Practice expense battle shifts back to HCFA

Comment period extension buys time

Congress has decided to delay implementation of a controversial resource-based physician practice expense payment formula for Medicare, and has approved a "down payment" on the redistribution of physician fee schedules valued by primary care physicians, but the battle over the proposed rule’s ultimate fate is far from over.

Indeed, most observers expect several more years of intense political maneuvering between competing physician specialty interests before the issue is finally settled. For now, the focus is back on the Health Care Financing Administration (HCFA).

Last June, HCFA issued a proposed practice expense rule. The original public comment period ended Aug. 18. However, HCFA effectively extended the public comment period by informing the American Medical Association (AMA) in an Aug. 13 letter that it planned to publish a notice of "pre-rulemaking" dealing with modifications to the practice expense formula — with another 60-day comment period — by the end of September, effectively giving the public until the end of November to comment on the proposed practice expense changes.

Between now and Jan. 1, 1999, the congressional deadline for starting to phase in implementation of the rule, there are a number of regulatory requirements HCFA is scheduled to meet. In response to critics who contend the data and methodology used to design and implement the proposed rule are faulty, HCFA will convene a series of physician "validation panels" in October to review the data used to develop the relative value units in the proposed June rulemaking notice. Participation in these panels is by HCFA invitation only, and the sessions will be closed to the public.

Next March, HCFA must report to Congress on the formula refinement process it intends to use for each year of the rule’s multiyear phase-in from 1998 and 2002.

By May 1998, HCFA must publish its revised proposed rule, with another 90-day public comment period. Meanwhile, the General Accounting Office (GAO) must review the revised proposal and the methodology and data used to create it, and report its findings to Congress within six months of the bill’s enactment.

Each step in this process creates a potential opportunity to substantially revise the proposal. Several specialty groups facing large financial cuts in their Medicare reimbursement because of the changes in the budget bill have promoted the idea of going back to Congress to try to water down the practice expense provisions.

Ophthalmologists and orthopedic surgeons, two groups especially hard-hit by the reimbursement changes contained in next year’s 10% down payment, have floated the idea of rewriting the down payment redistribution to soften its impact on their specialties. Primary care groups, however, have generally rejected any idea of having Congress reopen debate on the down payment.

Instead, look for the two basic opposing physician camps — surgeons and primary care physicians — to continue their fight to rewrite (or kill) the practice expense rule at the regulatory level.

‘We see no reason to throw it out’

Bob Doherty, vice president of government affairs for the Washington, DC-based American Society of Internal Medicine, says HCFA’s proposed rule is "fundamentally sound. Our position is, rather than rejecting what’s been done, thus far, HCFA should build upon it because its approach is fundamentally sound," says Doherty. "Supplement and refine the data if there’s a need, but we see no reason to throw it out and start over."

Meanwhile, in its Aug. 18 comments on the June proposal to HCFA, the Practice Expense Coalition — an organization of 41 medical groups opposed to the practice expense directive — said it felt the proposal was "fundamentally flawed " because the data collected were neither numerous enough to be statistically reliable, nor the right kind of data, because they "do not rely on actual data on indirect costs" needed to produce accurate cost estimates.

Among the hot areas to watch over the coming months are the October physician panels, which are expected to produce vigorous debate over the validity of the direct cost data associated with various procedure codes.

Another area of contention is the utilization rates for equipment used by physicians and how this affects proposed relative value payment rates. HCFA generally assumes procedure-specific equipment is in use half of the time, while overhead-cost-related equipment is being used 100% of the time. The AMA, however, claims that these 50%/100% assumptions of use vastly overstate the related utilization of most equipment.

The AMA also wants HCFA to do away with its June proposal to greatly reduce relative value units payment for office procedures provided at the same time as an office visit.

"Until resource cost data are provided showing that physician work and practice expenses are reduced by half when an office visit is also provided, there is no rationale for applying a multiple procedure reduction to office procedures," argues AMA executive vice president P. John Seward.