ASA October 2007 Newsletter

GAO Confirms Huge Medicare Conversion Factor Disparity for Anesthesiology

Ronald Szabat, J.D., LL.M.
Executive Vice-President – External Affairs and General Counsel

n a long-expected study, recently completed and released, the federal government’s General Accountability Office (GAO) has independently verified what ASA members have long known. Payments under Medicare for anesthesiology services are disproportionately lower than private payer “reimbursement” for comparable services. All told, and based on its methodology as discussed below, GAO says that Medicare anesthesia payments are 67 percent lower than average commercial payments.

Since the inception of Medicare’s resource-based relative value payment system, ASA has made the case that anesthesiology has been significantly undervalued and underpaid. ASA’s own biennial surveys have shown that Medicare payment for anesthesiologists is a mere fraction of what private insurance companies pay. And ASA advocacy efforts, both on the regulatory and legislative sides, have consistently made the case that the Medicare anesthesia conversion factor dramatically lags that of the private sector.

In support of gaining independent data to help Congress and the Administration, several years ago Rep. Fortney “Pete” Stark (D-CA), now chair of the House Ways and Means Health Subcommittee, and former Representative and Chairwoman Nancy Johnson (R-CT) asked GAO to take a hard look at government payments for Medicare anesthesia services. In asking GAO for a comprehensive study, Reps. Stark and Johnson expressed concern that the difference between Medicare and private anesthesia payments could create regional discrepancies in the supply of anesthesiologists, and they asked GAO to explore the issue in depth.

Specifically, GAO was asked to study the extent to which Medicare payments for anesthesia services were lower than private payments across Medicare payment localities in 2004 and whether or not the supply of anesthesia practitioners across Medicare payment localities at that time was related to the differences between Medicare and private payments for anesthesia services, or to the concentration of Medicare beneficiaries in these localities.

In a far-ranging report that admittedly used claims data from only two large anesthesia service billing companies for seven principal anesthesia services in 41 Medicare payment localities, GAO nonetheless reached conclusions verifying a huge payment disparity. As included in the report, “[for] 2004, average Medicare payments for the seven anesthesia services ranged from $177 to $303 across the 41 payment localities, a range of 71 percent.” At the same time, GAO concludes that “average private payments for the same set of seven anesthesia services … ranged from $472 to over $1,300 across these localities, a range of 177 percent (emphasis added).”

Not surprisingly, GAO also found that the number of anesthesiologists decreased as the concentration of Medicare beneficiaries increased in 87 payment localities. This fact alone gives new teeth to arguments long made by ASA and other national medical specialty organizations that the comparatively lower rates of Medicare payment, now coupled with annual threats of sustainable growth rate payment cuts, are a severe disincentive for physicians to practice in areas with a high concentration of Medicare beneficiaries.

Despite repeated attempts by ASA to supply data and assist GAO in its efforts, the report specifically did not review hospital stipend levels, thus failing to study any correlation between anesthesiologist supply and Medicare beneficiary numbers — a possible marker of cost-shifting to cover Medicare physician payment shortfalls. ASA believes this was a major missed opportunity by GAO to highlight another indicator of Medicare payment problems.

All told and despite its methodological limitations, the GAO report is useful in making the case for legislative and regulatory reform for anesthesiology payments. Along these lines, ASA’s own landmark work through the American Medical Association’s (AMA’s) Relative Value Update Committee should produce significant relief as Medicare considers thousands of comments from ASA members in support of an increase in the Medicare anesthesia conversion factor for 2008. Stay tuned for more on that in the coming months.

For a copy of the entire GAO report, please visit www.ASAhq.org/news/GAOreport.pdf.