Medicare & Anesthesia Reimbursement Methods Why the Medicare Fee Schedule Is the Wrong Benchmark for Commercial Anesthesia...
Background <ul><li>Anesthesia RVG since 1962 </li></ul><ul><ul><li>Base Units (complexity) </li></ul></ul><ul><ul><li>Time...
Evidence: Medicare Undervalues Anesthesia <ul><li>Calculated “Hourly Rate” Comparisons </li></ul><ul><li>“ Building Block”...
Medicare Hourly Rate Comparison <ul><li>Many CPT descriptors include time in definition of service </li></ul><ul><ul><li>e...
Time-Based RBRVS Payments 5 97542 Wheelchair management/propulsion training 0.44 15 $ 64.57 97124 Therapeutic procedure, m...
Building Block Analysis of Anesthesia Services <ul><li>Anesthesia Formula Is Inclusive & Global </li></ul><ul><ul><li>Preo...
Building Block Analysis 7 CPT   RVUs 99202   Outpatient visit, new patient, Level 2   1.38 99141   IV conscious sedation  ...
Internal Inconsistency in Fee Determination 8 Fee Schedule Calculation: 16.15 RVUs x $36.69 = $592.54 Anesthesia Unit Fee ...
Medicaid vs. Medicare <ul><li>Medicaid programs insure indigent </li></ul><ul><li>Typically  lowest  physician payment rat...
Anesthesia Rate: Medicaid vs. Medicare 10 $17.19 $16.88 $- $5.00 $10.00 $15.00 $20.00 $25.00 Welfare Medicare
Cross Specialty Commercial/Medicare Charge Reduction <ul><li>Commercial indemnity rates historically based on 80% of U&C c...
Expected Medicare Anesthesia Rate Table 12 Expected Medicare Rate Charge   Charge x 0.80 x 0.71 $   40.00   $   22.72 $   ...
Reasonable Charges in Anesthesia per   Federal Register  63:54756, 1998 <ul><li>U.S. Dept. of Veterans Affairs health syst...
Implications of VA Findings 14 If a reasonable charge for anesthesia is...............................$70.27 Then reasonab...
Unequal Impact of Common RBRVS Multiple <ul><li>Commercial insurers rapidly adopting RBRVS-based payment systems </li></ul...
Commercial Insurance Transition to  RBRVS-Based Payment <ul><li>11 Common Surgical Procedures </li></ul><ul><li>Pre: Four ...
RBRVS Impact on Anesthesia/Surgery Fees 17 PCT CHANGE
Aggregate Fee Reductions 18
Hsiao Pure Medicare Practice Model <ul><li>NEJM  1993:  Hsiao Assesses Impact of RBRVS-based Medicare Fee Schedule </li></...
McMenamin 1995 Adaptation of Hsiao <ul><li>Hsiao methodology </li></ul><ul><ul><li>Anesthesiology included </li></ul></ul>...
McMenamin Results <ul><li>Cardiology $ 276,090 </li></ul><ul><li>General Surgery $ 269,285 </li></ul><ul><li>Ob/Gyn $ 131,...
Conclusion <ul><li>Has a distorted relationship with commercial third party rates </li></ul><ul><li>Is frequently lower th...
Alternative Approaches to Implementing RBRVS Methodology in Anesthesia <ul><li>Index anesthesia CF to other specialties’ d...
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Medicare & Anesthesia Reimbursement Methods

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  • 1 Medicare &amp; Anesthesia Reimbursement Methods Slide 1 This presentation will demonstrate ways in which the Medicare fee schedule (MFS) is a flawed basis for determining commercial anesthesia payment rates. This subject is of importance because of the growing interest among private insurers in implementing a Medicare-based Relative Value System of physician reimbursement with a common conversion factor.
