This article is available in PDF format.

es, it’s true. Medicare proposes to lower payments to anesthesiologists and many other specialists yet again. On January 1, 2007 — as things stand now — the Medicare conversion factor for anesthesia services will drop by 12 percent for three independent reasons:

The unpleasantness is not over: In 2008, 2009 and 2010, the Centers for Medicare & Medicaid Services (CMS) project further annual 1-percent reductions attributable to the revaluation of practice expenses. CMS officials have said, however, that they expect that there will be new data and new lobbying arguments from all the specialties that will change these numbers over the next three years.

Those of you who have not put aside this column in disgust and who are reading on may be asking 1) why has ASA not prevented this outrage and 2) what is ASA doing now? The short answers to these important questions follow.

1. Why has ASA not been able to stop the endless series of Medicare cuts?
Medicare has a congressionally established annual budget that grows much more slowly than the demand for medical and health care services. Anesthesiology accounts for about 1.5 billion Medicare dollars each year and nurse anesthesia approximately $523 million more — more than 2 percent of the agency’s spending on physician services. This is a significant amount of money that ASA alone is eager to see increase.

The Medicare Fee Schedule, since its launch in 1992, has been extremely structured and also driven by the assumption that primary care services are underpaid. Adjustments to the payments made for any one specialty’s services depend upon convincing the American Medical Association (AMA)/Specialty Society RVS Update Committee (RUC) and CMS that the relative values assigned under the fee schedule to three different categories — work, practice expenses and professional liability expenses — are incorrect.

Anesthesiology’s disadvantage, in this system, is that we have lower practice costs and malpractice insurance rates than most. Eighty percent of the anesthesia conversion factor reflects a measurement of “work.” For the rest of medicine, practice expenses, i.e., the costs of running a medical office, account for some 45 percent. We are handicapped by our inability to show increases on the cost side to offset the tremendous devaluation of anesthesia work that slashed the conversion factor in 1992. And, as we know all too well, we have not been able to convince the other specialties on the RUC to redistribute relative values (i.e., dollars) from their pockets to ours. That is a tough argument to sell when anesthesiologists’ relative incomes are well known to our colleagues to be just below the 90th percentile.

In a budget-neutral world, where dollars shift according to arbitrary measurement processes and total spending cannot grow more than $20 million per year without congressional action, specialties lose ground if they cannot demonstrate satisfactorily that the amount of work or of practice costs has increased. The complexity of the fee schedule and the heavy reliance on the RUC has enabled CMS to pin the responsibility for the unfairness and absurdity of a $17 conversion factor on factors of which it surrendered control long ago.

When organized medicine first offered to hash out the relative values for all services among ourselves through the RUC, handing CMS a welcome gift, a very experienced and street-smart surgical organization lobbyist told me that measuring “resource costs” realistically was a fantasy. We all should just have insisted on negotiating prices with the federal government. He may have been right, but the bargaining option is no longer before us.

2. What Is ASA Doing Now?
We are urging CMS to make sure that the payment changes in the proposed fee schedule rule are transparent and correctly analyzed. We also are strongly encouraging the use of better practice expense data.

The two big changes in the proposed rule were the increases in the work valuation of visit (“evaluation and management” [E/M]) services — a mid-level office visit increased by 37 percent and the adoption of a new methodology for calculating practice expense values combined with the acceptance of private surveys submitted by a number of specialty societies. CMS is considering creating a special work adjuster to make the work values redistribution budget-neutral — and less visible than it would be if the adjustment were made directly to the conversion factor, as it has been in the past. ASA is joining the majority of medical societies in discouraging recourse to a special adjuster.

We also are calling upon CMS to delay any decrease in the conversion factor that would finance the currently proposed practice expense shifts. Along with the many other societies that did not commission special practice expense surveys, we have committed $25,000 to pay for a new multispecialty survey that will apply the same methodology to all, as did previous socioeconomic monitoring system surveys conducted by AMA. Finally we have asked CMS some technical questions, both in our formal comment letter and in a meeting at CMS headquarters in July, to ensure that the work values for the anesthesia codes have been updated properly to reflect the E/M adjustments and that the practice expense values have been weighted by site of service.

Although we received a derisory update in the valuation of anesthesia work in the last overhaul of the Medicare Fee Schedule, our efforts have not abated. Norman Cohen, M.D., chair of the Committee on Economics, with assistance from Stanley W. Stead, M.D., and Alexander A. Hannenberg, M.D., has developed a new methodology that should satisfy the objections of the RUC and of CMS in the last five-year review.

Perhaps the most important answer to the question, “What is ASA doing?” is this: We — officers, members and staff — do not let up in our efforts to persuade Congress to reform Medicare payment first by fixing the inequities of the SGR system. If, as Dr. Cohen says, “We just don’t have the political muscle,” we can build it up. Please keep checking the NEWSLETTER, the ASA Web site and your e-mail for information on how you can help to make the government listen.

Practice Tip: Apply Now for Your National Provider Identifier
May 23, 2007, could be the day Medicare stops processing your claims if you have not obtained your National Provider Identifier (NPI).

All physicians and other health care providers who are covered entities under the Health Insurance Portability and Accountability Act, or HIPAA, must obtain an NPI from CMS. The NPI will identify physicians and other providers on an electronic claim. It will replace not only the Unique Provider Identification Number used for years by CMS but also the various physician I.D. numbers used by private payers. The practice itself must also have an NPI.

CMS outlined the three ways to apply for an NPI in a May 2005 letter to health care providers:

The letter in its entirety is available at <www.cms.hhs.gov/NationalProvIdentStand/Downloads/NPIdearprovider.pdf>.

CMS representatives report that as of July 2006, they have issued more than 840,000 NPIs and are processing about 800 applications per day. Anesthesiologists and their practices who have not yet applied for an NPI should start the process now. Remember, as of May 23, 2007, “no NPI will mean no payment,” in the no-nonsense words of Sharon Merrick, ASA Coding and Reimbursement Manager.

CMS has established the following time frame for implementation:

Private payers may follow a different implementation schedule but are also required to use the NPI by May 23, 2007. Small health plans have until May 23, 2008.

For further information, please see <www.cms.hhs.gov/apps/npi/01_overview.asp>.