American Health Lawyers Association Institute on Medicare and Medicaid Payment Issues. History of the Physician Fee Schedule

Transcription

1 American Health Lawyers Association Institute on Medicare and Medicaid Payment Issues March 20-22, 2013 Baltimore, Maryland Sidney S. Welch, Esq. 1 History of the Physician Fee Schedule Prior to 1992, Medicare paid for most physician services based on reasonable charges In 1989, statutory amendments were enacted which required CMS to develop and implement a fee schedule derived from a resourcebased relative value scale (RBRVS) and adjusted geographically only for cost differences. (42 U.S.C. 1395w 4). Since January 1992, the basis of the physician s payment is the lower of the actual charge or the fee schedule amount. 2

2 Changes Created By The New System First, the new system determined Medicare payments based on the resources that a physician used in serving the beneficiary rather than the amount the physician charged for the service. Second, the new fee schedule was uniform across the country rather than differing regionally, and this change led to numerous new, national policies. Third, the fee schedule attempted to control aggregate Medicare spending for physician services by reducing payment rates for services if overall spending rises too fast rather than focusing on the rate of inflation. 3 Applicability of the Fee Schedule The fee schedule applies to services furnished by physicians, dentists, podiatrists, optometrists, and chiropractors to the extent that their services are covered by Medicare. The fee schedule also applies to certain services, regardless of whether they are furnished by physicians: Outpatient physical and occupational therapy Antigens Diagnostic tests other than clinical diagnostic laboratory tests Radiology services. 4

3 Determining the Fee Per CMS, there is a relative value for each physician service identified in the coding system used by Medicare Three components to each relative value physician work, practice expense, malpractice costs The payment amount for a particular service and physician is figured by multiplying each component of the relative value for the service by the geographic index for the area in which the physician is located. 5 Determining the Fee The formula for calculating 2012 physician fee schedule amounts is as follows: 2012 Non Facility Pricing Amount = [(Work RVU * Work GPCI) + (Transitioned Non Facility PE RVU * PE GPCI) + (MP RVU * MP GPCI)] * Conversion Factor (CF) 2012 Facility Pricing Amount = [(Work RVU * Work GPCI) + (Transitioned Facility PE RVU * PE GPCI) + (MP RVU * MP GPCI)] * CF 6

4 Relative Values The relative value for each service is meant to consider the resources that are put into the service provided by the physician Three components of the relative value: The work component reflects physician time and intensity in providing the service The practice expense component reflects overhead costs for running the practice The malpractice component reflects malpractice expenses associated with the service. 7 The Work Component In creating the work component to measure physician time and intensity, CMS used a survey methodology as well as discussions with physicians William Hsiao of the Harvard School of Public Health assigned relative values to 460 codes based on the creation of vignettes to simulate services provided by physicians Small groups of physicians later assigned relative values to 4,300 codes by comparing Hsiao s work to other procedures that remained unassigned 8

5 The Work Component CMS determined the relative values for evaluation and management (E/M) services by determining the amount of intraservice work involved for each type of E/M service As new codes have been established, the work component has been determined by surveying physicians who compare the work in a new procedure to the RVUs of reference services. 9 The Practice Expense Component CMS uses a top down methodology that is based on practice expenses currently being incurred by physicians. To calculate the practice expense component, CMS looks at each specialty to determine the expenses spent per hour by physicians and the amount of hours that each specialty billed to Medicare In allocating the expenses over individual codes, CMS uses separate allocation methods for direct costs and indirect costs Direct costs are considered to be clinical labor, medical supplies, and medical equipment Indirect costs are all other costs 10

