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The Nov. 1, 2000, Federal Register announced a 4.5% overall increase in Medicare payments for physicians starting Jan. 1 — an increase that typically is folded into the way the Health Care Financing Administration (HCFA) and private-sector payers calculate their new year’s capitation payments.
Typically, when negotiating per-member-per-month (PMPM) payments — even for non-Medicare patients — insurers rely on Medicare’s Resource Based Relative Value Scale (RBRVS) to set payment levels. This year, in fact, is the first year that Medicare’s payments are fully based on RBRVS, rather than being phased in at varying levels with a separate practice cost component.
The 4.5% across-the-board increase will hike the physician payment schedule’s conversion factor from $36.61 to $38.26. The conversion factor is the dollar value that is multiplied by the weighted value of each service a physician performs to derive payment amount. All physician services are reflected by a CPT code, which is weighted based on cost and intensity of the service.
News of the increase was met with appreciation from American Medical Association (AMA) Chairman Ted Lewers, MD. "This is good news for America’s seniors and the physicians who care for them," Lewer said in a prepared statement.
While 4.5% is the overall increase, payments will vary widely across specialties because of the full phase-in to RBRVS. Specialty CPT codes, which historically have reflected relatively higher practice expenses than other CPT codes, will likely see overall payment declines as the system attempts to level out those disparities.
For example, office-based physicians will see higher increases than surgeons, whose charges tended to be higher than RBRVS-based rates. Optometrists are expected to see a 12% increase, while dermatologists and rheumatologists will see 9% rate increases. Thoracic and cardiac surgeons will see an average 1% reduction, according to the Federal Register. In negotiating capitation payments, practice officials should be certain that their new payment rates from HMOs reflect HCFA’s newest assessment of adequate payment levels.
The AMA had even more interest than usual in HCFA’s announcement this year because of the "sustainable growth rate" (SGR) issue. In 1999, the AMA stated in a lawsuit that HCFA was underestimating the SGR in 1998, making 1999 reflect $3 billion in underpayments to physicians. AMA- backed legislation required HCFA to correct the omission of the SGR, Lewers explained.
"Today’s announcement [about HCFA’s physician payment hike] also indicates that the spending target for 2000 . . . has been increased to 8%," Lewers said. "This is an enormous improvement, almost four times the original year 2000 SGR, or the 2.1% that HCFA estimated in the fall of 1999."