Reimbursement, demystified.

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Reimbursement, demystified.

• Charles William Bowkley, III MD
• 2007-8 James Moorefield Fellow, ACR
• Brown University Warren Alpert Medical School

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Patient Care
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Radiologist
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Its really not that bad

• I promise

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Introduction

• CMS defines rate at which you are paid
• Very complicated . . .
• You negotiate with 3rd PP
• What you get paid for (Procedure, E/M)
• How much you get paid
• A complex series of events determines the final
  outcome

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Lets address the basics
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Medicare

• Part A Hospital insurance
• Inpt, SNF, Home Health, Hospice
• Payroll taxes (FICA), Self Employed tax, RRA
• Part B Medical insurance (Physician Fees)
• Otpt Hospital / Physician Office, ASC, Health
  prac., Lab/Dx services, etc.
• Enrollee pymt, Fed. Revenues, Interest on B fund
• Part C Medicare Advantage (MA)
• Entitled to A, enrolled in B, reside in area of
  MA
• Capitated HMO/PPO insurance for qualified
• Part D Prescription Drug Plan

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Medicaid

• Federal financing for low income
• Stringent requirements
• May require co-pay
• paid to state health care provider, not patient

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Lets walk through a simple patient encounter
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46 yo male with CC of Dyspnea

• HPI 36 ppd with new onset of SOB, cough, and
  hemoptysis.
• PMH None
• PSH Appy, CCY
• Meds MVI
• ALL NKDA
• In-office CXR nl, CBC nl
• A/P 46 yo smoker w/ hemoptysis, cough, and
  dyspnea. ? PNA ? CA
• - CT Chest I

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Follow the paper trail . . .
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ICD-9

• International Classification of Diseases, 9thed
• BBA 1997 physician ordering test MUST have signs,
  symptoms, and possibly diagnosis
• 786 (Cannot specify diagnosis)
• Symptoms involving respiratory system and other
  chest symptoms
• 786.2 Cough
• 786.3 Hemoptysis

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CPT

• 99203 Detailed history, office/outpt visit
• Primary care physician billing
• 71260 CT Chest I
• Radiologist billing

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Gray Shield - RI
C.A.
71260
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CPT

• Current Procedural Terminology
• Codes and modifiers used to report services
  performed by healthcare providers
• Chosen as national standard code set
• Maintained by AMA CPT Editorial Panel

http//www.ama-assn.org/ama/pub/category/3882.html
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CPT

• Category I
• Widespread use.
• Peer reviewed literature.
• Advisor support.
• Referred to AMA-RUC for valuation
• Category II
• Optional, Performance measurement
• Decreased need to manually audit charts
• None created to date
• No payment
• Category III
• Limited dissemination
• Literature suggests future growth and utility.
• Primarily for tracking new procedures.
• NOT referred to AMA-RUC for valuation.
• Carrier priced if covered.

http//www.ama-assn.org/ama/pub/category/3882.html
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CPT Editorial Panel

• Chair William T. Thorwarth Jr., M.D., (Former
  president of the ACR and former chair of the ACR
  Economics Commission)
• 18 Members
• 11 nominations by AMA
• 2 Vice-Chairmen and representative of Health
  Care Professionals Advisory Committee (HCPAC)
• 1 Blue Cross Blue Shield Association
• 1 Health Insurance Association of America
• 1 CMS
• 1 American Hospital Association
• 1 Performance Measures

http//www.ama-assn.org/ama/pub/category/3882.html
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CPT Editorial Panel
RUC Panel
Advisory Committee
Advisory Committee
Code Application
Staff Review
Panel has already addressed the issue
New Issue or Significant New Information Received
Specialty Advisors
Advisors Say Give Consideration Or 2 Specialty
Advisors Disagree on Code Assignment or
Nomenclature
Advisor(s) Agree No New Code or Revision Needed
Staff Letter to Requestor Informing Him/Her of
Correct Coding Interpretation or Action Taken by
the Panel
Editorial Panel
Table for Further Study
Reject Proposal Change
Add New Code/Delete Existing Code/or Revise
Current Terminology
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RUC

