Immeasurably aided by a robust economy serving to trim the federal deficit all by itself, Congress sent historic budget reconciliation and tax legislation to the President at the end of July that was calculated to balance the federal budget by the year 2002 and to provide some $90 billion in tax cuts. President Clinton signed the bills into law on August 5.

Physician Payments

The reconciliation bill includes approximately $140 billion in net deficit reduction, of which $115 billion would be achieved by restraining Medicare growth and providing more managed care opportunities for seniors. Restraints on physician reimbursement will be relatively mild in comparison to other provider groups; approximately $5 billion to $7 billion in savings will be achieved by introduction of the new single conversion factor for all specialties (except anesthesiology) and in establishing a new "sustainable growth rate" formula for annual updates in the conversion factor.

For ASA members, the reconciliation bill marks a major legislative accomplishment. Instead of cofront-ing a 9-percent cut in the Medicare anesthesiology conversion factor (CF) effective next January 1, as proposed in the President's FY1998 budget, the 1998 national CF has been set at 46 percent of the new single CF for all other specialties, meaning approximately a 2.4-percent increase for anesthesiologists next year. Except as adjusted for changes in relative value unit values for other specialties, this 46:100 relationship will continue in future years; that is, the same annual percentage update in Medicare reimbursement will be applicable to anesthesiology as is applied to all other specialties.

Some anesthesiologists contacting the ASA Washington Office have expressed skepticism that establishment of the anesthesiology CF at 46 percent of the new single CF for other specialties can be regarded as a legislative accomplishment, whatever the President may have proposed. The fact is, however, that because Medicare reimbursement for the specialty is based upon the ASA Relative Value Guide, utilizing base and time units, the anesthesiology CF must be scaled to the CF for all other specialties, which is multiplied by "relative value units" to determine appropriate payment. The new 46-percent rate preserves the relative relationship of the specialty to all other specialties that is currently in effect as a result of the 22.76-percent increase in anesthesiology work values placed into effect on January 1, 1997.

Practice Expenses

ASA supported efforts of the Practice Expense Coalition to gain postponement by Congress of the proposed January 1, 1998, effective date for budget-neutral implementation of resource-based practice expense values under the Medicare Fee Schedule. The reconciliation bill postpones effectiveness of the new values until January 1, 1999, requiring that the Health Care Financing Ad-ministration (HCFA) engage in further study of the validity of proposed practice expense values published last June and requiring that the new values be phased in over four years beginning in 1999.

In the end, however, Congress exacted a price for the postponement. Next January 1, some $390 million in payments for nonprimary care procedures and services will be arbitrarily allocated to the primary care codes as, in effect, a "down payment" on what Congress expects to be the outcome of the overall revaluation of practice expenses.

Funds for the down payment will be derived from reducing 1998 practice expense relative values for virtually all nonprimary care codes to not more than 110 percent of the respective physician work values for those codes. These funds will serve to increase 1998 practice expense values for office visit codes by a correlative amount. Because practice expense relative values of only three nonprimary care codes historically billed by anesthesiologists exceed physician work values by more than 10 percent, the impact of this reallocation on the specialty should be almost nil. The major impact will be felt by ophthalmologists performing cataract surgery, certain other specialist surgeons and cardiologists.

Nonphysician Providers

ASA was also successful in persuading Congress not to include a provision in the reconciliation bill that was advanced by the American Association of Nurse Anesthetists (AANA), by which the requirement of physician supervision of nurse anesthetists, currently contained in the Medicare Conditions of Participation for Hospitals, would have been eliminated. This issue has been under consideration by HCFA for many months as part of an overall administrative review of the Conditions of Participation, and ASA argued successfully that adoption of the AANA proposal would amount to inappropriate micromanagement of the Medicare program by Congress.

