L. Charles Novak, M.D., Chair
Ad Hoc Committee to Study Payment Methodology

Norman A. Cohen, M.D.
ASA Representative to AMA/Specialty Society Relative Value Update Committee (RUC)

Why Would ASA Look at Anesthesia Payment Methodology?
n 1992, Medicare replaced its “usual and customary” system to pay for physician services with the Medicare Physician Fee Schedule (MFS). The transition depended heavily on the Resource-Based Relative Value Scale (RBRVS) of physician work developed by William C. Hsiao, Ph.D., under a government contract. At that time, Medicare proposed to pay for anesthesiology services using a flat fee for each anesthesia Current Procedural Terminology™ (CPT) code. ASA fought the proposal and was successful in retaining our traditional base + time unit payment methodology under the MFS. ASA was blindsided, however, by a drastic reduction in the Medicare anesthesia conversion factor (CF) from $19.27 to $13.94 with MFS implementation.

ASA has sought correction of the CF problem during mandatory five-year reviews of the MFS. A moderate correction was attained in 1997. No significant gain was attained in 2002. Facing the third review, the 2003 ASA House of Delegates (HOD) authorized a Task Force to Study Payment Methodology to “study the relationship of anesthesiology’s payment methodology to RBRVS.” An underlying question was, could a methodology change help to solve the undervaluation of anesthesia services by Medicare?

What About Our Current (and longstanding) Payment Methodology?
For more than a generation, the base + time unit methodology has served our specialty well. The anesthesia CPT code set has simplified billing and the use of actual time has provided specificity in individual patient charges. Careful analysis reveals, however, that too much of the value of an anesthetic service is loaded into the base units and too little into the time units. Although our current system values them so, time units do not involve the same amount of physician work across the full array of services we provide.

How Do We Relate to Other Physicians?
The fact that the anesthesia payment system and the RBRVS differ significantly has created difficulties in convincing Medicare to correct anesthesia undervaluation. The RBRVS assigns each CPT service a value for physician work, practice expense (PE) and professional liability insurance (PLI). The anesthesia Medicare fee schedule globally allocates work, PE and PLI as shares of the Medicare anesthesia CF rather than on a procedure-specific basis. The RUC advises the Centers for Medicare & Medicaid Services (CMS) on the values assigned to these components for every new and revised CPT code, except for the anesthesia codes, where the RUC only recommends a value for the basic units assigned.

The RUC and CMS spend much time assessing the value of physician work for RBRVS procedures. Although the RUC typically uses average time from surveys in valuing RBRVS codes, payments for a growing number of services vary based on time. These time-based codes differ from anesthesia procedures in that physician work per minute (intensity) varies from procedure to procedure, whereas anesthesia time units have the same intensity across all services. The RUC has cited these fundamental differences between our systems (global work, PE and PLI allocation, fixed intensity of time units and front-loading intensity into the base units) to justify the RUC’s inability to address the anesthesia valuation issue. CMS followed the RUC’s lead, resulting in no change in anesthesia work values in the last five-year review. Recently, several RUC members have strongly suggested to ASA that a switch to RBRVS for anesthesia payments might create a more favorable environment at the RUC to discuss undervaluation.

What Did the Task Force Do in 2004?
The task force developed four payment models consistent with RBRVS. In the first model, an anesthesiologist would report anesthesia services using the same codes submitted by the surgeon. While this model would yield great specificity in reporting, it would require the elimination of separate time reporting and increase the complexity of billing. ASA would lose control of its own code set and also face the monumental task of valuing the anesthesia work for 6,000 procedures.

The second and third models considered expanding the existing anesthesia code set to provide greater specificity but differed in that one model would use average time for determination of value and the second would allow separate reporting of time. In the separate-time model, the work intensity of time “add-on” codes would vary by service, thereby addressing one of the RUC’s concerns. While both models would preserve ASA’s role in code development, the task force determined that the number of new codes requiring creation would be large and implementation would be challenging.

The fourth model evaluated would “unbundle” anesthesia work into components, with separate reporting of evaluation and management codes for preanesthesia and postanesthesia work and a graduated scale of time-based codes for intraservice work, chosen to reflect the combination of patient complexity and anesthetic intensity. Although this model does capture perioperative work fairly completely, this model is sufficiently different from other RBRVS services that it might perpetuate ASA’s isolation at the RUC due to our still having a “different system.”

What Message(s) Did the House of Delegates Send?
The task force presented its work before a special Reference Committee of the 2004 House of Delegates in three reports and a far reaching resolution. The resolution would have authorized ASA to propose a restructuring of Medicare payments for anesthesia services based on the following three principles:

1. That any new coding system must accurately reflect both the complexity and duration of the associated surgical procedures to compensate for the elimination of separately reported anesthesia time;
2. That the inevitable influence of a uniform Medicare conversion factor on payment rates in the private sector be thoroughly considered; and
3. That any transition to a uniform Medicare conversion factor must be based on a value sufficient to protect the specialty, as a whole and in aggregate, from economic damage.
The resolution was not adopted, but rather referred to an ad hoc committee of the President’s choice for further study. Many ASA members testified that current payment methodology was serving their practices very well despite the Medicare issue, that the proposal lacked sufficient development and that the proposal was definitely premature.

What Is the Ad Hoc Committee Up to Now?
Refinement of the task force’s initial proposals has depended upon acquiring real world data on surgical and anesthesia procedures and times from a cross-spectrum of anesthesia practices. This has been difficult since most practices do not capture surgical procedure codes in sufficient detail for the ad hoc committee to accurately analyze the various models. The committee has acquired the required data from a few practices with integrated information systems. One important area being investigated is the variability of surgical and anesthesia times within a single surgical procedure. Initial results demonstrate wide variability, raising concerns about how one can fairly assign values in the average time models. The large variability in time would likely also create large variability in impact by practice type. Small workgroups of the committee have continued to refine the descriptions of the component coding model and the separate anesthesia time model as well as pursue methods to expand the existing anesthesia code set.

What Lies Ahead?
Payment methodologies and policies for physician services are under constant scrutiny by both public and private third-party payers. The tsunami of retiring baby boomers and other factors are certain to increase the prominence of Medicare as a payer; an increasing problem for our specialty. These factors demand that we have a thorough understanding of issues and options relating to the changing climate of payment for physician services. Although changing payment methodology for anesthesiology services in not likely in the near term, ASA’s leadership, Board of Directors and House of Delegates must be informed so that they can make the best decisions possible on behalf of the membership when conditions dictate action.

The task force and the ad hoc committee have not solved the Medicare valuation problem. If an opportunity to correct the problem depends on a transition to RBRVS methodology, however, ASA is in a much better position to make an informed decision about such a change than it was two years ago.

L. Charles Novak, M.D., is Clinical Professor of Anesthesiology, University of Washington School of Medicine, Harborview Medical Center, Seattle, Washington.

Norman A. Cohen, M.D., is Staff Anesthesiologist, Oregon Anesthesiology Group, P.C., Good Samaritan Hospital, Corvallis, Oregon.