June 1997
Volume 61 |
Number 6
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PRACTICE MANAGEMENT
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| ASA Analyzes Commercial
Relative Value System Based on Average Time |
Karin Bierstein,
Practice Management Coordinator
In March, members received a letter
from ASA President Phillip O. Bridenbaugh, M.D., alerting them
to an alternative relative value system recently introduced by
Cambridge Health Economics Group, Inc. (CHEG). Dr. Bridenbaugh
wrote a second letter in May, describing briefly the results of
our analysis of the CHEG product. This column will provide further
details of those results and will also discuss negotiation strategy.
The CHEG "resource-based relative value scale" for
anesthesia services, or ARBRVS™, incorporates average anesthesia
times into a composite relative value for each anesthesia service.
The ARBRVS™ relative values replace the base and time units
of the ASA Relative Value Guide system. They are scaled to the
Medicare RBRVS, so that a third-party payer can use the same dollar
conversion factor for anesthesia as it does for surgical and medical
procedures.
As noted in Dr. Bridenbaugh's letters, ASA contracted for an
analysis of the ARBRVS™ by the Lewin Group, an independent
consulting firm. Members of the ASA Task Force on Procedure-Based
Reimbursement Systems reviewed the Lewin analysis. ASA leadership
has long assumed that the winners and losers in any payment methodology
based on national average times would depend on each practice's
case mix and individual average times, and the Lewin analysis
of the ARBRVS™ validates this assumption.
Structure of the ARBRVS™: The ARBRVS™
creates relative values for 254 anesthesia codes (the series of
codes in the American Medical Association's Current Procedural
Terminology Fourth Edition, or CPT-4, between 00100 and 01999)
and also for 4,840 surgical codes. The basic algorithm used to
compute the values is straightforward. CHEG obtained Medicare
average time numbers from the "BMAD" data files maintained
by the Health Care Financing Administration (HCFA), supplemented
by commercial payer data from several unidentified midwestern
health insurance carriers. Average time units were added to ASA
RVG base units to yield average total billed units for each procedure.
Multiplying the average total billed units by the Medicare anesthesia
conversion factor yielded an average Medicare allowed charge for
each anesthesia CPT code. To calibrate these values with respect
to all other CPT codes in the Medicare Fee Schedule, average allowed
charges were divided by the simple average of the three Medicare
conversion factors for primary care, surgical and "other"
services, i.e., $36.66.
To illustrate the formula, consider code 00406, "anesthesia
for radical procedures on the breast with internal mammary node
dissection," which has a base unit value of 13 and an average
of 6.7 time units as estimated by CHEG:
|
13
|
base units |
|
+
|
6.7
|
average time units |
|
19.7
|
total units |
|
x
|
$16.68
|
[1997 anesthesia conversion factor] |
|
$328.60
|
Medicare average allowed charge, rounded |
| |
|
|
$328.60
|
|
|
÷
|
$36.66
|
[Nonanesthesia conversion factor] |
|
8.96
|
CHEG units |
How valid is this approach? CHEG has calculated
an average Medicare payment for each anesthesia service and then
calibrated that payment to the relative value units assigned to
medical and surgical services by the Medicare RBRVS. The formula
makes sense, if one wishes to use average rather than actual times.
The results make less sense, however, because of the nature and
quality of the average time information used by CHEG.
The Medicare files provide average times only for the 254 anesthesia
codes. The midwestern carrier data define average times by surgical
code. There is, in many instances, considerable variation between
the two. When Lewin examined the 42 anesthesia codes that are
crosswalked to a single surgical code, it found that use of a
surgical code for a given procedure might result in more than
double as many CHEG units as are assigned to the corresponding
anesthesia code. There does not appear to be any justification
for such anomalies.
Most of the anesthesia codes can be crosswalked to multiple surgical
codes -- as many as 226 surgical codes -- in the case of 00100,
"anesthesia for procedures on integumentary system of head
and/or salivary glands." The minimum CHEG value for a surgical
code corresponding to 00100 is 0.49 units and the maximum is 17.19,
more than a 35-fold variation. Obviously, an anesthesiology group
that bills using the anesthesia codes and whose case mix is weighted
toward the low-end procedures is going to fare well under this
system, while another group with a case mix favoring longer procedures
is going to lose. As stated in the Lewin report, "At a minimum,
if an average time system is implemented, the anesthesia coding
system would have to be disaggregated to accommodate the significant
differences in average times within the current anesthesia coding
system."
ASA provided the Lewin Group with a database containing more
than 83,000 commercial claims, with average times shown by surgical
code. This database came from a billing company with a national
anesthesia client base. Although the data do not represent a 100
percent or even a random sample, the degree of variation in average
anesthesia times within surgical codes suggests that even if groups
bill using surgical codes, whether an average time-based system
will be lucrative or ruinous will depend on individual practice
patterns.
