Wake up and smell the coffee; Medicare changes effective in January
Wake up and smell the coffee; Medicare changes effective in January
Will your practice win or lose under new laws?
Anyone who tried to tune out this summer’s Medicare budget talks will get a startling wake-up call in January. That’s when physician practices will feel the real-world pocketbook impact of the net changes in Medicare fee schedules and payment policies that were included in the final federal budget bill.
Among the changes practices will notice:
1. Three conversion factors will be consolidated into one. All physicians will be paid under a single conversion factor. Currently, three conversion factors are used to calculate reimbursement rates: one each for primary care services, surgical services, and all other services.
2. Practice expense payments based on historical data will become history themselves. Up to $390 million in physician practice expense payments will be redirected from selected surgical codes to office-based codes as a new resource-based relative value unit system is phased in, replacing the historical-cost-based formula.
3. E/M work values will be beefed up. Lastly, HCFA will increase the evaluation and management (E/M) work values associated with global surgical services next year. Last June, HCFA proposed increasing the work relative values for E/M services associated with global surgical services, which should benefit specialties forced to absorb payment cuts as a result of changes in the conversion factor and practice expense provisions. HCFA is expected to issue the final rule implementing the E/M changes late this year.
"Surgical specialties take quite a hit under HCFA’s proposed practice expense proposal. These E/M changes are intended to help soften the blow," observes Rita Scichilone, MHSA, RRA, CCS, a coding adviser with Professional Management Midwest of Omaha, NE, who writes the Physician’s Coding Strategist column for Physician’s Payment Update.
A recent American Medical Association (AMA) study found that primary care, medical, and hospital-based specialists should see their Medicare rates increase in 1998, with some specialties seeing average hikes of 8% and more (see chart above for specific changes by specialty). In January, for instance, Medicare rates will rise 8% for internists, 8.8% for neurologists, and 9.3% for radiation oncologists.
On the downside, surgical specialties with the exceptions of otolaryngology and obstetrics-gynecology can expect to see their net Medicare reimbursement fall.
The exact impact on any given practice will depend on its medical service mix and what percentage Medicare contributes to its overall patient base and total revenues.
Within ophthalmology, for example, the AMA says cataract surgeons can expect especially deep cuts. The fee for cataract surgery will drop 16% from $970 in 1997 to $807 with the institution of relative value units (RVU) to calculate physician practice expense payments. However, such reductions are magnified compared to other specialties because 47% of an average ophthalmologist’s revenue comes from Medicare.
Meanwhile, look for physicians in urban academic medical centers who concentrate on performing surgical procedures to have their overall Medicare reimbursement reduced more than rural surgeons who provide a wider mix of medical services. This is due to changes in reimbursement patterns and county Medicare rates.
These changes in Medicare reimbursement rates will probably have a multiplier effect as private health plans and Medicaid programs that pay Medicare rates adjust their own payment policies to shadow the new federal fee schedules.
Speaking of changes, the move to a single conversion factor will mean reimbursement adjustments for many practices. Under the new law, Medicare will abandon its current three conversion factors for a single conversion factor based on the one used for primary care services.
It’s expected the 1997 primary care conversion factor of $35.77 will be updated to $37.13. Instead of a volume performance standard, future updates will be based on a "sustainable growth rate" linked to the nation’s gross domestic product. Additionally, the conversion factor has some built-in limits: an inflation ceiling of three percentage points above and a floor seven points below the Medicare Economic Index.
The more surgery you do, the deeper the cuts
According to the Physician Payment Review Commission, this new single conversion factor will increase payments for primary care services by an estimated 3.8% next year. Surgical services should experience a 9.4% drop, and Medicare payments for all other services should increase by 9.7%.
The exact impact on any practice of changing to a single conversion factor depends on the mix of services each specialty provides, notes the AMA analysis. For instance, specialties like thoracic surgery that primarily furnish surgical services would have larger decreases than those that provide more non-surgical services.
Some specialty groups are not so enthusiastic about these changes. The American Society of Cataract and Refractive Surgery (ASCRS), for instance, says cataract surgery the "largest surgical line item in the Medicare budget" will be reimbursed at half of what it was in 1986, and will drop to one-third of the 1986 amount by 2002.
As a result of this slashing of reimbursement rates, cataract surgeons, especially those practicing in rural areas, eventually aren’t even going to be able to afford to perform the procedure, the ASCRS warns.
Neurosurgeons who perform spine procedures also face dramatic Medicare rate cuts of up to 14% next year for the three most common procedures they perform on seniors.
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