Nonphysician providers were successful, however, in gaining inclusion of a provision in the bill forbidding Medicare and Medicaid managed care organizations from discriminating, solely on the basis of state licensure or certification, in selection of participants for their provider panels. ASA opposed this provision as amounting to unwarranted interference with the right of managed care plans to select their panel participants. Neither the managed care industry nor any other physician group expressed any willingness to join in that opposition, and the provision finally included in the bill was one which the managed care industry found acceptable during debate on the Clinton health plan four years ago. In the last analysis, however, the provision is of little meaning: nothing in the provision prevents a managed care organization from discriminating on the basis of education or experience, e.g., having completed a residency in anesthesiology.

Managed Care Issues

Notwithstanding the efforts of the Patient Access to Specialty Care Coalition, of which ASA is a member, few significant patient or provider protections against managed care abuses were included in the reconciliation bill, other than a prohibition against so-called "gag" clauses, protection of physicians against managed care indemnification requirements and a requirement that any denial of benefits based on medical necessity be made only by a physician. Inclusion of most patient protections supported by the Coalition simply ran contrary to the philosophical bent of many members of the Republican congressional majority, which disfavors government interference in the marketplace whenever the need for government regulation does not appear overwhelming.

While stopping well short of the "freedom of entry" provisions advocated by the American Medical Association, the reconciliation bill does create a legislative framework, making it easier for provider service organizations (PSOs) to form and compete with traditional managed care entities. Specifically, the bill calls upon the Secretary of Health and Human Services (HHS) to establish federal solvency standards for PSOs and authorizes HHS to waive state licensure standards in certain limited circumstances.

Beneficiary Provisions

In addition to the right of a limited number of beneficiaries to establish medical savings accounts, the reconciliation bill also includes a new option for obtaining the services of the physician of the beneficiary's choice, albeit at greater expense. This option would permit a beneficiary and a physician to contract privately for provision of a medical service, outside the Medicare program, and as long as the physician had agreed not to file any Medicare claims, with respect to any patient, for two years. Given the fact that most anesthesiologists are not in a position to remain outside the Medicare program, whether by virtue of contract or economic necessity, this option would seem to be of limited benefit to the specialty.

Perhaps the biggest disappointment to the provider community regarding the reconciliation bill was the unwillingness of federal legislators to require that Medicare beneficiaries "share the pain" of the increasing costs of the program. Thus, in the end, the proposals to charge higher Part B premiums to wealthy seniors, to increase the Medicare eligibility age from age 65 to age 67 and to require a modest $5 co-payment for home health services all fell by the wayside. The only provision of the bill affecting Part B premiums was the repeal of existing law that, without repeal, would have reduced beneficiary cost below the current 25 percent of current program cost.

In political terms, there perhaps will be no better time than 1997, a year of significant prosperity, for Congress to take even these tiny steps toward facing up to the looming Medicare crisis, and the fallout early in the next century will be all the more painful as a result. Unfortunately, all that the current Congress could muster is a requirement that a federal commission be appointed to make recommendations for fundamental revisions in the Medicare program and the future financing of physician and nonphysician education. Recommendations are to be made within two years from the time of enactment of the bill, meaning, of course, that they will be presented to the next Congress, not this one.

Fraud and Abuse

The Administration failed in its effort to gain repeal of the right to obtain an advisory opinion with respect to antikickback matters; to the contrary, the reconciliation bill newly authorizes obtaining advisory opinions with respect to physician self-referral. The bill also authorizes permanent exclusion from the Medicare program after an individual has been criminally convicted three times for program violations, but in general, the bill only tinkers at the margins of the fraud provisions of last year's Portability Act.

Other Issues

Other provisions of the reconciliation bill of interest to physicians is the authorization of a four-year medical savings account demonstration project involving up to 390,000 Medicare beneficiaries, a gradual ratcheting-down of the indirect medical education adjustment from the current 7.7 percent to 5.5 percent by 2001 and authorization of direct medical education payments to nonhospital settings. Not included were the MICRA-based professional liability reforms that had been approved by the House or authorization for establishment of a permanent center of excellence program as sought by the Administration.

In mid-July, the HHS Office of Inspector General released its report on the first audit of HFCA's financial statements covering fiscal year 1996. The report included the auditor's estimate that net HCFA overpayments for beneficiary care amounted to $23.2 billion, or about 14 percent of HCFA's $168.6 billion in fee-for-service payments for the year.

