Valuing Physician Services
Describing and valuing physician services in the U.S. health care system is a two-step process: first creating a code at the Current Procedural Terminology (CPT ^®) Panel and then defining a value for the service within the Resource-Based Relative Value Scale (RBRVS). CPT is wholly owned by the American Medical Association (AMA), and the Centers for Medicare & Medicaid Services (CMS) maintain the RBRVS. An important AMA-sponsored committee, the AMA/Specialty Society Relative Value Scale Update Committee (RUC) is the primary avenue for physicians and other health care professionals to help CMS value the code by establishing physician work, practice expense and professional liability costs for each RBRVS service. Getting the right values for each code is important, not only for Medicare payment but because RBRVS has become the most common payment system in this country.

CPT Coding
CPT is a coding system that allows the reporting of professional activities, supplies and equipment associated with a specific clinical service. CPT was originally developed in 1966 by AMA and was adopted by the Health Care Finance Administration (HCFA) — now known as CMS — as the method for describing physician services in the 1980s. In 2000, as part of the Health Insurance Portability and Accountability Act, CPT became the required coding system for use in all health care transaction reporting. AMA continues to maintain CPT and manage the entire process for editing, creating or deleting codes. The process allows any specialty or individual to propose new codes or challenge the definitions or need for existing codes. The clinical service codes, Level 1, are five-digit codes that may be reported with two-digit modifiers. CMS has developed the Healthcare Common Procedure Coding System (HCPCS) Level II codes for reporting product, supply and other non-CPT services that are provided to patients. These are codes made up of a letter (A-S and V) followed by four digits, with two character modifiers.¹ HCPCS Level II codes can be modified by CMS via a process that is outlined on its Web site at www.cms.hhs.gov/MedHCPCSGenInfo/Downloads/2007_alpha.pdf.

The CMS rules for use of CPT in billing are explicit in their requirement that as many codes be used (with various modifiers) as are needed to accurately describe a service — without “unbundling.” Unbundling refers to the process of breaking down a service into its component parts and charging for them separately in an attempt to boost payment. Such activity is considered abuse of the Medicare Trust and could lead to prosecution. Each service is described by a single code, while additional codes may be used to describe services that might have been provided concomitant to the first service, unless those codes are not allowed to be reported simultaneously (i.e., are “bundled”).

RBRVS and RUC
Once a service is properly coded, the payment for the service by Medicare is determined based on the relative value of the service compared to other clinical services. In 1992, Medicare altered the way it pays for most physician services. Instead of paying physicians based on charges, HCFA established a standardized payment schedule based on a resource-based relative value scale, or RBRVS. Under the RBRVS system, CMS determines payments by estimating the resource costs needed to provide the clinical service. CMS uses “relative value units,” or RVUs, to compare the relative amount of resources used for an individual service compared to all other services on the Medicare Fee Schedule. The resources include three components: physician work, practice expense (PE) and professional liability (malpractice) (PLI) costs, each expressed in RVUs. Payment is calculated by multiplying the combined RVUs for a service by a conversion factor, a monetary amount that is determined annually by CMS. CMS determines the code-specific RVU values based in large part on recommendations received from the RUC. The RUC makes recommendations to CMS for all three resource elements for almost every code published in CPT. For practice expenses, a standing subcommittee of the RUC known as the Practice Expense Review Committee, or PERC, considers expense items proposed by specialty societies and recommends to RUC the values for direct practice expense items, which are clinical labor time, equipment and supplies. While the RUC makes recommendations on time, type of equipment and number and type of supply items used, CMS determines the cost assigned to each of these items, converting the total into a PE RVU value, using a very complex formula. In the final determination of payment, there is the additional factor of the geographic practice cost index that adjusts the payment to account for geographic differences in costs.

In addition to defining values for new codes, the RUC provides a reassessment of all previously valued codes through a five-year update process. Both specialty societies and CMS can nominate services felt to have incorrect work values for review. Not surprisingly, specialties prefer to bring codes forward in the five-year review that are felt to be undervalued, while CMS typically brings forward codes thought to be overvalued.

The recommendations of the RUC are forwarded to CMS, which makes final value determinations. As a result of the processes established by the RUC, AMA and specialty societies, the recommendations of the RUC have, in the great majority of cases, been accepted by CMS, recognizing that “organized medicine” has established the relative valuation of services. Nonetheless it is the responsibility of CMS to maintain values in the RBRVS. In the end RUC is only an advisory body, albeit a very influential one.

