Reimbursement, demystified.
Charles William Bowkley, III MD
2007-8 James Moorefield Fellow, ACR
Brown University – Warren Alpert Medical School
3rd PP
ACR
Patient Care
Radiologist
CMS
3rd PP
RUMC
Radiologist
CMS
P4P
Industry
It’s really not that bad…
I promise
Introduction
CMS defines rate at which you are paid
Very complicated . . .
You negotiate with 3rd PP
What you get paid for (Procedure, E/M)
How much you get paid
A complex series of events determines the
final outcome…
Let’s address the basics…
Medicare
Part A – Hospital insurance
• Inpt, SNF, Home Health, Hospice
• Payroll taxes (FICA), Self Employed tax, RRA
Part B – Medical insurance (Physician Fees)
• Otpt Hospital / Physician Office, ASC, “Health
prac.”, Lab/Dx services, etc.
• Enrollee pymt, Fed. Revenues, Interest on B fund
Part C – Medicare Advantage (MA)
• Entitled to A, enrolled in B, reside in area of MA
• Capitated “HMO/PPO” insurance for qualified
Part D – Prescription Drug Plan
Medicaid
Federal financing for low income
• Stringent requirements
• May require co-pay
• $$ paid to state health care provider, not patient
Let’s walk through a simple
patient encounter…
46 yo male with CC of Dyspnea
HPI: 36 ppd with new onset of SOB, cough, and
hemoptysis.
PMH: None
PSH: Appy, CCY
Meds: MVI
ALL: NKDA
In-office CXR “nl”, CBC nl
A/P: 46 yo smoker w/ hemoptysis, cough, and
dyspnea. ? PNA ? CA
- CT Chest I+
Follow the paper trail . . .
ICD-9
International Classification of Diseases, 9thed
BBA 1997 physician ordering test MUST have signs,
symptoms, and possibly diagnosis
786 (Cannot specify diagnosis)
Symptoms involving respiratory system and other chest
symptoms
786.2 Cough
786.3 Hemoptysis
CPT
99203 Detailed history, office/outpt visit
Primary care physician billing
71260 CT Chest I+
Radiologist billing
Gray Shield - RI
C.A.
71260
CPT
Current Procedural Terminology
Codes and modifiers used to report services
performed by healthcare providers
Chosen as national standard code set
Maintained by AMA CPT Editorial Panel
http://www.ama-assn.org/ama/pub/category/3882.html
CPT
Category I
Widespread use.
Peer reviewed literature.
Advisor support.
Referred to AMA-RUC for valuation*
Category II
Optional, Performance measurement
Decreased need to manually audit charts
None created to date
No payment
Category III
Limited dissemination
Literature suggests future growth and utility.
Primarily for tracking new procedures.
NOT referred to AMA-RUC for valuation.
• Carrier priced if covered.
http://www.ama-assn.org/ama/pub/category/3882.html
CPT Editorial Panel
Chair: William T. Thorwarth Jr., M.D., (Former president of the ACR and former chair
of the ACR Economics Commission)
18 Members
11 nominations by AMA
2 Vice-Chairmen and representative of Health Care Professionals Advisory
Committee (HCPAC)
1 Blue Cross Blue Shield Association
1 Health Insurance Association of America
1 CMS
1 American Hospital Association
1 Performance Measures
http://www.ama-assn.org/ama/pub/category/3882.html
CPT Editorial Panel
RUC Panel
Advisory Committee
Advisory Committee
Code Application
Staff Review
Panel has already
addressed the issue
New Issue or Significant
New Information Received
Specialty Advisors
Advisor(s) Agree No New Code
or Revision Needed
Staff Letter to Requestor Informing Him/Her
of Correct Coding Interpretation
or Action Taken by the Panel
Table for
Further Study
March 22, 2016
Advisors Say Give Consideration
Or 2 Specialty Advisors Disagree on
Code Assignment or Nomenclature
Editorial Panel
Reject
Proposal Change
Add New Code/Delete
Existing Code/or Revise
Current Terminology
18
RUC
29 members
23 appointed by special societies
Chair
American Medical Association Representative
CPT Editorial Panel Representative
American Osteopathic Association Representative
Health Care Professionals Advisory Committee Representative
Practice Expense Review Committee Representative
RUC Cycle
Coordinated with CPT Editorial Panel schedule
Required to Survey at least 30 practicing physicians **(Essential)**
Recommendations presented to RUC
RUC may adopt or modify before submitting to CMS
RUC recommendations forwarded to CMS in May
CMS meets with Carrier Medical Directors (MAC) to review
recommendations
Medicare Physician Fee Schedule (includes CMS’s review of RUC
Recommendations) published late Fall. Valued codes from May
submission reflected January 1 following year.