6 The Practice Expense Component For direct costs, CMS used CPEP estimates for such costs and allocated the direct costs of a specialty to individual codes in proportion to the CPEP estimates of those costs Because more than one specialty typically uses the same code, the practice expenses for each code were found by averaging the costs determined for each specialty, weighted by the number of claims that each specialty submitted for the code For indirect costs, the same CPEP estimates and proportions were used to determine the indirect expenses that should be allocated to each code CMS also added the physician work value relative value units related to each code, converted to dollars based on the fee schedule conversion factor 11 The Practice Expense Component CMS pays physicians differently for performing a service in a facility setting as compared to performing the same service in an office setting. In particular, CMS estimated practice expenses differently for services furnished in a facility Per CMS, the facility rate in the fee schedule applies to hospitals, skilled nursing facilities (SNF), comprehensive inpatient rehabilitation facilities, inpatient psychiatric facilities, community mental health centers (CMHC), and for approved procedures in approved ambulatory surgical centers. Alternatively, non facility rates apply to skilled nursing facilities for services furnished to patients covered only by Medicare Part B, in a patient s home and in a facility or institution other than a hospital, SNF, CMHC, or ASC. As well, all therapy services are paid per non facility rates. 12

7 Malpractice Component The malpractice component of the fee schedule became resource based in 2000 The methodology to calculate the component was as follows: CMS calculated a national average for the malpractice insurance premiums of the 20 largest physician specialties The data for the 20 largest specialties was extrapolated to the other specialties based on risk class Multiple specialties use most codes, so CMS used the data to create a blended premium for each specialty based on the amount that each specialty used each code 13 Special Relative Values Radiology Services Relative value scale of the American College of Radiology was compared to Hsiao s relative values to create relative value for billing Anesthesia Services Like with radiology, pre existing relative values were compared with Hsiao s work to create new relative values, which are based on difficulty of the procedure Separate Professional and Technical Components Certain services, such as radiation therapy, are performed by physicians as well as other entities, so the use of technical components and professional components allows CMS to pay for the non physician work and physician work separately 14

8 Periodic Adjustment CMS is required to review the relative values at least every five years and perform adjustments based on changes in medical practice, new data, new procedures, and similar factors Two methods for updating practice expense relative values Physician specialties can sponsor supplemental surveys, which CMS will use to update practice expenses CMS re estimates the data estimates representing the expenses and supplies used in furnishing specific services 15 Budget Neutrality Per the statute, any adjustments in relative values that are made for a year cannot increase or reduce aggregate spending by more than $20 million This requires the reduction in payments for existing procedures when a new code is added CMS makes budget neutrality adjustments by revising the conversion factor 16

9 Geographic Adjustment Factors Geographic Practice Cost Indices (GPCI) Payment rates are adjusted for geographic variations based on indices, which compare costs of a location to the national average costs CMS develops an index to reflect geographic variations in each of the three components of the relative values practice expense, malpractice costs, and physician work When calculating the payment amount, the GPCI for each of the three components of the relative values is multiplied by that component 17 Geographic Adjustment Factors Every three years, CMS must update the GPCIs, and the changes are phased in over two years Geographic differences in payments are based on Medicare localities CMS uses statewide localities except for areas within a state that has a geographic adjustment factor that is more than 5% greater than the geographic adjustment factor for the remainder of the state 18

10 Practice Expense GPCI The GPCI for total practice expenses was formed by determining the geographic variation for three costs employee wages, office rents, and equipment and other costs and combining them according to the relative weights indicated by AMA survey data, which provides a breakdown of these costs GPCIs are based on metropolitan statistical areas (MSAs) If more than one locality falls in the same MSA, they all get the same GPCI If a locality crossed MSA lines, the values for each MSA were assigned to the locality in proportion to the total number of relative value units billed to Medicare in each locality in the MSA Changes from Affordable Care Act Limit in recognition of locality differences in comparison to the national average for rent and employee compensation Made permanent the 1.5 GPCI floor for AK and created a permanent 1.0 floor for practice expense GPCI in NV, SD, ID, WY, and MT 19 Malpractice Costs GPCI GPCI uses a three year average of premiums in each geographic area for a claims made insurance policy affording a particular level of coverage The GPCI uses an average weighted by the share of Medicare spending accounted for by each risk class. This is due to premiums ranging based on physician specialty 20

