New Payment Policies a Concern for ED Providers
Emergency providers will be busy for months weighing the impact of their gains and losses under the federal Balanced Budget Act of 1997. Along with overall spending reductions amounting to $115 billion for Medicare and $14.6 billion for Medicaid over five years, lawmakers and the Clinton administration gave emergency medicine what amounts to a mixed bag of new payment policies, including:
An outpatient prospective payment system (PPS)
After threatening for years to impose prospective payments on hospital outpatient Medicare, the Baltimore-based Health Care Financing Administration (HCFA) is moving ahead with plans to place all Medicare ambulatory hospital services under a fee schedule.
Affected by the mandate will be virtually all hospital-based walk-in services paid for under Medicare, including routine ED visits and hospital-based ambulatory surgeries.
Beginning on Jan. 1, 1999, EDs will be paid a fixed amount for routine emergency medical services delivered to Medicare beneficiaries. The payments will by determined by the CPT-4 and ICD-9-CM coded claims and will be based on a combination of aggregate rather than hospital-specific charges and costs taken from Medicare cost reports.
Medicare officials are considering use of a payment methodology called ambulatory patient groups (APGs), which convert diagnosis and procedure codes into resource-based weights to determine payments. For example, any of the evaluation and management codes listed in the Physicians’ Current Procedural Terminology manual for a typical medical visit and their accompanying ICD-9-CM code would be assigned a pre-designated APG.
Each of the more than 200 APGs being considered by HCFA will have been already weighted and priced based on median aggregate cost-report data and regional economic factors such as the local consumer price index. The medical visit APG would then determine the prospective payment for the visit. APGs are currently in use by other payers in some states, including Washington and by Iowa Medicaid.
Most health care professionals anticipate payment cuts. Providers are concerned that HCFA may not accurately price the APGs. That and the stated goal of using prospective payment to help slow rapidly-rising Medicare expenditures into the year 2002 continue to worry providers. "Our concern is that the methodology be properly constructed to bear a true relationship to costs," says Joel Perlman, CPA, senior vice president of finance at Montefiore Medical Center in New York.
Practice expense payments
All physicians won a delay on a controversial plan to have Medicare pay their practice expenses. Providers have been irate over the complex proposal, which grew out of the 1992 law that created the physician resource-based relative value units (RVUs). Physicians accused the government of using flawed techniques in developing the RVUs. The budget act delays implementation until Jan. 1, 1999 and phases in the payments over four years.
The plan originally attempted to limit several practice expense RVUs to 110% of the 1998 work RVUs. It also singled out office visit practice expense RVUs to increase them by the same overall amount that other services were cut.
For example, it would raise office-visit RVUs by five percentage points (a hypothetical figure) if hospital-expense RVUs were cut by the same amount. But in doing so, HCFA was limited to spending only an additional $390 million in making the adjustment.
However, under the present postponement, HCFA is required to develop new RVUs intended to better reflect staff, equipment, supplies, and expenses. The issue is important to emergency physicians due to the growing number involved in office-based practices. Furthermore, many providers think that managed care organizations (MCOs) will eventually adopt a similar methodology.
Single conversion factor
The law also simplifies the way RVUs are converted into dollar amounts under the Medicare physician fee schedule. It creates one conversion factor rather than the current three for primary care, surgical services, and other non-surgical services. The dollar value of the new conversion factor will be about $37.13, or a 3.8% increase over the current primary care conversion factor of $35.77. The increase inevitably raises payments to emergency physicians. Some 80% of ED evaluation and management codes fall under the primary care conversion factor. The change will be effective Jan. 1, 1998.
Direct and indirect graduate medical education (GME) payments
While cuts are under way in both Medicare direct and indirect medical education payments, the law phases in reductions and carves out GME payments under managed care. It also caps the number of residents that a hospital can claim for reimbursements under the GME regulations. Hospitals that voluntarily comply with the residency caps may be eligible for unspecified incentive payments.
GME payments under capitated programs will be cut in increments of 20 percentage points per year beginning with 20% in 1998 and ending at 100% in 2002. And downward adjustments in annual indirect medical education amounts will also be phased in beginning with 7% in 1998 and ending with 5.5% in 2001 and subsequent years.
Both categories of GMEs will be carved out in phases over five years from the rates HCFA pays health plans. In effect, HCFA will be paying hospitals for GME separately under the new adjustment schedule instead of lumping the payments in with the total capitation budget. However, disproportionate-share hospitals will be exempted from the carve-outs presumably because of their high Medicare patient loads.
Reimbursements for clinical support staff.
The law also simplifies payments for physician assistants, nurse practitioners, and clinical nurse specialists. In all three cases, payments will increase to 80% of the actual charge or 85% of the physician fee schedule amount, whichever is lesser.
The law also eliminates current restrictions on location of the work and authorizes direct payments but bars them if they are being duplicated under another reimbursement. The change is effective Jan. 1, 1998.
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