Medicare

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Medicare Anesthesia Reimbursement Methods

• Why the Medicare Fee Schedule Is the Wrong
  Benchmark for Commercial Anesthesia Payments

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Background

• Anesthesia RVG since 1962
• Base Units (complexity)
• Time Units
• Total Units x CF Fee
• RBRVS Medicare Fee Schedule 1992
• Anesthesia RVG Maintained
• Separate Conversion Factor
• Reduced 29 at Implementation
• 1998 46 of Fee Schedule CF
• Based on Medicare historical relationship since
  1992
• National Average Medicare Anesthesia CF 16.88

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Evidence Medicare Undervalues Anesthesia

• Calculated Hourly Rate Comparisons
• Building Block Analysis of Anesthesia Services
• Medicaid vs. Medicare Comparisons
• Relationship to Commercial Rates
• Cross Specialty Impact of Common RBRVS Multiples
• Pure Medicare Anesthesia Practice Model

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Medicare Hourly Rate Comparison

• Many CPT descriptors include time in definition
  of service
• e.g., each 15 min. up to one hr. etc.
• Calculating hourly Medicare
• Formula 60/min RVUt 36.69
• Anesthesia fee determination includes time
• Compare anesthesia hourly rate to other
  time-based services

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Time-Based RBRVS Payments
CPT Procedure RVUt Time
CALC /Hr.
97542 Wheelchair management/propulsion
training 0.44 15 64.57 97124 Therapeutic
procedure, massage 0.47 15 68.98 97122 Therapeut
ic procedure, traction, manual 0.54 15 79.25 975
04 Orthotics fitting and training 0.61 15 89.52
97113 Therapeutic procedure, aquatic therapy,
exercises 0.66 15 96.86 90875 Individual
psychophysiological therapy, biofeedback 1.2 25
105.67 99238 Hospital discharge day
management 1.83 30 134.29 99401 Preventive
medicine counseling 0.96 15 140.89 99344 Home
visit new patient 3.97 60 145.66 99211 Office
visit est. patient, may not require presence of
M.D. 0.38 5 167.31 95920 Intraoperative
neurophysiology testing, per hour 4.98 60 182.72
99291 Critical care 5.54 60 203.26
01484 Anesthesia ORIF ankle fracture 180 90.03
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Building Block Analysis of Anesthesia Services

• Anesthesia Formula Is Inclusive Global
• Preop, Intraop and Postop Care Included
• Only Unusual Procedures Separately Recognized
• Constituent Services Individually Valued in Fee
  Schedule
• Compare Anesthesia Formula to Sum of Constituent
  Parts

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Building Block Analysis
CPT RVUs 99202 Outpatient
visit, new patient, Level 2
1.38 99141 IV conscious sedation
1.68 90780 IV infusion, by physician, up to
one hour 1.14 31500 Endotracheal
intubation 3.61 94770 Expired carbon
dioxide analysis 0.66 94761 Pulse
oximetry, multiple determinations
0.7 94656 Mechanical ventilation, initiation
(first day) 2.47 99356 Prolonged
physician service (e.g., fetal monitoring), first
hour 2.64 91105 Gastric
intubation 0.82 99231 Subsequent
hospital visit, Level 1 16.15
COMPONENTS OF ANESTHETIC CARE VENTRAL HERNIA
REPAIR
PREOP VISIT
DAY OF SURGERY PREPARATION FOR ANESTHESIA
INTRAOPERATIVE CARE
POSTOPERATIVE CARE PACU/POSTOP VISIT
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Internal Inconsistency in Fee Determination
Fee Schedule Calculation 16.15 RVUs x 36.69
592.54
Anesthesia Unit Fee Calculation 6 Base 4 Time
10 Units x 16.88 168.80
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Medicaid vs. Medicare

• Medicaid programs insure indigent
• Typically lowest physician payment rates
• Low payment rates limit access to services
• Many programs use standard base plus time
  anesthesia unit methodology
• National survey of Medicaid anesthesia rates
• Comparable methodology, data available 29
  states
• Relationship of Medicaid anesthesia rate to
  Medicare