11 Physician Work GPCI This adjustment is sometimes referred to as a cost of living factor and is controversial The statute compromised the argument between physicians in urban and rural areas by providing for only one quarter of the geographic variation to be recognized Payments to physicians in AK, MT, WY, ND, SD, and NV are protected by federal statute 21 Conversion Factor The last factor in the payment computation, which also is the most important for determining the amount that Medicare pays Initial conversion factor was created in 1992 and accounted for physician s response to payment reductions under the fee schedule Conversion factor is adjusted annually based on two factors The Medicare Economic Index (MEI) Medicare expenditures for physician services as compared to a sustainable growth rate 22

12 Medicare Economic Index MEI is a measure of inflation in physician fees and practice costs Based on two broad components operating expenses of physicians and general earnings levels Office expense portion of the MEI is calculated by first determining weights to be assigned to each of six major subcomponents and assigning an inflation index to each Inflation factor used for the net income portion is the Bureau of Labor Statistics index of hourly earnings of professional and technical workers 23 Sustainable Growth Rate The sustainable growth rate is intended to measure and inhibit the rate of increase for Medicare expenditures Four factors set a target for acceptable growth in Medicare expenditures Inflation in Medicare payment rates Population growth of Medicare beneficiaries Changes in laws and regulations Growth in real GDP Services that are considered in calculating the sustainable growth rate actually include services beyond those covered by the fee schedule 24

13 Update Conversion Factor The conversion factor is updated annually by the increase in the MEI, adjusted for compliance with the sustainable growth rate The conversion factor is limited by statute Cannot be 3% greater or 7% less than the MEI change Recently, Congress has taken action to stop drastic payment reductions for physicians For example, in 2011, the reduction should have been 24.9%, but Congress set the 2011 update conversion factor at zero. Similarly, for 2012, Congress set a factor of zero, averting a 24.7% decrease 25 Bundling of Services Medicare actively precludes physicians from billing more than one code where one code includes all services provided by the physician Visits combined with procedures In order for Medicare to pay for a visit or consultation concurrent to a procedure, a significant, separately identifiable evaluation and management service must be provided Multiple evaluation and management services For outpatient procedures, two separate, unrelated problems must be identified in order for a physician to bill two visits with the same patient on the same day For hospital inpatients, only one visit may be billed per day 26

14 Bundling of Services Supplies Since the fee schedule was introduced, most separate payment for supplies has been discontinued Telephone calls Telephone calls are not eligible for Medicare reimbursement because CMS considers them to be bundled into recent or future visits Correct coding initiative CMS has identified code pairs that cannot be billed together because one code is considered to be included within the other 27 Involvement of Multiple Physicians Concurrent care For care by multiple physicians to be covered, each physician must play an active role in the patient s treatment This is scrutinized more closely when the physicians practice the same specialty X Rays and EKGs in emergency rooms Medicare will pay for one interpretation, defined as being accompanied by a written report Thus, both a physician and radiologist, for example, will not be paid by Medicare for analyzing the same report 28

15 Involvement of Multiple Physicians Use of CPT modifiers CPT codes are used in conjunction with the regular codes in order to identify special circumstances As the name implies, these codes will modify the regular payment that Medicare would have made for a procedure For example, 22 is used by a surgeon when he encounters excessive adhesions during a surgery which increased the surgery time 29 Physicians Practicing in Facilities Physicians working in facilities such as hospitals, skilled nursing facilities, and comprehensive outpatient rehabilitation facilities have a combination of administrative and patient oriented duties Administrative duties are paid under Part A Patient oriented duties are paid under Part B To receive Part B payment, certain conditions must be met per the Medicare Claims Processing Manual, CMS Pub , Ch A: The services must be personally furnished for an individual patient by a physician; The services must contribute directly to the diagnosis or treatment of an individual patient; In case of anesthesiology, radiology, or pathology/laboratory services, requirements apply to ensure that the services being billed truly represent a physician s professional as opposed to physician supervision services; and The services must ordinarily require performance by a physician 30