Role of ASA in Valuing Clinical Services
Specialty societies such as ASA play a major role in advising CMS by providing advisors to the CPT, RUC and its subcommittees. Specialties that have large Medicare case volumes (including ASA) have permanent membership on the RUC, with smaller specialties having the opportunity to be elected to one of three rotating two-year RUC seats. Every specialty that has a seat in the AMA House of Delegates has an advisor at CPT and the RUC who serves as an advocate for their specialty. This advocacy includes presenting codes to CPT, recommending values to the RUC for work and practice expense and commenting on the presentations of other specialties. Each member of the CPT Editorial Panel and the RUC serves in the role of an expert in coding (CPT) or in valuation (RUC). Procedural rules prevent the panel and committee members from advocating on behalf of their specialties, unlike the role of the advisers. As a result, participation in this process by ASA representatives is critical to the proper valuation of nonanesthesia clinical services provided by anesthesiologists (notably evaluation and management, critical care and pain management codes). Although anesthesia services use a different system for determining payment (base + time rather than work + PE + PLI), CPT is responsible for creating anesthesia codes, and the RUC recommends base values to CMS.

AMA appoints the physician members of the CPT Editorial Panel, and these CPT panel members are subject to term limits. While the workings of the committees may seem arcane, they employ a scrupulous methodology that strives to be fair to all while requiring a scientific approach to the valuation of services. The CPT panel will entertain testimony from any entity that might wish to see a change in the CPT coding (adding, altering or deleting a code). The RUC hears testimony only from physician or allied health professional specialty society representatives in determining valuation. The overriding principle is that CMS reimbursement valuations must be “budget neutral” so that any increased payment for one CPT code — usually thereby favoring one or a few specialties — often means a potential commensurate downgrading of other code valuations. CMS actually mandates that any alterations in valuation may not cause physician fee schedule payments to vary overall by more than $20 million from that which would have ensued had the changes not been made.²

Thus the process is driven by evidence, and the demand for proof of efficacy or work valuation requires that members of the specialty participate in the surveys that determine what practice expense and work valuations actually are [see “The Survey Process” below].

The Survey Process: Why It Is So Critical to Proper Valuation of Codes?

When a specialty society earns Current Procedural Terminology (CPT ^®) approval for a new or revised code, the next step is to determine a work value, usually at the American Medical Association (AMA)/Specialty Society Relative Value Scale Update Committee (RUC). In most cases, the RUC process requires that the specialty conduct a survey of providers who have experience with the clinical service and can provide an assessment of the relative value of the physician work involved.

The RUC has a well-defined process for developing work relative values. After CPT approves a new or changed code, each specialty society is asked to indicate if it has a “level of interest” in determining valuation for the service. When a specialty, such as ASA, receives this invitation, it has one of several options:

1. Survey the members to obtain data on the amount of physician work involved in providing the service;
2. Comment on recommendations developed by other societies; or
3. Take no action.

For codes that are frequently performed by anesthesiologists, ASA usually selects option number 1. It is critical that anesthesia providers who provide the service participate in the survey process, since this familiarity is essential to accurately determining the value of physician work.

The survey process is straightforward but requires careful consideration in providing reliable and credible data for the RUC. AMA staff prepares the survey instrument based on specific RUC-approved language and instructions. In some cases, such as the survey form used for anesthesia codes, the RUC has approved a special survey document to satisfy individual requirements. Specialties request that physicians completing a survey compare the work of the new or revised service to that of an established reference service of widely accepted value. A list of 15 to 30 potential references accompanies the survey.

After the survey period ends, the specialty society committee reviews the results and prepares value recommendations and supporting rationales for the RUC. When two or more specialty societies are involved in developing recommendations, the RUC encourages coordination of the survey process and joint development of recommendations.

The specialty(ies) then presents its recommendations to the RUC and is required to defend every aspect of the proposed valuation. As a result, the more surveys that are submitted and the more detailed the information provided by the physicians completing the surveys, the greater the credibility of the information. After presentation of recommendations, the RUC votes on the specialty’s recommendation. A two-thirds majority is necessary for approval. The RUC forwards its recommendations to the Centers for Medicare & Medicaid Services (CMS), which has final authority for maintaining the Medicare fee schedule and the resource-based relative value scale. CMS historically has accepted more than 95 percent of the RUC’s work value recommendations.

References:
1. American Medical Association. Physicians’ Current Procedural Terminology. Chicago: American Medical Association; 2005:10-15.
2. CMS Final Rule, Federal Register, November 21, 2005:70119. www.acro.org/pdf/Final%20Fule%Physicians%20Nov2005.pdf. Accessed June 28, 2006.

Neal H. Cohen, M.D., M.P.H., M.S., is Vice-Dean, Professor of Anesthesia and Medicine, University of California-San Francisco School of Medicine, San Francisco, California.

Tripti C. Kataria, M.D., M.P.H., is Assistant Professor, Department of Anesthesiology, Northwestern University, Chicago, Illinois.

Tripti C. Kataria, M.D., M.P.H., is Assistant Professor, Department of Anesthesiology, Northwestern University, Chicago, Illinois.