CPT Editorial Panel
RUC Panel
Advisory Committee
Advisory Committee
Specialty Society Advisors
Review New and Revised
CPT Codes
CPT Editorial Panel Adopts
Coding Changes
Codes Do Not Require
New Values
RVS Update
Committee
No Comment
Comment on Other
Societies’ Proposals
Survey Physicians
Recommended Values
Specialty Society
RVS Committee
CMS
Medicare Payment
Schedule
March 22, 2016
21
What is relative value ?
RBRVS
RBRVS: resource based relative value scale
• Pressure to change Part B expenditure
Phased in January 1, 1996
“Customary, Prevailing, Reasonable”
•
•
•
•
Specialty specific
C: Median of individual charges for a specified time
P: 90th %ile of all peers in a defined area
R: Lowest of the Actual, Customary, Prevailing fee
RVS1
California 1956
• Based on median charges reported by C. BS
Harvard RBRVS, third iteration 1985
• W. C. Hsiao, MD & P. Braum, MD
• Phase I
» 18 medical specialties
• Phase II
» 15 additional specialties
• Phase III / IV
» Include remaining services coded by CPT
2
RVS
Include 3 main variables
1. Relative Physician Work (52%)
2. Practice Expenses (44%)
3. Professional Liability Insurance Costs (4%)
Modifiers
1. Adjust for geographic locale
2. Different specialty, same service = same payment
3. “Budget Neutral” conversion factor (CF)
(Would not change Medicare spending -/+)
4. Include process for annual update in CF
5. Limits on Balance billing
6. Medicare Volume Performance Standard (SGR)
ICD-9
CPT
PC/TC
786.2
71260
786.3
Black Box
55.36 / 263.79
PAYMENT (Physician Component)
Total RVU = Conversion Factor * (_____)
CF *
Work: (Work RVU x Work GPCI) +
PE: (PE RVU x PE GPCI) +
PLI: (PLI RVU x PLI GPCI) +
CF * [(Work RVU * Work GPCI) + (PE RVU * PE GPCI) + (PLI RVU * PLI GPCI)]
Technical Component
MPFS
(RVU PE *GPCI(PE) + RVU PLI *GPCI(PLI)) * CF
HOPPS (APC)
Payment Rate * Wage Index (Regionally Calculated like the GPCI)
How did we arrive at these calculations?
“Lawmakers See Red Over Meat Packaging”
“…warn consumers to discard any product
with an unpleasant odor, slime, or a bulging
package.”
- USA Today, 10/31/2007
Pretty Good Advice!!!
MPFS
RVU
CPT
WORK
PE
PLI
Global Billing
Professional Component
“Attempt to devise the best payment system”
Technical Component
HOPPS
APC
PAYMENT
RATE
Physician Work
Time to perform service
Technical skill and effort
Mental effort and judgment
Psychological stress of iatrogenesis
Currently Based on: ACR Socioeconomic Supplemental Survey Data
Historically Based on:
Harvard RBRVS study
1992 RVS Refinement Process
AMA/Specialty Society RVS Update Process
Physician Expense
What it costs the “Practice” to run: Rent, Wages, Equip. / Supplies
Practice Expense Advisory Committee (PEAC)
ACR Socioeconomic Monitoring System Supplemental Survey Data
Clinical Practice Expert Panels (MD’s)
• Data for constructing cost estimates
• In/Direct cost elements for a service
• Estimates extended to related codes in CPT family
CPEP Technical Expert Group
• Monitor data collection process
AMA Socioeconomic Monitoring System Data
Common service provided only by X (Avg. Medicare 1991 payment $100), the percentage of PE cost for the given
specialty X (Y%), multiply that number by the $100 cost and you get Y (Initial Dollar) RVU’s.
Equipment Utilization and Interest Rate
(Technical Component (Included in Physician Expense RVU) )
[1/(minutes per year * 50% usage)) * Price * ((11% interest
rate/1) (1/(1+ 11% interest rate) * life of equipment)) + 5%
maintenance]
Courtesy of Pam Kassing
Physician Liability Insurance
Initially: Omnibus Budget Reconciliation Act 1989
Now..
•
•
•
•
•
Calc. average professional liability premium
Calc. risk factor based on specialty
Mult. % of service (CPT based) by risk factor
Mult. By Work RVU
Rescale for budget neutrality ( x Fudge Factor)
GPCI “Gypsie”
Geographic practice cost indexes
AMA SMS 1987 survey
Must be updated Q 3 years
Changes phased in over a two year period
Cost of living: 1990 census college grads, 2000
professional organizations, updates since….
