October 2002
Volume 66 |
Number 10 |
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PRACTICE MANAGEMENT
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| Medicare
Is Still the Wrong Benchmark
Karin Bierstein, J.D.
Assistant Director of Governmental Affairs (Regulatory)
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Payers continue to seek anesthesia rates based on the Medicare
conversion factor (CF), which, as we know all too well,
is $16.60 at the national level. In 1999, ASA published
a slide set with full narrative titled "Medicare and
Anesthesia Reimbursement Methods: Why the Medicare Fee Schedule
Is the Wrong Benchmark for Commercial Anesthesia Payments."
This monograph, developed by Alexander A. Hannenberg, M.D.,
chair of the ASA Committee on Economics, contained a number
of analyses based on 1998 payment data, which are now obsolete.
An August trip to West Virginia to explain why Medicare
is the wrong benchmark to several state governmental payers
provided the opportunity to update some of the models developed
three years ago.
1. Difference in Medicare Rates for Anesthesia Versus
Other Services
According to our 2001 commercial reimbursement survey, the
national average CF (unweighted) for anesthesia services
was $45.75. The Medicare CF was $17.83. For all other services
paid under the Resource-Based Relative Value Scale (RBRVS),
the unweighted average of Blue Cross/Blue Shield, managed
care and other non-Medicare, non-Medicaid plans reported
by the American Medical Association (AMA) in 2001 was $45.98.
The corresponding Medicare rate was $38.26.
| |
Medicare/Commercial |
| Anesthesia |
38.9% |
| Other services |
83.2% |
As a percentage of commercial payment levels, therefore,
Medicare payment for anesthesia services is less than half
of Medicare payment for other medical and surgical services.
2. In Absolute Dollars, the 2002 Anesthesia CF Is 14
Percent Lower Than It Was in 1991
In 1991, the last year before Medicare implemented the
RBRVS-based Fee Schedule, the national average CF for anesthesia
services was $19.27. In 2002, it is $16.60, a 14-percent
decrease.
These are absolute dollar amounts, not adjusted for inflation.
$19.27 in 1991 dollars has the same buying power as $25.48
in 2002. Adjusted for inflation, the 1991 anesthesia CF
would have been 46 percent higher than it is today.
3. Hourly Rate for Anesthesia Versus Nonphysician Services
Payment for anesthesia is based in part on the time that
it takes to provide the service. There are quite a few other
codes in the Current Procedural Terminology (CPT) system
with descriptors that depend on the amount of time involved
in providing the service (e.g., "each 15 minutes"
or "30 minutes or less"). Multiplying the Medicare
payment for some of these codes by 4 or 2 or another appropriate
factor yields a per-hour rate, which we can compare to one-third
of the payment for a three-hour anesthetic for open reduction
and internal fixation (ORIF) of an ankle fracture:
When the time that it takes to perform one of these services
is normalized to one hour, the Medicare Fee Schedule (MFS)
places a higher value on orthotics fittings and aquatic
therapy than on a typical anesthesia service. An office
visit for an established patient with minimal presenting
problems "that may not require the presence of a physician"
and where "typically, five minutes or less are spent
performing or supervising these services" is worth
2.75 times five minutes of the anesthesiologist's time in
the operating room.
Medicare payment for the office visit above is calculated
using the higher relative values allowed for a private office's
overhead. Even if the visit takes place in the hospital
and the allowable, minus the office overhead and normalized
to an hour, is just $104.28, it is still worth 18 percent
more than the anesthetic.
4. Cross-Specialty Comparison of Medicare-Based Net
Income
Health economist Peter McMenamin, Ph.D., calculated
a 1995 annual net income for anesthesiology and other specialties
using a model developed by the architect of the RBRVS, Harvard
Professor William C. Hsiao, Ph.D. For each specialty studied,
Dr. Hsiao chose a typical service, computed the Medicare
payment for that service, determined annual hours worked,
calculated an annual gross income based on providing only
that one service to Medicare patients, subtracted practice
expenses and came up with an annual net income figure.
Dr. McMenamin updated Dr. Hsiao's figures and added the
specialty of anesthesiology using colectomy as a typical
service. In 1995, net incomes based on Medicare payments
for 46 weeks times 45 hours of providing the single service
per specialty were as follows:
Updating the McMenamin analysis to 2002, we find that anesthesiologists
would be earning just $304 more than they were in 1995.
Multiplying the annual number of colectomies by the 2002
Medicare CF and subtracting practice expenses projected
to 2002 through the inflation calculator on the Bureau of
Labor Statistics' Web site, the 2002 net annual income for
an anesthesiologist would be $54,073.
5. RBRVS-Based Payments for the Components of an Anesthesia
Service
Any given anesthesia service as described in CPT or
in the Relative Value Guide includes many components. The
code covers preoperative, intraoperative and postoperative
care; only a very few procedures, such as pulmonary artery
catheterization or epidurals for postoperative pain management,
are separately payable. Many of the procedures performed
during the course of a normal anesthetic correspond (with
varying degrees of precision) to separate CPT codes.
Looking at the individual components or building blocks
of an anesthetic for ventral hernia repair (00832), we find
that their RBRVS relative value units add up to a total
of 13.59:
The total payment for the above components of an anesthesia
service would be $491.96 (13.59 RVUs „ $36.30).
