Malpractice expense reforms not expected soon
Malpractice expense reforms not expected soon
Opposition to 1998 reform is fading fast
Despite promising signs of a more equitable Resource-Based Relative Value Scale (RBRVS), Congress has paid little attention to reforming malpractice expenses, says Katie Merrell, a senior analyst at the Washington, DC-based Physician’s Payment Review Commission (PPRC).
The main reason for this is that medical liability accounts for only about 4% of total payments, she says. "It’s a tiny corner of the pie," says Merrell. "And the fact that it’s separated out as its own component in the [Medicare] fee schedule is more a recognition of its emotional importance to physicians. Because of the concerns with the work and practice expense RVUs [relative value units], which are still very wrong, there’s been very little talk at all about the malpractice component."
Even a small percentage of total payments, however, can add up to a significant loss of payment over time, says Robert Doherty, associate director of the department of federal affairs at the Washington, DC-based American Society of Internal Medicine (ASIM).
When the PPRC conducted its initial study of practice expenses in 1991, the commission also studied malpractice expenses, which are similarly charge-based, in that the relative values are not based on the idea of relative resources used, says Merrell. "[The charge-based system] is inconsistent with what we think the intent of the fee schedule is," she adds. The PPRC recommended to Congress as early as 1992 that both practice expense and malpractice expense be changed in the Medicare fee schedule to become resource-based. Two years later, Congress mandated that the practice expense component would be changed accordingly, but malpractice wasn’t included.
"On the Hill, somebody noticed and cared [about the malpractice expense problem] but not enough to fight hard about it," says Merrell. In every annual report since 1992, the PPRC has recommended overhauling the malpractice component, but Merrell senses no "legislative interest or will" to do so. "The practice expense component is on path to get fixed, but the malpractice expense is a little languishing orphan that nobody but us ever seems to comment on," she says.
Physicians in Pennsylvania have been hit particularly hard by the federal government’s failure to reform malpractice expenses, says Dennis Olmstead, MPA, group director on medical economics for the Harrisburg-based Pennsylvania Medical Society.
Because of HCFA’s proposed realignment of Medicare’s fee schedule areas in 1996, providers in Pennsylvania began to see decreases in total payments for medical liability expenses. At the same time, state legislators were tightening the screws. In 1995, the state raised the cost of surcharges for Pennsylvania’s Catastrophic Loss Fund (CAT) by more than 100% of premium, says Alice Gosfield, JD, president of Philadelphia-based consulting firm Alice Gosfield and Associates. In 1996, legislators proposed a further increase of more than 250%.
In addition to paying their primary carrier for malpractice insurance, Pennsylvania physicians are required to pay into the CAT fund, which covers malpractice losses of more than $200,000, up to a limit of $1.2 million, says Dennis Olmstead, MPA, group director on medical economics for the Harrisburg-based Pennsylvania Medical Society. Physicians feel doubly victimized because HCFA’s formula for calculating the geographic practice cost indices (GPCIs) for malpractice fails to take into account the skyrocketing cost of CAT fund premiums, instead factoring in only premiums paid to primary insurers.
"Last year, we had not only a surcharge [for the CAT fund] but an emergency surcharge over and above that," says Olmstead. "So it’s become very onerous. What’s funny is that the GPCI update in 1998 still will not be using the 1995 and 1996 malpractice premium data, so that revision also will not reflect the increases."
The most recent fee schedule revision used a rolling average of malpractice premiums paid throughout the country in 1990, 1991, and 1992 to calculate the malpractice GPCIs. The 1998 revision will include malpractice data from 1992, 1993, and 1994. Officials at the Pennsylvania Medical Society contend that the use of such old data will continue to penalize physicians unfairly.
"We think HCFA should be using more up-to-date information to actually reflect the increased cost of malpractice insurance in Pennsylvania, calculating in the 1995 and 1996 surcharges and emergency surcharges that we have," says Olmstead. "Otherwise, the GPCI is undervalued. That means the total payout of dollars in Pennsylvania isn’t what it should be, because it’s not truly measuring all the costs that are incorporated into calculating the Medicare payments."
One encouraging sign, particularly for primary care physicians, is that opposition to reforming the current charge-based formula for practice expenses is fading, says Doherty. Congress’s 1994 mandate requires that HCFA make practice expense payments resource-based no later than Jan. 1, 1998, but certain surgical associations have lobbied for delaying implementation by at least one year. Further, some have argued there should be a three- to four-year transition period as well, Doherty notes. "That would mean we wouldn’t see full implementation until around 2001," he says.
Nevertheless, supporters of the change in practice expense RVUs are encouraged by a recent vote by the Chicago-based American Medical Association’s (AMA) house of delegates. Although the AMA supports a one-year delay, pushing implementation back to 1999, the house rejected a resolution calling for a multiyear transition to the new system.
"We get a growing feeling of acceptance that not much is going to be gained by delaying this further," says Doherty. "HCFA has said that it has no plans to initiate any new studies, so even if Congress were to give them an additional year, it’s not clear what they would use that year for. So we’re cautiously optimistic that we can head off the effort to delay and/or require a transition on top of a delay. We’ll see, though. It’s not a done deal yet."
Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.