  • Medicare & Anesthesia Reimbursement Methods

    1. 1. Medicare & Anesthesia Reimbursement Methods Why the Medicare Fee Schedule Is the Wrong Benchmark for Commercial Anesthesia Payments 1
    2. 2. Background <ul><li>Anesthesia RVG since 1962 </li></ul><ul><ul><li>Base Units (complexity) </li></ul></ul><ul><ul><li>Time Units </li></ul></ul><ul><ul><li>Total Units x CF = Fee </li></ul></ul><ul><li>RBRVS Medicare Fee Schedule 1992 </li></ul><ul><ul><li>Anesthesia RVG Maintained </li></ul></ul><ul><ul><li>Separate Conversion Factor </li></ul></ul><ul><ul><ul><li>Reduced 29% at Implementation </li></ul></ul></ul><ul><li>1998: 46% of Fee Schedule CF </li></ul><ul><ul><li>Based on Medicare historical relationship since 1992 </li></ul></ul><ul><ul><li>National Average Medicare Anesthesia CF $16.88 </li></ul></ul>2
    3. 3. Evidence: Medicare Undervalues Anesthesia <ul><li>Calculated “Hourly Rate” Comparisons </li></ul><ul><li>“ Building Block” Analysis of Anesthesia Services </li></ul><ul><li>Medicaid vs. Medicare Comparisons </li></ul><ul><li>Relationship to Commercial Rates </li></ul><ul><li>Cross Specialty Impact of Common RBRVS Multiples </li></ul><ul><li>Pure Medicare Anesthesia Practice Model </li></ul>3
    4. 4. Medicare Hourly Rate Comparison <ul><li>Many CPT descriptors include time in definition of service </li></ul><ul><ul><li>e.g., “each 15 min.” “up to one hr.” etc. </li></ul></ul><ul><li>Calculating hourly Medicare $$ </li></ul><ul><ul><li>Formula: 60/min * RVUt * $36.69 </li></ul></ul><ul><li>Anesthesia fee determination includes time </li></ul><ul><li>Compare anesthesia hourly rate to other time-based services </li></ul>4
    5. 5. Time-Based RBRVS Payments 5 97542 Wheelchair management/propulsion training 0.44 15 $ 64.57 97124 Therapeutic procedure, massage 0.47 15 $ 68.98 97122 Therapeutic procedure, traction, manual 0.54 15 $ 79.25 97504 Orthotics fitting and training 0.61 15 $ 89.52 97113 Therapeutic procedure, aquatic therapy, exercises 0.66 15 $ 96.86 90875 Individual psychophysiological therapy, biofeedback 1.2 25 $ 105.67 99238 Hospital discharge day management 1.83 30 $ 134.29 99401 Preventive medicine counseling 0.96 15 $ 140.89 99344 Home visit: new patient 3.97 60 $ 145.66 99211 Office visit: est. patient, may not require presence of M.D. 0.38 5 $ 167.31 95920 Intraoperative neurophysiology testing, per hour 4.98 60 $ 182.72 99291 Critical care 5.54 60 $ 203.26 CPT Procedure RVUt Time CALC $/Hr. 01484 Anesthesia: ORIF ankle fracture 180 $ 90.03
    6. 6. Building Block Analysis of Anesthesia Services <ul><li>Anesthesia Formula Is Inclusive & Global </li></ul><ul><ul><li>Preop, Intraop and Postop Care Included </li></ul></ul><ul><ul><li>Only Unusual Procedures Separately Recognized </li></ul></ul><ul><li>Constituent Services Individually Valued in Fee Schedule </li></ul><ul><li>Compare Anesthesia Formula to Sum of Constituent Parts </li></ul>6
    7. 7. Building Block Analysis 7 CPT RVUs 99202 Outpatient visit, new patient, Level 2 1.38 99141 IV conscious sedation 1.68 90780 IV infusion, by physician, up to one hour 1.14 31500 Endotracheal intubation 3.61 94770 Expired carbon dioxide analysis 0.66 94761 Pulse oximetry, multiple determinations 0.7 94656 Mechanical ventilation, initiation (first day) 2.47 99356 Prolonged physician service (e.g., fetal monitoring), first hour 2.64 91105 Gastric intubation 0.82 99231 Subsequent hospital visit, Level 1 16.15 COMPONENTS OF ANESTHETIC CARE: VENTRAL HERNIA REPAIR PREOP VISIT INTRAOPERATIVE CARE POSTOPERATIVE CARE: PACU/POSTOP VISIT DAY OF SURGERY: PREPARATION FOR ANESTHESIA
    8. 8. Internal Inconsistency in Fee Determination 8 Fee Schedule Calculation: 16.15 RVUs x $36.69 = $592.54 Anesthesia Unit Fee Calculation: 6 Base + 4 Time = 10 Units x $16.88 = $168.80
    9. 9. Medicaid vs. Medicare <ul><li>Medicaid programs insure indigent </li></ul><ul><li>Typically lowest physician payment rates </li></ul><ul><li>Low payment rates limit access to services </li></ul><ul><li>Many programs use standard “base plus time” anesthesia unit methodology </li></ul><ul><ul><li>National survey of Medicaid anesthesia rates </li></ul></ul><ul><ul><li>Comparable methodology, data available: 29 states </li></ul></ul><ul><li>Relationship of Medicaid anesthesia rate to Medicare </li></ul>9
    10. 10. Anesthesia Rate: Medicaid vs. Medicare 10 $17.19 $16.88 $- $5.00 $10.00 $15.00 $20.00 $25.00 Welfare Medicare
