medicare & anesthesia reimbursement methods

© 1999 American Society of Anesthesiologists

Medicare & Anesthesia Medicare & Anesthesia Reimbursement MethodsReimbursement Methods

Why the Medicare Fee Schedule Is Why the Medicare Fee Schedule Is the Wrong Benchmark for the Wrong Benchmark for

Commercial Anesthesia PaymentsCommercial Anesthesia Payments

1

© 1999 American Society of Anesthesiologists2

BackgroundBackground

• Anesthesia RVG since 1962Anesthesia RVG since 1962>Base Units (complexity)Base Units (complexity)

>Time UnitsTime Units

>Total Units x CF = FeeTotal Units x CF = Fee

• RBRVS Medicare Fee Schedule 1992RBRVS Medicare Fee Schedule 1992>Anesthesia RVG MaintainedAnesthesia RVG Maintained

>Separate Conversion FactorSeparate Conversion Factor

> Reduced 29% at ImplementationReduced 29% at Implementation

• 1998: 46% of Fee Schedule CF 1998: 46% of Fee Schedule CF >Based on Medicare Based on Medicare historicalhistorical relationship since 1992 relationship since 1992

>National Average Medicare Anesthesia CF $16.88National Average Medicare Anesthesia CF $16.88


Evidence: Medicare Undervalues AnesthesiaEvidence: Medicare Undervalues Anesthesia

• Calculated “Hourly Rate” ComparisonsCalculated “Hourly Rate” Comparisons• ““Building Block” Analysis of Anesthesia ServicesBuilding Block” Analysis of Anesthesia Services• Medicaid vs. Medicare ComparisonsMedicaid vs. Medicare Comparisons• Relationship to Commercial RatesRelationship to Commercial Rates• Cross Specialty Impact of Common RBRVS MultiplesCross Specialty Impact of Common RBRVS Multiples• Pure Medicare Anesthesia Practice ModelPure Medicare Anesthesia Practice Model


Medicare Hourly Rate ComparisonMedicare Hourly Rate Comparison

• Many CPT descriptors include time in definition Many CPT descriptors include time in definition of serviceof service>e.g., “each 15 min.” “up to one hr.” etc.e.g., “each 15 min.” “up to one hr.” etc.

• Calculating hourly Medicare $$Calculating hourly Medicare $$>Formula: 60/min * RVUt * $36.69Formula: 60/min * RVUt * $36.69

• Anesthesia fee determination includes timeAnesthesia fee determination includes time• Compare anesthesia hourly rate to other Compare anesthesia hourly rate to other

time-based servicestime-based services


Time-Based RBRVS PaymentsTime-Based RBRVS Payments

97542 Wheelchair management/propulsion training 0.44 15 $ 64.57

97124 Therapeutic procedure, massage 0.47 15 $ 68.98

97122 Therapeutic procedure, traction, manual 0.54 15 $ 79.25

97504 Orthotics fitting and training 0.61 15 $ 89.52

97113 Therapeutic procedure, aquatic therapy, exercises 0.66 15 $ 96.86

90875 Individual psychophysiological therapy, biofeedback 1.2 25 $ 105.67

99238 Hospital discharge day management 1.83 30 $ 134.29

99401 Preventive medicine counseling 0.96 15 $ 140.89

99344 Home visit: new patient 3.97 60 $ 145.66

99211 Office visit: est. patient, may not require presence of M.D. 0.38 5 $167.31

95920 Intraoperative neurophysiology testing, per hour 4.98 60 $ 182.72

99291 Critical care 5.54 60 $ 203.26

CPT Procedure RVUt Time CALC $/Hr.

01484 Anesthesia: ORIF ankle fracture 180 $ 90.03


Building Block Analysis of Anesthesia ServicesBuilding Block Analysis of Anesthesia Services

• Anesthesia Formula Is Inclusive & GlobalAnesthesia Formula Is Inclusive & Global• Preop, Intraop and Postop Care IncludedPreop, Intraop and Postop Care Included

• Only Unusual Procedures Separately RecognizedOnly Unusual Procedures Separately Recognized

• Constituent Services Individually Valued in Fee Constituent Services Individually Valued in Fee ScheduleSchedule

• Compare Anesthesia Formula to Sum of Compare Anesthesia Formula to Sum of Constituent PartsConstituent Parts