Inputs to medical practice varied by geographic locale
Premiums for policy 1 mil/ 3 mil
Conversion Factor
Updated yearly based on BBA 1997
CFx = CFx-1 * MEIx * UAFx * LCx * BNx
MEI: Medical Economic Index
Measures average price change for medical goods/services with respect to inflation
UAF: Update Adjustment Factor
Comparison of actual and target Medicare expenditure. Designed to prevent
unsustainable increases in Medicare expenditures.
LC: Legislation Change
BN: Budget Neutrality
So, how does it all add up?
Example: CT Chest I+ 712602008
[(Work RVU x Work GPCI) + (PE RVU x PE GPCI) + (PLI RVU x PLI x GPCI)] x CF
Work ((1.24) x Budget Neutrality Adjuster (0.8816)) ,
PE(0.44), PLI (0.05), CF(34.0682)
RI = (((1.24 x 1.045 x 0.8816) + ((0.44 x 0.991)) + ((0.05
x 0.895)) x (34.0682)) = $ 55.36
Ca (SF) = (((1.24 x 1.060 x 0.8816)) + ((0.44 x 1.546)) +
((0.05 x 0.640)) x (34.0682)) = $ 63.71
Technical Component
MPFS (RVU PE *GPCI(PE) + RVU PLI *GPCI(PLI)) * CF
RI: (7.48 (0.991) + 0.37(0.895)) * 34.0682 * = 263.79
CA(SF): (7.48 (1.546) + 0.37(0.640)) * 34.0682 * = 402.00
HOPPS (APC 0283): Payment Rate * Wage Index(2006)
RI: 289.71 * 1.0954 = 317.35
CA(SF): 289.71 * 1.4974 = 433.81
MPFS
RVU
CPT
WORK
PE
PLI
Global Billing
Professional Component
Technical Component
HOPPS
APC
PAYMENT
RATE
OK, now I understand…
But what is the big picture?
Adapted from Woody, I. O.
JACR 2005; 2(2):139-150
Courtesy of CMS and H. Forman, MD
Courtesy of CMS and H. Forman, MD
What can we do…
Well, all politics is local . . .
Local Medicare Carriers
W
A
Noridian
MT
h
OR
Noridian
BC/BS of MT
National
Heritage
ND
WY
Noridian
WI
WPS
SD
CIGNA
National
Heritage
Insurance
Company
VT
NM
Empire
NH
NY
MA
BC/BS of Group
Western NY Health CT
RI (BC/BS
WPS
Noridian
ID
MI
WPS
Noridian
NV
NE
BC/BS of KS
Noridian
UT
In
National
Heritage
Insurance
Company
Noridian
Noridian
CO
KS
BC/BS of KS
CA
Noridian
AK
AZ
BC/BS of AR
OK
NM
BC/BS of AR
IA
Noridian
IL
WPS
BC
MO
/
BS
BC/BS of
of
AR
KS
Trailblazer
AK
IN
AdminaStar
KY
Trailblazer
AdminaStar
BC/BS of
AL
Cahaba
(Cahaba
Gov. Ben.
Gov. Ben.
LA
Admin
Admin)
BC/BS of
AR
AL
MS
of AR)
PA
HGSA of PA
OH
Palmetto Gov.
Ben. Admin.
WV Trailblazer
TN CIGNA
AR
BC/BS of
AR
TX
Noridian
ME
MN
NJ
Empire
DE
Trailblazer
MD
DC
VA
NC
CIGNA
Palmetto
Gov. Ben.
Admin.
GA
SC
Cahaba Gov.
Ben. Admin
FL
First Coast
Service
Options
HI
First Coast
Service Options
Noridian
July 6, 2006
MAC
All politics is local…..
>90 % Of Coverage And Payment Decisions Occur At The Local Level
Each MAC is required by CMS to have a physician Contractor Medical Director
(CMD), who must follow the Coverage Issues Manual, Program Memoranda and
other transmittals from CMS defining the CMS national policy for Medicare
reimbursement
ACR involvement helps prevent the spread of reimbursement policy damaging to
radiology between contractors
CMS gives authority to the local contractors to determine under what
conditions a service is considered medically necessary and claims may be
denied if not appropriate.
