Primary care, office practices gain in new fee schedule from HCFA

New formula to determine malpractice-related payments introduced

Medicare’s decade-long march toward what it says will be a fairer payment system for physicians has taken a major step forward with publication of the proposed physician fee schedule for the year 2000.

The change would shift more money toward historically underpaid primary care and office-based practices and away from higher-paying surgical and hospital-intensive procedures.

As part of the schedule, the Health Care Financing Administration (HCFA) proposed changing the method for reimbursing the malpractice portion of its practice expense payment from the traditional charge-based approach to the new relative value resource-based (RVRB) system, which is slated to be fully phased in by 2002. (For details, see story, p. 130.)

During FY 2000, about $37 billion will be paid out via the physician fee schedule. HCFA’s practice expense formula determines how $20 billion of this money is allocated to physicians and other health care providers.

Under last year’s first-stage transitional RVRB schedule, specialists such as cardiologists took a roundhouse punch in the pocketbook and were forced to absorb an average 9% cut in their related Medicare fees. This time, however, the financial losers will lose less while specialties that get a raise will rise at a slower rate.

Overall, most specialties will only see their projected fee schedule fall or increase an average 1% to 2%, HCFA predicts. The impact of the year 2000 proposed resource-based professional liability component of practice expense payments also appears to be fairly minor. The largest cuts, about 1%, mainly affect cardiac and orthopedic surgeons, while emergency medicine physicians see a 2.7% gain. (For details, see charts, pp. 130-131.)

By shifting to a so-called "top-down" malpractice expense formula which relies on actual rather than estimated costs, Medicare "continues the transition to a fairer physician payment system," says HCFA Deputy Administrator Michael Hash. "The proposed 2000 fee schedule represents an important next step in making sure Medicare pays physicians fairly."

"I don’t necessarily call our projected 8% fee schedule cut fair," says Karin Bierstein, practice management coordinator for the American Society of Anesthesiologists in Park Ridge, IL.

Indeed, a court suit filed last year by a coalition of 11 specialty societies challenging the legality of HCFA’s new practice expense procedures is still pending.

If victorious — which many consider unlikely — the suit could force HCFA to toss out its proposed practice expense changes and go back to the drawing board. "Frankly, I don’t know if anyone has the stomach for that," notes one healthcare lobbyist who has been a pivotal player in the practice expense battle.


RVU Impact by Specialty
Listed below are the estimated revenue impact by specialty of the proposed changes in malpractice plus fully implemented practice expense payments in 2002. The exact impact on any practice will vary depending on its mix of services and sites where the services are provided:
Specialty %

% Impact on Payments

Anesthesiology

-8%

Cardiac surgery

-9%

Cardiology

-3%

Clinics

0%

Dermatology

2%

Emergency medicine

1%

Family practice

2%

Gastroenterology

-2%

General practice

2%

General surgery

0%

Hematology/oncology

1%

Internal medicine

1%

Nephrology

1%

Neurology

1%

Neurosurgery

1%

Obstetrics/gynecology

2%

Ophthalmology

0%

Orthopedic surgery

2%

Other physician

0%

Otolaryngology

2%

Pathology

1%

Plastic surgery

-1%

Psychiatry

-1%

Pulmonary

-1%

Radiation oncology

0%

Radiology

-1%

Rheumatology

6%

Thoracic surgery

-7%

2%

Vascular surgery

0%

Source: 64 Fed Reg 39,608-39,771 (July 22, 1999