, who often leave their doctors’ bills unpaid. That would be good for doctors.

But the potential downside is that, if the new public plan pays at rates below the private insurers, as the federal Medicare program does now, doctors could see their numbers of lucrative private-pay customers go down. Their incomes would follow.

On average, Medicare payments to doctors fall 20 percent below rates paid by private insurers.

Also, under a proposal by the Obama administration, Medicare rates will go down in 2010 for some specialists, including an 11-percent cut for radiologists, the main group Zotec serves.

 “There’s a cost benefit for having a company whose sole purpose is billing and coding and collections,” said Andrew Viernes, chief information officer at Radiology Associates. As reimbursement declines further, he added, more doctors’ groups will look to companies like Zotec “to mitigate in-house costs for billing and also to be able to maximize their returns.”

Talk of maximizing returns sparks concern among health insurers. They fear billing companies often resort to abusive practices like upcoding and unbundling.

Upcoding is falsely billing under more severe diagnosis and procedure codes in order to get higher reimbursement. Unbundling involves billing one procedure, such as a blood test that measured cholesterol and glucose, as two separate procedures, thereby boosting reimbursement.

Limiting fraud, abuse and other kinds of waste is also a key goal of the health care reform proposals. The Blue Cross and Blue Shield Association, of which Indianapolis-based WellPoint Inc. is a member, said its anti-fraud recoveries and savings spiked 43 percent last year.

Indianapolis fraud examiner Greg Wright has his eye on third-party billing providers. He’s gearing up to begin investigating medical claims on behalf of employer-funded health plans next month because he sensed the pressure of the recession was causing an increase in fraud.

“As their growth goes down, it’s easy to reach out and ‘sex up’ their claims, if you know what I mean,” Wright said.

But Law said he has no doubts Zotec is above board. A former accountant at PricewaterhouseCoopers, Law said he had Zotec’s computer software designed to document everything in order to make it easy to audit.

“I sleep very comfortably at night,” he said. •

 

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