    11. 11. Cross Specialty Commercial/Medicare Charge Reduction <ul><li>Commercial indemnity rates historically based on 80% of U&C charges </li></ul><ul><li>PPRC reports Medicare rates 71% of commercial across all specialties </li></ul><ul><li>Expected relationship of Medicare to U&C charges: </li></ul><ul><ul><li>Charge x 0.80 x 0.71 </li></ul></ul><ul><li>Compare actual Medicare anesthesia ($16.88) to expected value </li></ul>11
    12. 12. Expected Medicare Anesthesia Rate Table 12 Expected Medicare Rate Charge Charge x 0.80 x 0.71 $ 40.00 $ 22.72 $ 45.00 $ 25.56 $ 50.00 $ 28.40 $ 55.00 $ 31.24 $ 60.00 $ 34.08 $ 65.00 $ 36.92 $ 70.00 $ 39.76 $ 75.00 $ 42.60
    13. 13. Reasonable Charges in Anesthesia per Federal Register 63:54756, 1998 <ul><li>U.S. Dept. of Veterans Affairs health system </li></ul><ul><li>VA transition from collecting “costs” to “charges” from private insurers </li></ul><ul><li>200-page report establishing “reasonable charges” - including physician services </li></ul><ul><li>Anesthesiology charges </li></ul><ul><ul><li>Fees for all “0” series anesthesia codes </li></ul></ul><ul><ul><li>Conversion factor imputed from St. Anthony’s base units and time units from Medicare database </li></ul></ul>13
    14. 14. Implications of VA Findings 14 If a reasonable charge for anesthesia is...............................$70.27 Then reasonable commercial payment is (80%)...................$56.22 And expected Medicare payment (71%) should be..............$39.91 But actual Medicare payment is............................................$16.88 Thus, the required multiplier to correct Medicare is...............2.36
    15. 15. Unequal Impact of Common RBRVS Multiple <ul><li>Commercial insurers rapidly adopting RBRVS-based payment systems </li></ul><ul><li>Commercial Conversion Factor (CF) based on Medicare CF </li></ul><ul><li>Example: transition from fee schedule to 125% Medicare </li></ul><ul><li>Assess impact of implementation in anesthesia vs. other specialties </li></ul>15
    16. 16. Commercial Insurance Transition to RBRVS-Based Payment <ul><li>11 Common Surgical Procedures </li></ul><ul><li>Pre: Four Commercial Fee Schedules </li></ul><ul><li>Post: 125% Medicare Fee Schedule Allowables </li></ul><ul><li>Anesthesia Payment Calculation </li></ul><ul><ul><li>Average Base/Time Units from Medicare datafile </li></ul></ul>16
    17. 17. RBRVS Impact on Anesthesia/Surgery Fees 17 PCT CHANGE
    18. 18. Aggregate Fee Reductions 18
    19. 19. Hsiao Pure Medicare Practice Model <ul><li>NEJM 1993: Hsiao Assesses Impact of RBRVS-based Medicare Fee Schedule </li></ul><ul><li>Multiple Specialties Providing Typical Service Full Time to Medicare Beneficiaries </li></ul><ul><li>Estimate of Annual Earnings </li></ul><ul><li>McMenamin Adaptation of Method to Assess Anesthesiology </li></ul>19 Hsiao, W.C., Dunn, D.L., Verrilli, D.K. Assessing the Implementation of Physician Payment Reform, N Eng J Med .1993; 328:928.
    20. 20. McMenamin 1995 Adaptation of Hsiao <ul><li>Hsiao methodology </li></ul><ul><ul><li>Anesthesiology included </li></ul></ul><ul><ul><li>Updated HCFA Fee Schedule, Time Data </li></ul></ul><ul><ul><li>AMA Practice Cost Data </li></ul></ul><ul><li>Pure Medicare Anesthesia model </li></ul><ul><ul><li>Colectomy @ 182 minutes </li></ul></ul><ul><ul><li>14.8 procedures/week </li></ul></ul>20 P. McMenamin 1995
    21. 21. McMenamin Results <ul><li>Cardiology $ 276,090 </li></ul><ul><li>General Surgery $ 269,285 </li></ul><ul><li>Ob/Gyn $ 131,234 </li></ul><ul><li>Gastroenterology $ 123,748 </li></ul><ul><li>Psychiatry $ 96,006 </li></ul><ul><li>Anesthesiology $ 53,769 </li></ul>P. McMenamin 1995 21 Specialty Net Earnings
    22. 22. Conclusion <ul><li>Has a distorted relationship with commercial third party rates </li></ul><ul><li>Is frequently lower than Medicaid rates </li></ul><ul><li>Is internally inconsistent with fee schedule components </li></ul><ul><li>Produces a disproportionate impact when used as the basis for commercial payment </li></ul><ul><li>Results in compensation incompatible with the nature & risks of service </li></ul>The Medicare anesthesia conversion factor:
    23. 23. Alternative Approaches to Implementing RBRVS Methodology in Anesthesia <ul><li>Index anesthesia CF to other specialties’ discount from charges </li></ul><ul><li>Index anesthesia CF to other specialties’ discount (if any) from prevailing commercial/managed care rates </li></ul><ul><li>Apply a “correction factor” to the Medicare anesthesia CF before applying a common multiplier </li></ul><ul><li>Retain existing anesthesia RVG and CF </li></ul>23

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