ASA January 2008 Newsletter

Happy New Year: ASA’s Hard Work Pays Off — Medicare’s 2008 Anesthesia Conversion Factor Takes Huge Step Toward Parity

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

fter years of concerted efforts and piecemeal gains, ASA has succeeded in convincing Medicare to raise significantly its conversion factor applicable to anesthesia services. The revised 2008 average national Medicare anesthesia conversion factor has been set at $17.82 starting January 1, 2008. Locale-specific conversion factors for 2008 follow in chart form (see table below).

This dramatic 32-percent increase in work values for 2008 and beyond — which narrows by more than half the gap between the average national Medicare conversion factor for anesthesiology as compared to the private pay market — is the result of dogged determination by ASA’s leadership, lobbying staff and particularly the Committee on Economics. Significant ASA grassroots support during the Medicare agency’s recent comment period also helped “seal the deal.” The result is fairer payments from Medicare, which is all the more important as the tidal wave of early baby boom retirees begins in the next few years.

For the past decade, ASA has made the strong case that the Medicare anesthesia conversion factor was roughly 40 percent less than what is paid on average by private insurers. For example, in 1990 and 1991, the average anesthesia conversion factor was $19.30, yet when the Medicare Fee Schedule went into effect in 1992, the Medicare anesthesia conversion factor plummeted to $13.94. Using Department of Labor statistics, if the 1990 and 1992 conversion factors had merely kept up with the general inflation rate, at the end of 2007 they would have stood at $29.77 and $20.03, respectively. Now, because of ASA’s efforts to force a re-examination of work value based on a sophisticated econometric model developed by ASA and an outside consultant, anesthesiologists will see the average national anesthesia conversion rise to $17.82 from $16.19 and probably go closer to the $20 mark as short-term corrections are made to offset the effects of the sustainable growth rate (SGR) formula’s application to 2008 payment, realizing an additional short-term 10-percent increase for which ASA has battled along with the American Medical Association (AMA) and all of medicine.

ASA’s current success came by shepherdering its study and findings through the AMA/Specialty Society Relative Value Scale Update Committee (RUC) and seeing the RUC’s positive recommendation go forward to the Centers for Medicare & Medicaid Services (CMS) for public comment. The success of this skilled modeling and maneuvering stands in stark contrast to two earlier well-reasoned attempts over the previous 10 years. Then, ASA sought relief from this Medicare disparity by participating in the five-year review process dictated by the Medicare statute. In those instances, ASA provided detailed comparisons of the physician work involved in various common anesthesia procedures to procedures commonly performed by other specialties. Not surprisingly, these data showed that anesthesia work was greatly undervalued, but CMS was not then to be moved.

On the first of these two reviews, CMS (then the Health Care Financing Administration) modestly adjusted the Medicare anesthesia conversion factor upward, and, on the second, it slightly adjusted a handful of procedures, declining to extrapolate its findings to the full range of anesthesia procedures.

The slashing of Medicare anesthesia payment in 1992, coupled with CMS’ subsequent unwillingness to remediate the cut and the previous large gap between Medicare and private anesthesia fees, has resulted in a situation in which anesthesiologists have tended to migrate away from hospitals and localities with disproportionately higher Medicare populations. These hospitals must regularly provide subsidies to the anesthesiology department to retain anesthesiologists and keep operating rooms fully open.

The Government Accountability Office (GAO) report from this past summer confirmed the payment disparity between Medicare and commercial payments for anesthesia services, yet surprisingly did not study the effect of subsidies on the delivery of anesthesiology medical care. As previously reported, GAO concluded that Medicare anesthesia payments through 2007 were 67 percent lower than average commercial payments. Further, the GAO study found that the number of anesthesiologists had decreased as the concentration of Medicare beneficiaries increased in 87 Medicare payment localities.

Against this backdrop, ASA was very pleased that CMS has taken the necessary steps to reduce this gross Medicare underpayment for anesthesia services and significantly increase its conversion factor. In its proposed rule of July 2007, CMS included the 32-percent increase to the work value portion of the anesthesia conversion factor recommended by the RUC. And, in response, ASA launched a massive grassroots drive for comments to CMS.

ASA is very grateful to the several thousand anesthesiologists who, as one trade rag put it, “bombarded” CMS with positive comment letters. Indeed, ASA was able to make great strides with only some 4,000 members, or about 10 percent of our membership, responding to our call to action. At the same time, as ASA President Jeffrey L. Apfelbaum, M.D., recently wrote to all members, imagine the force ASA could be by doubling, tripling or even quadrupling that number when called to act and lobby Congress or the Administration.

As all ASA members receive well-deserved Medicare payment increases for 2008, please stop to think about ways that you can use your voice to help the profession.