We know the Medicare Physician Fee Schedule is "budget neutral" but that doesn't mean that all physician specialities are treated equally. Here's a chart of some of the winners and losers in this year's proposed rule. Remember though, things can -- and will change by November when the rule is finalized. Read on for more...
Every year the Centers for Medicare & Medicaid Services releases thousands of pages of proposed regulatory changes affecting the way the Medicare program pays for physician services. Since the Omnibus Budget Reconciliation Act of 1989 was passed -- and the Medicare Physician Fee Schedule began its transition in 1992, Medicare has paid for physician services on a relative value basis. By shifting the focus of payment from "reasonable and customary charges" to the resources required to provide the service, Medicare expected to reduce spending on physician services.
The resource based, relative value unit system (RBRVS) looks to rank order services based on three measures of the intensity of the services. These measures are: physician work, practice expenses, and malpractice insurance. Each measure evaluates the amount of effort required for its respective portion of the service. The National Health Policy Forum defines these three measures as follows:
"Physician work RVUs account for the time, technical skill and effort, mental effort and judgment, and stress to provide a service. Practice expense RVUs account for the nonphysician clinical and nonclinical labor of the practice, as well as expenses for building space, equipment, and office supplies. Professional liability insurance RVUs account for the cost of malpractice insurance premiums" [“The Basics: Relative Value Units.” National Health Policy Forum, 2015, www.nhpf.org/library/the-basics/Basics_RVUs_01-12-15.pdf].
It isn't simply enough to measure the relative intensity of each proportion of the service. Those RVUs need to be converted into dollars -- that is the amount of reimbursement under the fee schedule. Since Congress pass the Medicare Access and CHIP Reauthorization Act of 2015, the Medicare conversion factor has been adjusted each year by the application of two primary factors. First a statutory update percentage, which in recent years has been zero percent, is applied to the previous year's conversion factor. Then a budget neutrality adjustment is applied.
From the beginning, it was acknowledged that the shift to a resource based, relative value unit payment system would have disparate impacts on different provider specialty types. Services that require more physician time, or which are inherently more complicated procedures are paid at higher rates that services which are not. Similarly, when a procedure is performed in a physician's office, and that procedure requires a significant amount of clinical staff time, equipment and supplies than another procedure, the more complex procedure will have a higher RVU for its practice expense.
A number of factors can cause an RVU to change from one year to the next. Efforts to revalue codes based on stakeholder feedback, or through a regular audit process can result in changes to RVUs from the prior year. Changes to individual codes, including changes to supply costs, can also result in changes to RVUs. Legislative changes and CMS policy changes -- such as the recent changes to office- and outpatient-based evaluation and management (E&M) visits, can also affect RVUs for some services.
Further complicating the matter is that the MPFS is a budget neutral system. If the sum of all RVU changes across all physician services exceeds $20 million CMS is required to make budget neutrality adjustments in order to ensure that spending is managed appropriately. These adjustments are applied through a budget neutrality adjustment applied to the MPFS conversion factor.
While the changes to most specialties tend to be rather modest -- between zero and five percent up or down, some specialties are impacted by these changes more than others. For instance, if the proposed rule is finalized without any changes, endocrinologists would receive an overall 10% increase in payments based on changes to the codes that they normally bill. On the other hand, nurse anesthetists would see an overall 11% decrease in payments.
While it may not seem fair that certain specialties are disproportionately affected by these changes, it is a result of the structure of the physician fee schedule payment system. Specialty societies are well aware of these changes and remain mindful of the impact that these changes have on Medicare payments.
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