Building Block AnalysisBuilding Block Analysis

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CPT RVUs

99202 Outpatient visit, new patient, Level 2 1.38

99141 IV conscious sedation 1.68

90780 IV infusion, by physician, up to one hour 1.1431500 Endotracheal intubation 3.6194770 Expired carbon dioxide analysis 0.6694761 Pulse oximetry, multiple determinations 0.794656 Mechanical ventilation, initiation (first day) 2.4799356 Prolonged physician service (e.g., fetal monitoring), first hour 2.6491105 Gastric intubation 0.82

99231 Subsequent hospital visit, Level 1 16.15

COMPONENTS OF ANESTHETIC CARE: VENTRAL HERNIA REPAIR

PREOP VISIT

INTRAOPERATIVE CARE

POSTOPERATIVE CARE: PACU/POSTOP VISIT

DAY OF SURGERY: PREPARATION FOR ANESTHESIA


Internal Inconsistency in Fee DeterminationInternal Inconsistency in Fee Determination

Fee Schedule Calculation:

16.15 RVUs x $36.69 = $592.54

Anesthesia Unit Fee Calculation:

6 Base + 4 Time = 10 Units x $16.88 = $168.80


Medicaid vs. MedicareMedicaid vs. Medicare

• Medicaid programs insure indigentMedicaid programs insure indigent• Typically Typically lowestlowest physician payment rates physician payment rates• Low payment rates limit access to servicesLow payment rates limit access to services• Many programs use standard “base plus time” Many programs use standard “base plus time”

anesthesia unit methodologyanesthesia unit methodology• National survey of Medicaid anesthesia ratesNational survey of Medicaid anesthesia rates

• Comparable methodology, data available: 29 statesComparable methodology, data available: 29 states

• Relationship of Medicaid anesthesia rate to MedicareRelationship of Medicaid anesthesia rate to Medicare


Anesthesia Rate: Medicaid vs. MedicareAnesthesia Rate: Medicaid vs. Medicare

$17.19 $16.88

$-

$5.00

$10.00

$15.00

$20.00

$25.00

Welfare Medicare


Cross Specialty Commercial/Medicare Cross Specialty Commercial/Medicare Charge ReductionCharge Reduction

• Commercial indemnity rates historically based Commercial indemnity rates historically based on 80% of U&C chargeson 80% of U&C charges

• PPRC reports Medicare rates 71% of PPRC reports Medicare rates 71% of commercial across all specialtiescommercial across all specialties

• Expected relationship of Medicare to U&C Expected relationship of Medicare to U&C charges:charges:• Charge x 0.80 x 0.71Charge x 0.80 x 0.71

• Compare actual Medicare anesthesia ($16.88) Compare actual Medicare anesthesia ($16.88) to expected value to expected value


Expected Medicare Anesthesia Rate TableExpected Medicare Anesthesia Rate Table

ExpectedMedicare Rate

Charge

Charge x 0.80 x 0.71

$ 40.00 $ 22.72 $ 45.00 $ 25.56 $ 50.00 $ 28.40 $ 55.00 $ 31.24 $ 60.00 $ 34.08 $ 65.00 $ 36.92 $ 70.00 $ 39.76 $ 75.00 $ 42.60


Reasonable Charges in AnesthesiaReasonable Charges in Anesthesiaperper Federal RegisterFederal Register 63:54756, 1998 63:54756, 1998

• U.S. Dept. of Veterans Affairs health systemU.S. Dept. of Veterans Affairs health system• VA transition from collecting “costs” to VA transition from collecting “costs” to

“charges” from private insurers“charges” from private insurers• 200-page report establishing “reasonable 200-page report establishing “reasonable

charges” - including physician servicescharges” - including physician services• Anesthesiology chargesAnesthesiology charges

>Fees for all “0” series anesthesia codesFees for all “0” series anesthesia codes

>Conversion factor imputed from St. Anthony’s base Conversion factor imputed from St. Anthony’s base units and time units from Medicare databaseunits and time units from Medicare database


Implications of VA FindingsImplications of VA Findings

If a reasonable charge for anesthesia is...............................$70.27

Then reasonable commercial payment is (80%)...................$56.22

And expected Medicare payment (71%) should be..............$39.91

But actual Medicare payment is............................................$16.88

Thus, the required multiplier to correct Medicare is...............2.36


Unequal Impact of Common RBRVS MultipleUnequal Impact of Common RBRVS Multiple

• Commercial insurers rapidly adopting Commercial insurers rapidly adopting RBRVS-based payment systemsRBRVS-based payment systems

• Commercial Conversion Factor (CF) based Commercial Conversion Factor (CF) based on Medicare CFon Medicare CF