16 Physicians Practicing in Facilities The services of interns and residents are ordinarily not eligible for Part B billing because direct medical education payments cover the costs of their salaries For teaching physicians, Part B billing is allowed only when the teaching physician performs such services which exercise full control over the services that the patient seeks As well, per the statute, services to the Medicare patient must be of the same nature as services to non Medicare patients The statute also requires at least 25% of the hospital s non Medicare patients to have paid all or a substantial part of charges imposed for services by attending physicians These last two requirements have not been implemented The cost reimbursement option was created by Congress to resolve the teaching physician problem, but it is not often used It allows the hospital to elect reimbursement of the costs of teaching physicians compensation if all physicians practicing in a teaching hospital agree not to bill Medicare patients 31 Recent Developments ACOs Accountable Care Organizations (ACOs) The Affordable Care Act created new types of integrated delivery organizations, such as accountable care organizations (ACOs) Such a program is generally is an organization healthcare providers, including physicians, held accountable for the overall quality and cost of care delivered to a defined population of traditional fee for service Medicare beneficiaries, who are assigned by CMS to an ACO Theory is that integration is necessary to achieve coordination of care Integration through ACOs is incentivized by shared savings, or cost savings ACO holds healthcare providers accountable for outcomes by requiring detailed reporting 32

17 Recent Developments ACOs During the first two years of the ACO programs, CMS will pay the doctors the standard fee for service for the services rendered As well, Medicare will pay back a percentage of savings that an ACO achieves The ACO itself will determine how much of those savings and in what percentage will be distributed to physician members After the initial two year period, the payment to ACOs will be population based payments It is unclear whether physicians will be paid by ACOs or Medicare 33 Recent Developments Creation of CMI Affordable Care Act directed the Secretary of HHS to create and begin operation of the Center for Medicare & Medicaid Innovation (CMI) by January 1, 2011 Goal of CMI is to test innovative payment and service delivery models that reduce Medicare and Medicaid expenditures while maintaining the level of care CMI is to pick solutions that also improve the coordination, quality, and efficiency of healthcare services furnished to Medicare or Medicaid beneficiaries Importantly, HHS may waive certain laws, such as the Stark law and Anti Kickback statute, while testing new models 34

18 Recent Developments Pilot Program on Payment Bundling Affordable Care Act calls for the Secretary to establish a pilot program for integrated care, using episodic payments centered around hospitalization The program will be available to entities comprised of providers and suppliers of healthcare services Various payment methods may be established, and in so doing, exceptions are permissible from the Stark Law and safe harbors for the Anti Kickback statute The direction of this program is away from Medicare fee for service reimbursement 35 Recent Developments Family Medical Homes The Affordable Care Act authorizes HHS to provide grants or contract directly with states to establish community based interdisciplinary, interprofessional teams to support primary care practices A family medical home must meet multiple requirements Personal physicians must lead all other health providers in caring for the patients Care should be coordinated through all of the providers using integrated healthcare technology Payments for services in a family medical home must recognize the primary care value and reflect both physician and non physician value 36

19 Recent Developments Family Medical Homes Results of current family medical homes Physicians and providers adapt slowly to the change Patients don t always perceive the benefit of the change, especially because they are receiving more care from nurse practitioners and paraprofessionals Data has suggested that patient outcomes have been improved and costs reduced Substantial investment into technology and infrastructure is necessary to make a success of family medical homes Federally Qualified Health Center (FQHC) Multi payer Advanced Primary Care Practice Model (MAPCP) Comprehensive Primary Care Initiative 37 Recent Developments Other New Programs The Affordable Care Act offers a variety of other innovative delivery models aimed at reforming healthcare The major focus is on reforming the payment structures to create joint payments that must be shared by the various providers through some formula or other methodology The goal is to change the standard fee for service model 38

20 Contact For more information, please contact: Sidney S. Welch, Esq. Arnall Golden Gregory LLP th Street, Suite 2100 Atlanta, GA