In contrast, Medicare payment for a one-hour ventral hernia
repair would be as follows:
| 00752 (6 Base
Units + 4 Time Units) „ $16.60 = $166 |
|
Breaking down an anesthesia service into its components
and applying the RBRVS-based Medicare allowable to each
of those CPT codes would thus yield a payment almost three
times greater than billing for the service using the anesthesia
code.
Conclusion
The above analyses show that Medicare greatly undervalues
anesthesia services relative to the other medical and surgical
services in the MFS.
• The ratio of Medicare:commercial payments for anesthesia
services is less than half the ratio for other services;
• The minute-for-minute payment for a typical anesthesia
service is lower than that for such nonphysician services
as aquatics therapy;
• Annual net income for an anesthesiologist, calculated
on the model of a single Medicare case, is less in 2002
than it was for all nonprimary care specialties in 1995;
• Breaking down an anesthesia service into its component
services on the RBRVS and comparing the Medicare payment
for the total of those component services produces a Medicare
allowable three times greater than the payment for the all-inclusive
anesthesia code. In other words, the MFS is internally inconsistent
as well as inequitable across specialties.
The simplest demonstration of the inadequacy of the Medicare
conversion factor for anesthesia services can be made without
reference to other specialties. Had it kept pace with inflation
since the implementation of the MFS, the CF today would
have been nearly 1.5 times greater than it is.
ASA Argues the Case for an Increase One
More Time
In our efforts to persuade the Centers for Medicare & Medicaid
Services (CMS) to increase the Medicare CF, we have been
limited to the one method that CMS recognizes in showing
that anesthesia "work" is undervalued. After nearly
three years of hard work at the AMA/Specialty Society Relative
Value Update Committee (RUC), we are now trying to make
sure that CMS at least implements the RUC's data and analyses
showing that our services are undervalued by an average
of about 10 percent. This is obviously far less than the
increase needed to close the gap between anesthesia and
other services. Because the physicians representing the
various specialties on the RUC are acutely aware that any
increase in the valuation of one specialty's "work"
will come out of their own pockets, the RUC ultimately refused
to make an affirmative recommendation that CMS apply its
findings but instead sent its data and analyses to CMS.
In our formal "comments" on the proposed rule
for the 2003 physician fee schedule, we recently urged CMS
to take the final step and give some meaning to the entire
RUC process by translating the analyses into a CF increase.
A copy of Dr. Glazer's letter is available at < www.asahq.org/washington/pract_mgmt.html
>. We are now seeking the help of key members of Congress
to inspire CMS to take the appropriate action.
No, Aetna's Payment
Levels Are Not Perfect
Editor Mark J. Lema, M.D., Ph.D., and the Washington Office
have received several complaints about the August "Practice
Management" column describing ASA's ongoing dialogue
with Aetna and the payment policy changes that we have persuaded
Aetna to make. We recognize that many anesthesiologists
are legitimately dissatisfied with Aetna's payment amounts.
ASA cannot compel any payer to raise its rates. What we
have been able to accomplish is to convince Aetna to change
some of the policies that affect payment amounts, e.g.,
to cover monitored anesthesia care anesthesia in more circumstances
than originally planned and to reinstate separate payments
for invasive monitoring lines and postoperative pain management.
Aetna has just granted our request for an explicit statement
that it will not attempt to apply the medical direction
payment reductions to cases involving residents. Readers
will recall that other large payers, notably United Healthcare,
have taken advantage of the Medicare rules regarding payment
for teaching anesthesiologists and reduced reimbursement
by 50 percent in concurrent cases. The following statement
forwarded on September 16, 2002, by Aetna's Jeffrey Livovich,
M.D., is an important confirmation and example for other
payers:
The [medical direction] modifiers should be used to
report the supervision of CRNAs. These modifiers should
not be used to report the supervision of residents in an
academic institution within an anesthesia-training program.
Aetna will pay up to two rooms of resident supervision,
providing the attending physician is present for all critical
portions of the anesthesia service (induction, etc.).
All of this took considerable effort on the part of several
physicians inside Aetna (as well on ASA's part). We certainly
appreciate Aetna's willingness to work with us even though
we may not gain every policy change or action that we discuss,
and we would be delighted if other payers were equally forthcoming.
Negotiating higher CFs must be, under the terms of the
federal antitrust laws, up to individual physicians and
integrated groups. ASA encourages its members to negotiate
as forcefully as they believe appropriate.
Don't forget about the Ninth ASA Practice Management Conference
in San Antonio, Texas, January 31-February 2, 2003! For
more information, contact Jeff R. Schultz at (847) 825-5586,
ext. 45.
Source Materials:
• Hannenberg
AA. Medicare and Anesthesia Reimbursement Methods:
Why the Medicare Fee Schedule is the Wrong Benchmark
for Commercial Anesthesia Payments. ASA, 1999.
• Bierstein K. Fees paid for anesthesia
services: 2001 Survey Results. ASA Newsl. 2001;
65(9):34-37.
• Gallagher PE. Medicare
RBRVS: The Physicians' Guide. AMA, 2002:120.
• U.S. Department of Labor, Bureau of
Labor Statistics, inflation calculator: < www.bls.gov/cpi/
>.
• McMenamin P. Reassessing Anesthesia
Fees Under the Medicare Fee Schedule, 1995. Paper
prepared for ASA, available at < www.asahq.org/Washington/McMenamin.pdf
> .
• Hsiao WC, Dunn DL, Verrilli
DK. Assessing the implementation of physician
payment reform. N Engl J Med. 1993; 328:928-933. |
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