Residency and Economics: Why You Need to Pay Attention

Paloma Toledo, M.D., Past President
Resident Component Governing Council

fter three years of training, anesthesiology residents are prepared to deliver a safe anesthetic to patients in almost any situation. And as we move into practice, our goal should always be to protect the interests of our patients and deliver excellent care. Delivery of safe care, however, entails more than just the physical act of making an anesthetic plan and then executing it; it also encompasses decision-making regarding the cost of the care and how to code and bill properly so that you are paid for what you do. Understanding the basics of anesthesia billing, coding and reimbursement as a resident will certainly help you in the practice of anesthesia in the future.

Payment for physician services has changed dramatically since the 1970s when physicians were reimbursed based on “usual and customary” charges. In the 1970s and 1980s, costs for physician services skyrocketed, leading the government to step in and help contain health care costs. Medicare’s solution to standardizing physician costs was the implementation of the resource-based relative value scale (RBRVS).

In this system, reimbursement for physician work is based on care for the “typical patient” undergoing a procedure. Prior to the development of the RBRVS, ASA developed the Relative Value Guide™ (RVG). In fact, Medicare based its anesthesia RBRVS payment scheme on the RVG relative value. In the RVG, a recommended value for services is listed, and anesthesiologists can use these numbers for a guide to develop their fee schedule. In addition to this, modifying units or qualifying circumstances are considered in the determination of total payment. Anesthesiologists report the services provided to patients by use of a numeric five-digit procedure code. Payments for services are based on the codes provided.

Anesthesia values are determined by adding a base value (which is related to the complexity of the service and is independent of patient condition) to a time unit. The base units include the preoperative assessment, routine monitoring, interpretation of noninvasive monitors and postoperative visits. The measurement of time begins when you prepare the patient for anesthesia, excluding the preoperative visit, and ends when the patient is transferred for postoperative care. In the Medicare system, time units are defined in 15-minute increments, and fractions of time units are rounded to the nearest tenth of a unit. This definition of a time unit may vary depending on the payer.

One of the main differences between the RVG system and those used by Medicare, Medicaid and many private payers is that the latter do not pay for modifiers or qualifying circumstances, which are used in anesthesia billing. However, some private insurers do recognize these modifiers. For anesthesia, there are eight modifiers that can be used, the most well known being the ASA Physical Status (PS) modifier. In essence, modifiers identify circumstances that increase the complexity, intensity or risk of the anesthetic service provided. A qualifying circumstance can be used if the condition of the patient, the operation or a specific risk factor significantly changes the character of the anesthetic provided, i.e., extremes of age, deliberate hypotension or emergency surgeries.

Accordingly, accurate documentation on your anesthesia record will facilitate the appropriate use of modifiers and qualifying circumstances for accurate coding and billing.

Once you have decided on the proper codes, added the modifiers and qualifying circumstances, and your statement is sent to Medicare or another third-party payer, what happens?

Your payment is based on relative value units (RVUs) as well as an anesthesia conversion factor (CF). The unit value is the RVU, which is composed of three factors: physician work, practice expense and practice liability insurance. Work is the actual effort expended by the physician to perform a medical service. Practice expense is the cost of overhead to run a practice as well as the cost of supplies, equipment and employed clinical labor. Professional liability insurance is the estimated cost of professional liability. Payers convert the RVU into a payment amount by multiplying the RVU by a CF that defines the monetary unit of the RVU. To the physician work component, a budget neutrality adjustor is added. All of these components are placed into an equation, and from that, payment is calculated.

As residents, we are sheltered from the world of coding and reimbursement. However, we cannot ignore their significance. As many of you are aware, Medicare payments to physicians have been slated for 5-percent decreases for the past several years. If these payment reductions occur, you will be paid less for what you do. This could create barriers for access to care for our patients. ASA and AMA worked hard to help prevent this payment decrease. Luckily, Congress reversed the payment cuts in 2006 and 2007. If physicians do not continue to voice their concern, however, our legislators can and will continue to decrease already low physician reimbursement rates.

Additionally this year, the Centers for Medicare & Medicaid Services (CMS) acknowledged that payments for anesthesia work are undervalued by 32 percent. CMS proposed regulations that included an increase in Medicare anesthesia payments. ASA members, including residents, were called upon to comment on the need for this payment increase.

As residents, we are just starting our careers; we have the most to gain (or lose) from the changes affecting reimbursement. There are many changes looming on the horizon — it is unclear what will happen with Medicare physician reimbursements or what pay for performance will bring. I urge you to read the other articles in this ASA NEWSLETTER to learn about some of the basics of economics as they pertain to anesthesiologists. In the interim, be diligent about your preoperative assessments and intraoperative charting, as you now know that these documents are the foundation for coding and billing. Most importantly, please keep checking the ASA NEWSLETTER, the ASA Web site and your e-mail for information on how you can stay involved in the dialogue regarding anesthesia payments — not just for you, but for your patients.

Be active and be involved. Your future depends upon it!

Paloma Toledo, M.D., is an obstetric anesthesiology fellow, McGaw Medical Center, Northwestern University, Chicago, Illinois.