Coding Corner June 2009

From Practice Division Director
Dan Nagle, MD

Trends in physician work relative values

Washington continues to be under the impression that those providing evaluation and management services such as primary care physicians are somehow disadvantaged vis-à-vis the proceduralists (surgeons).  However, if one looks closely it becomes clear the data does not support this supposition. Indeed, from 1992-2007 there has been a 45% increase in the physician work relative values for evaluation and management services.  This compares to a 9% increase in the surgical work relative value units during the same period. Evaluation and management services account for approximately 53% of all of the RVU’s billed to Medicare.  Surgery on the other hand accounts for 21%.  The work relative value unit per minute for surgery (WRVU/Min) is 0.0398 as opposed to 0.0391 for evaluation and management.  As you can see this is not a significant difference.  This effectively debunks the perception that surgeons are overpaid and that primary care is underpaid at least in regard to physician work relative value units.  (Remember, the total relative value unit is composed of physician work, practice expense and professional liability relative value units.)

Practice Expense

Interestingly, the information provided to us during this meeting by the AMA legislative liaison was that Congress is finally starting to understand that all physicians are underpaid.  This fact is supported by the recent survey of practice expense that was completed by the American Medical Association in conjunction with the specialty societies and Dmrkynetec.  I will provide additional data from that study once it becomes available.  The survey has provided CMS with detailed information regarding the current cost of practicing medicine in the United States.  The calculation of practice expense is still a 19-step Byzantine process.  This new survey however, will provide more accurate data to feed into the CMS computers.  Included below is a spreadsheet comparing the practice expense per hour (PE/Hr) derived from the survey for a few selected specialties including hand surgery.

AMA 2007-2008 Physician Practice Information Survey Results

If one compares this data to the current per hour reimbursement by Medicare for the majority of hand surgery procedures, one notices that the total reimbursement for our procedures, including physician work and practice expense, reaches the $193 per hour level in only 8% of hand surgery procedures.  This means that not only does Medicare not cover your expenses, but it also does not reimburse you for any of your physician work 92% of the time.  Given this data, it is clear that from a purely economic point of view, it makes no sense to do business with CMS.  Most physicians in the United States however, continue to see Medicare patients and are able to do so by offsetting the Medicare shortfall with the revenue collected from other payers/sources. (NB. No one knows how CMS will use this new data.)

SGR

The media and the federal government have told us the current crisis in health care delivery in the United States is in a large part due to the overuse of imaging services.  Of interest however, is the fact that according to the most recent Medicare volume data, advanced imaging leveled off in 2007.  Indeed, the estimated change in the SGR (Sustainable Growth Rate) spending from 2007-2008 for advanced imaging will be approximately 3% which is similar to the growth seen in most other categories.  This is contrary to the perception that advanced imaging is a major cause of increased Medicare spending.  In spite of this, the general feeling is that CMS will continue to look very closely at advanced imaging spending and we should not be surprised to see a decrease in future reimbursement for such imaging.

The Obama administration has indicated that it is dedicated to reining in Medicare costs.  It would appear the current plan is to cut reimbursement to hospitals and to decrease expenditures for radiology and drugs.  It would appear that for the time being, physician services are not being targeted.  Indeed, MedPAC (Medicare Payment Advisory Commission) has recommended a 1.1% increase for physician services in 2010 rather than the SGR calculated decrease of approximately 21 percent.

Accountable Care Organizations

Accountable Care Organizations (ACO) continue to be evaluated by CMS. An ACO would be a group of providers held responsible for the quality and cost of health care for a population of Medicare beneficiaries.  An ACO would be a combination of one or more hospitals, primary care physicians and possibly specialists, and would be accountable for total Medicare spending and quality of care for the Medicare patients served.  Bonuses and penalties could be tied to overall Medicare spending and quality measures.  This is not a new concept but new life has been breathed into it by the new administration.  In order to move ahead with the ACO concept, software solutions called Grouper Software are being vetted by CMS.  The two major competitors in this area are Ingenix (a division of United Healthcare) and Thomson Reuters.  The software consists of applications that group patient data by disease or medical episode.  Also the resources being dedicated to the care of the patient for a specific diagnosis can be analyzed.  Such software would be used by CMS to monitor the effectiveness of ACOs.

Recovery Accounting Contractor (RAC) program

The Recovery Accounting Contractor (RAC) program is back on track.  The map below indicates when the various contractors will begin auditing providers.  As you recall the RAC program consists of four private auditing firms contracted by CMS to audit providers in an effort to ferret out overpayment and ostensibly underpayment for care provided to Medicare recipients.  There exists a fundamental conflict of interest for these contractors in that they are allowed to keep a percentage of the revenue they recover.  Clearly there will be an incentive for these contractors to be particularly zealous in their auditing.  While it is generally expected that these contractors will be initially looking at institutions, there have already been reports of individual practices being audited.  As is always the case with the government, you are considered guilty until proven innocent.  It will be very worthwhile for our members to take a very close look at their billing practices before they have a visit from their friendly RAC.

I wish you all a pleasant summer,

Dan