• Example: transition from fee schedule to Example: transition from fee schedule to 125% Medicare125% Medicare

• Assess impact of implementation in Assess impact of implementation in anesthesia vs. other specialtiesanesthesia vs. other specialties


Commercial Insurance Transition to Commercial Insurance Transition to RBRVS-Based PaymentRBRVS-Based Payment

• 11 Common Surgical Procedures11 Common Surgical Procedures• Pre: Four Commercial Fee SchedulesPre: Four Commercial Fee Schedules• Post: 125% Medicare Fee Schedule AllowablesPost: 125% Medicare Fee Schedule Allowables• Anesthesia Payment CalculationAnesthesia Payment Calculation

• Average Base/Time Units from Medicare datafileAverage Base/Time Units from Medicare datafile


RBRVS Impact on Anesthesia/Surgery FeesRBRVS Impact on Anesthesia/Surgery Fees

-60

-40

-20

0

20

40

60

Knee arth. AAA Carotid Cataract CABG C-section Mastec. Lobectomy ORIF Hip Hernia L. colon

Chg Anesth $

Chg Surg $

PC

T C

HA

NG

E


Aggregate Fee ReductionsAggregate Fee Reductions

$20,996$19,219

$7,933

$3,750

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Surgery Anesthesia

Commercial125% MC


Hsiao Pure Medicare Practice ModelHsiao Pure Medicare Practice Model

• NEJMNEJM 1993: Hsiao Assesses Impact of 1993: Hsiao Assesses Impact of RBRVS-based Medicare Fee ScheduleRBRVS-based Medicare Fee Schedule

• Multiple Specialties Providing Typical Service Multiple Specialties Providing Typical Service Full Time to Medicare BeneficiariesFull Time to Medicare Beneficiaries

• Estimate of Annual EarningsEstimate of Annual Earnings• McMenamin Adaptation of Method to Assess McMenamin Adaptation of Method to Assess

AnesthesiologyAnesthesiology

Hsiao, W.C., Dunn, D.L., Verrilli, D.K. Assessing the Implementation of Physician Payment Reform, N Eng J Med.1993; 328:928.

Hsiao, W.C., Dunn, D.L., Verrilli, D.K. Assessing the Implementation of Physician Payment Reform, N Eng J Med.1993; 328:928.


McMenamin 1995 Adaptation of HsiaoMcMenamin 1995 Adaptation of Hsiao

• Hsiao methodologyHsiao methodology> Anesthesiology includedAnesthesiology included

>Updated HCFA Fee Schedule, Time DataUpdated HCFA Fee Schedule, Time Data

>AMA Practice Cost DataAMA Practice Cost Data

• Pure Medicare Anesthesia modelPure Medicare Anesthesia model>Colectomy @ 182 minutes Colectomy @ 182 minutes

>14.8 procedures/week14.8 procedures/week

P. McMenamin 1995


McMenamin ResultsMcMenamin Results

Cardiology $ 276,090General Surgery $ 269,285Ob/Gyn $ 131,234Gastroenterology $ 123,748Psychiatry $ 96,006Anesthesiology $ 53,769

P. McMenamin 1995

21

Specialty Net Earnings


ConclusionConclusion

• Has a distorted relationship with commercial third Has a distorted relationship with commercial third party ratesparty rates

• Is frequently lower than Medicaid ratesIs frequently lower than Medicaid rates• Is internally inconsistent with fee schedule Is internally inconsistent with fee schedule

componentscomponents• Produces a disproportionate impact when used as the Produces a disproportionate impact when used as the

basis for commercial paymentbasis for commercial payment• Results in compensation incompatible with the nature Results in compensation incompatible with the nature

& risks of service& risks of service

The Medicare anesthesia conversion factor:The Medicare anesthesia conversion factor:


Alternative Approaches to Implementing RBRVS Alternative Approaches to Implementing RBRVS Methodology in AnesthesiaMethodology in Anesthesia

• Index anesthesia CF to other specialties’ Index anesthesia CF to other specialties’ discount from chargesdiscount from charges

• Index anesthesia CF to other specialties’ Index anesthesia CF to other specialties’ discount (if any) from prevailing discount (if any) from prevailing commercial/managed care ratescommercial/managed care rates

• Apply a “correction factor” to the Medicare Apply a “correction factor” to the Medicare anesthesia CF before applying a common anesthesia CF before applying a common multipliermultiplier

• Retain existing anesthesia RVG and CFRetain existing anesthesia RVG and CF

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