In most states the CMD has the ultimate authority to determine medical
necessity
Adapted from John Patti, MD
CMS
Radiologist
State
MAC (MD)
CAC Rep
CPT
RUC
ACR
Local Coverage Determination
LCDs are produced by CMDs to inform providers of the local Medicare
reimbursement rules and the medically necessary reasons for an examination or
procedure
LCDs are created for certain CPT codes or a group of CPT codes (with
associated ICD-9 codes and established diagnoses) required when submitting a
Medicare claim
Procedure Description, Reasons For Denial, and Coding Guidelines are omitted
from LCDs and published in separate supporting articles by the Contractor
New LCDs and supporting articles must be posted for public comment prior to
integration; this period is 45 days
Traditionally contractors have been receptive to comment on both the LCDs and
supporting articles
Adapted from of John Patti, MD
Lines of communication
Managed Care
Committee / Network
3rd Party Payer
Courtesy of Bibb Allen, MD
Carrier Advisory Committee Network
Diagnostic Radiology, Radiation Oncology, Nuclear
Medicine, SIR CAC, RBMA CAC Network
Link between Medicare Carrier and general membership by
ensuring that local policies appropriately represent practice of
radiology
CPT III Codes specifically **
Staff assist CAC representative in evaluating Local
Coverage Determinations (LCDs)
Why all the doom and gloom?
The Perfect Storm
1. DRA
2. Contiguous Body Part Imaging
3. 5 Year Review
4. The calm _____________ the storm…..
Deficit Reduction Act of 2005: Section 5102(b)
limits TC payment for imaging in physician offices
or imaging centers on/after January 1, 2007.
TC capped at the lesser of the Medicare physician fee schedule payment
rate or the Ambulatory Payment Category (APC) rate under the hospital
outpatient prospective payment system (“HOPPS”).
Includes X-ray, ultrasound (including echocardiography), nuclear medicine
(including PET), MRI, CT, and fluoroscopy,
Excludes diagnostic and screening mammography
Professional Component is not affected
Congressional Budget Office (CBO): $2.8B savings over the next 5 years
ACR staff: $1.2 B savings in first year alone
CBO new score at $13B over 10 years
Deficit Reduction Act
The imaging provisions are a public policy disaster
FALSE: Wide variance of payment between hospital outpatient based
imaging services and imaging provided in physicians offices/imaging
centers
TRUTH: Study done by The Moran Company shows a variance across all
imaging modalities of 3%
Provisions written without input from the imaging community, without
Congressional hearing, without accountability to its authors
No one takes responsibility for authorship
Eliminates RBRVS and takes lower of payment between the MPFS and
HOPPS
DRA Impact
Financial Impact Breakdown By Procedure
Percent Reduction
MRI
35 %
US
30%
Nuc Med
16%
CT
9%
MRA
25%
CTA
37%
Lost Imaging Revenue
490 M
300 M
136 M
69 M
24 M
10 M
DRA Impact
Biggest Hits by Lost Revenue
MRI Brain
MRI Spine
Myocardial Perfusion SPECT
Carotid Artery Duplex
Echocardiography Color Doppler
PET and PET/CT
$162 M
$90 M
$132 M
$87 M
$83 M
??
Multiple Procedure Discount For
Contiguous Body Parts
CMS Regulation
Continues the reduction for the second and subsequent examinations at
25% in 2007
At the urging of ACR, CMS did not increase the reduction to 50%
– Any savings from multiple examinations goes back to the federal fund
– Application of the reductions to the HOPPS rate would result in 75%
reductions for the second procedure in some cases
CMS will apply the 25% reduction to the MFS payment rate and if that
payment is higher than the HOPPS payment, the HOPPS payment is
paid
The Third 5 Year Review
Budget Neutrality
Section 1848 (c) (2) (B) (ii) (II) of the Social Security Act requires
that adjustments in RVUs may not cause total Medicare Physician
Fee Schedule payments to differ by more than $20 million
When this tolerance is exceeded CMS must make a budget neutral
adjustment
The Third 5 Year Review
Mandated process for Medicare to review overvalued and
undervalued CPT codes (Via evaluation of RVU’s).
Over 160 high utilization codes were reviewed, 40
pertaining to radiology
Major change was 20% increase in E/M value, resulting in
greater than $4 billion budget neutral effect
Incidentally, Anesthesia work value inc. 32% - this is
reflected in the Budget Neutrality Adjustment in 2008 Final
Rule
The Third 5 Year Review
Budget Neutrality Adjustment For Physician Work
RVUS
Vigorously opposed by the ACR
Vigorously opposed by the RUC and almost all
medical specialties
Reasons For ACR Opposition
Major impact on hospital based physicians
This is a historical precedent for changing the CF
The Third 5 Year Review
Enter the Budget Neutrality Adjustment…
Professional Component (PC) Payment
(RVUxGPCI) +(RVUxGPCI) + (RVU+GPCI) * CF
(RVUxGPCIx.8816) +(RVUxGPCI) + (RVU+GPCI) * CF
CMS has finalized its 32% increase for anesthesiology
physician work values as part of the third 5 year review.