Insufficient or lack of documentation was reported to have accounted for almost half of the improper payments, with a lack of demonstrated medical necessity representing the next leading cause of overpayment, at about 37 percent of the total. Type of service, inpatient prospective payment system claims (PPS) and physician claims were listed as the leading causes of overpayments (about 23 percent and 22 percent of the total, respectively), followed by home health (16 percent), outpatient (12 percent), skilled nursing facility (10 percent) and laboratory claims (6 percent).

The audit report concludes that in view of the foregoing, HCFA needs to consider stronger deterrents to reduce improper Medicare benefit payments, enhance prepayment and postpayment controls by updating computer systems and software, and direct intermediaries and carriers to step up their efforts to deter improper payments.

Audit personnel emphasized that their review of HCFA's financial statements was not a fraud-and-abuse audit and that no conclusions had been drawn as to the intent involved in the

various categories of overpayment. Medicare providers can assume, nonetheless, that the audit will provide impetus for increased scrutiny of Medicare claims and that if next year's audit does not show substantial improvement, critical review of the situation by congressional committees will be almost inevitable.

Pursuant to action of the ASA Administrative Council this past spring, ASA has prepared a new monograph in its practice management series for ASA members. "Billing for Anesthesiology Services: Compliance with Medicare and Other Payer Billing Requirements" has been prepared by Judith Jurin Semo, Esq., and Scott T. Kragie, Esq., of Squire, Sanders and Dempsey, ASA legal counsel. It describes federal statutes dealing with fraud and abuse, discusses pitfalls in billing for anesthesiology services and contains a model compliance program for anesthesiology groups wishing to implement such an initiative.

Check the ASA Web site or contact the ASA Publications Department for ordering information.

ASA At Work For You

Conversion factor. Instead of a 9% cut as proposed by the President, the anesthesiology Medicare conversion factor will increase next year by 2.4%. ASA persuaded the Congress that in light of the history of treatment of the specialty under the Medicare Fee Schedule, the proposed cut would be unfair. Practice expense. ASA joined with other specialist physicians in convincing Congress that implementation next January 1 of resource-based practice expenses under the MFS would have been arbitrary. Congress voted a one-year delay in implementation, pending further study by HCFA, and a four-year phase-in of resource-based values. The congressionally enacted $390 million 1998 "down payment" to primary care does not adversely affect the specialty. Nurse anesthetist supervision. ASA succeeded in persuading the House Ways and Means and Senate Finance Committees not to adopt an AANA-sponsored proposal to eliminate the requirement that nurse anesthetists be supervised by a physician in Medicare-approved hospitals. Pain management practice expenses. ASA filed comments with HCFA August 18 attacking the arbitrariness of proposed HCFA practice expense edits that would improperly limit recognition of real administrative and clinical costs involved in delivery of pain management services.

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FEATURES

Celebrating 150 Years of Modern OB Anesthesia

• Management of Childbirth Pain Before Anesthesia
  
  
• Fanny Longfellow and Nathan Keep
  
  
• Analgesia in Labor Becomes Respectable: The Role of John Snow
  
  
• 'To Give Birth Without Pain!' The First Cases of Mesmeric Pain Relief for Obstetrics
  
  
• 150 Years of Obstetric Anesthesia: A Pictorial Overview
  
  
• And What About the Baby? Virginia Apgar and the Apgar Score
  
  
• Obstetric Anesthesia: The Last Five Decades
  
  
• John J. Bonica Makes Obstetric Anesthesia an Academic Concern
  
  

ARTICLES

• Breaking Down the Barriers to Pain Management
  
  
• Practice Options: Considerations in Setting Up an Office-Based Anesthesia Practice

DEPARTMENTS

• To the Membership
  
• Washington Report
  
• Practice Management
  
• Residents' Review
  
• ASA News
  
• Letters to the Editor
  
• FAER Report
  

The views expressed herein are those of the authors and do not necessarily represent or reflect the views, policies or actions of the American Society of Anesthesiologists.

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