What do "8.96 CHEG units" mean? The value
assigned to a given procedure only acquires a monetary meaning
when multiplied by a conversion factor (CF). If this CF is set
high enough, reimbursement will be satisfactory. If the payer
simply adopts the average Medicare CF of $36.66, reimbursement
for 00406 will equal the average allowed charge of $328.60.
It is possible to determine a CF that will equalize reimbursement
between the traditional base plus time units system and the ARBRVS™.
The Lewin Group compared Medicare total units (adding 1995 BMAD
average times to the base unit for each anesthesia code) to CHEG
relative value units and concluded that the overall volume-weighted
ratio was 2.18. Thus, an anesthesiology group with a commercial
conversion factor of $40 (and with a practice exhibiting the same
average times and same distribution of procedures as the HCFA
national average distribution) would be held harmless under a
conversion to the CHEG ARBRVS™ if the new conversion factor
was $87.20 (2.18 x $40). Few, if any, anesthesia groups will in
fact have the same distribution as the HCFA data, so the hold-harmless
conversion factor of $87.20 should be considered illustrative
only.
Negotiating the conversion factor. In an
era when commercial anesthesia CFs tend to run between $30 and
$50, very few payers will be likely to offer anything near $87.20.
Nevertheless, in negotiations with a payer that is contemplating
adoption of the CHEG ARBRVS™ along with a relatively low
CF, it may be helpful to demonstrate the magnitude of the discount
being suggested. Payers may simply be unaware of the difference.
And, given that neither a payer nor an anesthesiology group can
calculate the true impact of a changeover to the ARBRVS™
or any other average-time-based system without knowing the actual
average times and case mixes for the group(s) affected, the payer
will almost certainly not have budgeted the savings with any reasonable
precision. But the payer should be able to tell you how much it
proposes to pay for each procedure, and you should be able to
compare that amount to your own averages.
Medicare undervalues anesthesia services. Many
payers are attempting to adopt the Medicare Resource-Based Relative
Value Scale (RBRVS) as a payment system for all specialties, and
they typically offer physicians 110 to 130 percent of Medicare
payment rates. Anesthesiologists confronting a contract with an
unacceptable conversion factor that is based on the Medicare Fee
Schedule may wish to show the carrier that anesthesia remains
relatively undervalued by Medicare.
The 22.76-percent increase in the Medicare anesthesia work values
that took effect on January 1, 1997, reflected a strategic compromise
rather than the actual change needed for parity, in ASA's view.
The multispecialty panel of experts convened in the first phase
of the Abt Associates Inc. study of anesthesia work values recommended
an increase of approximately 35 percent. The AMA/Specialty Society
Relative Value Update Committee (RUC) invited ASA to attempt to
validate this recommendation through a survey of double-boarded
anesthesiologists. The result of the survey was a set of work
values that were, on average, 30.3 percent higher than those contained
in the report of the multispecialty panel.
Following this "validation," the original multispecialty
panel reconvened to review its recommendation and the survey findings.
In general, the panel concluded that the survey values were too
high, but that the survey did warrant a modest adjustment to the
panel's original recommendation, which went from a 35-percent
to a 40-percent increase in work values.
ASA's final recommendation to the RUC in August 1996 was for
a 35-percent increase. A redistribution of Medicare dollars, this
being a budget-neutral exercise, of that magnitude was unpalatable
to the other specialties on the RUC. Nevertheless, recognizing
the merits of ASA's argument about undervaluation and of the Abt
study methodology, the RUC voted unanimously to recommend a 22.76-percent
increase to the Health Care Financing Administration (HCFA). In
its final rule on the Medicare Fee Schedule for 1997, HCFA adopted
that recommendation.
The 22.76-percent increase in work values was implemented through
a 15.95-percent increase in the 1997 Medicare anesthesia conversion
factor (CF). (Because of budget-neutrality adjustments that applied
equally to all specialties, the final increase was 9.1 percent.)
Had the multispecialty panel's and ASA's recommendations for a
35-percent increase been adopted, the adjustment to the CF would
have been 24.29 percent. The difference between 24.29 and 15.95,
i.e., 8.34 percentage points, arguably represents, at the least,
Medicare's ongoing undervaluation of anesthesia services.
What more is ASA doing? We are exploring software
and other tools that will allow an anesthesiologist to assess
an alternative payment system such as CHEG's in relation to the
practice's own average times and case mix. In the short term,
if you would like a copy of the Lewin Group report (which, for
licensing reasons, will not include the actual CHEG ARBRVS™
values), please contact the ASA Washington Office at (202) 289-2222;
e-mail <mail@ASAwash.org>.
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