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Anesthesia Rate Medicaid vs. Medicare
25.00
20.00
17.19
16.88
15.00
10.00
5.00
-
Welfare
Medicare
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Cross Specialty Commercial/Medicare Charge
Reduction

• Commercial indemnity rates historically based on
  80 of UC charges
• PPRC reports Medicare rates 71 of commercial
  across all specialties
• Expected relationship of Medicare to UC charges
• Charge x 0.80 x 0.71
• Compare actual Medicare anesthesia (16.88) to
  expected value

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Expected Medicare Anesthesia Rate Table
Expected Medicare Rate
Charge
Charge x 0.80 x 0.71
40.00 22.72
45.00 25.56 50.00
28.40 55.00 31.24
60.00 34.08 65.00
36.92 70.00 39.76
75.00 42.60
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Reasonable Charges in Anesthesiaper Federal
Register 6354756, 1998

• U.S. Dept. of Veterans Affairs health system
• VA transition from collecting costs to
  charges from private insurers
• 200-page report establishing reasonable charges
  - including physician services
• Anesthesiology charges
• Fees for all 0 series anesthesia codes
• Conversion factor imputed from St. Anthonys base
  units and time units from Medicare database

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Implications of VA Findings
If a reasonable charge for anesthesia
is...............................70.27 Then
reasonable commercial payment is
(80)...................56.22 And expected
Medicare payment (71) should be..............39.
91 But actual Medicare payment is.................
...........................16.88 Thus, the
required multiplier to correct Medicare
is...............2.36
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Unequal Impact of Common RBRVS Multiple

• Commercial insurers rapidly adopting RBRVS-based
  payment systems
• Commercial Conversion Factor (CF) based on
  Medicare CF
• Example transition from fee schedule to 125
  Medicare
• Assess impact of implementation in anesthesia vs.
  other specialties

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Commercial Insurance Transition to RBRVS-Based
Payment

• 11 Common Surgical Procedures
• Pre Four Commercial Fee Schedules
• Post 125 Medicare Fee Schedule Allowables
• Anesthesia Payment Calculation
• Average Base/Time Units from Medicare datafile

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RBRVS Impact on Anesthesia/Surgery Fees
PCT CHANGE
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Aggregate Fee Reductions
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Hsiao Pure Medicare Practice Model

• NEJM 1993 Hsiao Assesses Impact of RBRVS-based
  Medicare Fee Schedule
• Multiple Specialties Providing Typical Service
  Full Time to Medicare Beneficiaries
• Estimate of Annual Earnings
• McMenamin Adaptation of Method to Assess
  Anesthesiology

Hsiao, W.C., Dunn, D.L., Verrilli, D.K.
Assessing the Implementation of Physician Payment
Reform, N Eng J Med.1993 328928.
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McMenamin 1995 Adaptation of Hsiao

• Hsiao methodology
• Anesthesiology included
• Updated HCFA Fee Schedule, Time Data
• AMA Practice Cost Data
• Pure Medicare Anesthesia model
• Colectomy _at_ 182 minutes
• 14.8 procedures/week

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P. McMenamin 1995
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McMenamin Results
Specialty Net Earnings

• Cardiology 276,090
• General Surgery 269,285
• Ob/Gyn 131,234
• Gastroenterology 123,748
• Psychiatry 96,006
• Anesthesiology 53,769

P. McMenamin 1995
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Conclusion
The Medicare anesthesia conversion factor

• Has a distorted relationship with commercial
  third party rates
• Is frequently lower than Medicaid rates
• Is internally inconsistent with fee schedule
  components
• Produces a disproportionate impact when used as
  the basis for commercial payment
• Results in compensation incompatible with the
  nature risks of service

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Alternative Approaches to Implementing RBRVS
Methodology in Anesthesia

• Index anesthesia CF to other specialties
  discount from charges
• Index anesthesia CF to other specialties
  discount (if any) from prevailing
  commercial/managed care rates
• Apply a correction factor to the Medicare
  anesthesia CF before applying a common multiplier
• Retain existing anesthesia RVG and CF

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