The physician work adjustor will cause the 10.1% cut in
physician work values for 2007 (with a work adjustor of
.89896) to be increased to a 11.94% cut (changing the
work adjustor to .8816) to all physician work values in the
physician fee schedule for 2008.
Conversion Factor
Calculated each year based on a statutory formula that centers around the
Sustainable Growth Rate - a.k.a. SGR
SGR components
Medical economic index - a.k.a. MEI
Volume of services in prior years
Target volume of services based on the Medicare population
Gross domestic product
SGR now demanding decreases in the conversion to achieve the target rates
Five years of fixes leaves a large amount to repay to the system
We are at the cliff and if the SGR formula is not changed double digit reductions
in the CF will occur
Decreases 10.1% for 2008 to $34.0682
ACR Policy Priorities
Co-founder of Access to Medical Imaging Coalition (AMIC), ACR will urge AMIC to support
Accreditation as a means to address rapid growth in utilization http://www.imagingaccess.org/
ACR will support participation in Accreditation programs BY ANY PHYSICIAN SPECIALTY
who commits to quality and appropriate use of imaging studies and further, the ACR will
support Medicare development of Accreditation requirements/Appropriateness criteria
based on private sector/physician specialty societies programs
AMA and medical community pushing for comprehensive legislation to fix or replace the
SGR focusing on those changes not adversely affecting radiology
Because the increase in imaging utilization by ~14% is seen as a driver of SGR spending,
radiology remains in the crosshairs
Extensive congressional lobbying with bipartisan co-sponsors re: DRA moratorium bills
filed in 2006 and 2007
Advocacy to CMS on contiguous imaging reduction – prevented a 50% cut for 2007,
continue to defend TC from attack
Advocacy to CMS on need for valid survey data on equipment utilization rate – CMS
proposed to hold rate steady for 2008
Final Rule for 2008
Conversion Factor for HOPPS payments will increase by 3.3%
CMS is proposing not to pay separately for the hospital TC of codes that they
describe as dependent items and services
HOPPS
All imaging guidance, supervision, and interpretation (S&I) codes would be
bundled into the procedure codes and, also Intraoperative services such as
ultrasound would be bundled into the procedure code
Image processing services – 3-D post processing would not be paid separately
Contrast material and radiopharmaceutical cost will not be paid separately
Conversion Factor for MPFS payments will decrease by 10.1%
MPFS
Anti-Markup Language – if you bill Medicare $50, they will ONLY pay you $50….
Under Arrangements – no joint venture participation by hospitals and referring
MD’s
ACR lobbied heavily for the Radiology Practice Expense / Hour increase to
$204.86
MPFS Final Rule for 2008
Practice Expense Methodology
Practice expense per hour (PE/hr) is amount it costs radiology practices in
indirect/overhead to run an office or imaging center per hour.
One of only a few specialties to conduct an alternate survey to re-calculate
PE/hr – original CMS Socioeconomic Monitoring Survey assigned $54/hr to
radiology
ACR survey to replace SMS survey was miscalculated by CMS contractor
(Lewin) at $174 PE/hr
ACR vigorously challenged Lewin – CMS agreed
In 2008 CMS will correct the radiology PE/hr to $204
– $100m shift to radiology
Will partially balance the DRA effects and CF changes
Courtesy of Pam Kassing
Future
•
Equipment Utilization
•
Interest rate for equipment debt
•
Practice Expense
•
CF
•
P4P
•
Radiology Utilization Management Companies
– “Steerage”, Pre-Auth.
•
Assume no DRA moratorium
•
Comparative Effectiveness
Future
•
Leasing Arrangements
•
Resolve Reimbursement Issues for use of RA’s
•
More self-referral regulations and Stark III
•
Fixing the SGR formula and how the conversion factor is calculated
•
Continue to work with private payers to address similar issues
Courtesy of Pam Kassing
Special Thanks and Attributes to…
John Patti, MD
Bibb Allen, MD
Howard Forman, MD
Pam Kassing
Maurine Spillman-Dennis
Diane Hayek
Anita Pennington
Kathryn Keysor
Helen Olkaba
Evelyn GIlbert
Thank You !
Thoughts, Questions, Concerns. . .
Cbowkley@gmail.com