• 29 members
• 23 appointed by special societies
• Chair
• American Medical Association Representative
• CPT Editorial Panel Representative
• American Osteopathic Association Representative
• Health Care Professionals Advisory Committee
  Representative
• Practice Expense Review Committee Representative

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RUC Cycle

• Coordinated with CPT Editorial Panel schedule
• Required to Survey at least 30 practicing
  physicians (Essential)
• Recommendations presented to RUC
• RUC may adopt or modify before submitting to
  CMS
• RUC recommendations forwarded to CMS in May
• CMS meets with Carrier Medical Directors (MAC)
  to review recommendations
• Medicare Physician Fee Schedule (includes CMSs
  review of RUC Recommendations) published late
  Fall. Valued codes from May submission reflected
  January 1 following year.

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CPT Editorial Panel
RUC Panel
Advisory Committee
Advisory Committee
Specialty Society Advisors Review New and Revised
CPT Codes
CPT Editorial Panel Adopts Coding Changes
Comment on Other Societies Proposals
Survey Physicians Recommended Values
Codes Do Not Require New Values
No Comment
Specialty Society RVS Committee
RVS Update Committee
CMS
Medicare Payment Schedule
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What is relative value ?
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RBRVS

• RBRVS resource based relative value scale
• Pressure to change Part B expenditure
• Phased in January 1, 1996
• Customary, Prevailing, Reasonable
• Specialty specific
• C Median of individual charges for a specified
  time
• P 90th ile of all peers in a defined area
• R Lowest of the Actual, Customary, Prevailing
  fee

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RVS1

• California 1956
• Based on median charges reported by C. BS
• Harvard RBRVS, third iteration 1985
• W. C. Hsiao, MD P. Braum, MD
• Phase I
• 18 medical specialties
• Phase II
• 15 additional specialties
• Phase III / IV
• Include remaining services coded by CPT

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RVS2

• Include 3 main variables
• Relative Physician Work (52)
• Practice Expenses (44)
• Professional Liability Insurance Costs (4)
• Modifiers
• 1. Adjust for geographic locale
• 2. Different specialty, same service same
  payment
• 3. Budget Neutral conversion factor (CF)
• (Would not change Medicare spending -/)
• 4. Include process for annual update in CF
• 5. Limits on Balance billing
• 6. Medicare Volume Performance Standard (SGR)

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ICD-9 CPT PC/TC

• 786.2
• 71260 55.36 / 263.79
• 786.3

Black Box
What happens in here?
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PAYMENT (Physician Component)

• Total RVU Conversion Factor (_____)
• Work (Work RVU x Work GPCI)
• CF PE (PE RVU x PE GPCI)
• PLI (PLI RVU x PLI GPCI)

CF (Work RVU Work GPCI) (PE RVU PE GPCI)
(PLI RVU PLI GPCI)
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Technical Component

• MPFS
• (RVU PE GPCI(PE) RVU PLI GPCI(PLI)) CF
• HOPPS (APC)
• Payment Rate Wage Index (Regionally Calculated
  like the GPCI)

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How did we arrive at these calculations?
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Lawmakers See Red Over Meat Packaging
warn consumers to discard any product with an
unpleasant odor, slime, or a bulging package.
- USA Today, 10/31/2007
Pretty Good Advice!!!
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MPFS
RVU
WORK
PE
PLI
CPT
Global Billing
Professional Component
Attempt to devise the best payment system
Technical Component
PAYMENT RATE
HOPPS
APC
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Physician Work

• Time to perform service
• Technical skill and effort
• Mental effort and judgment
• Psychological stress of iatrogenesis
• Currently Based on ACR Socioeconomic
  Supplemental Survey Data
• Historically Based on
• Harvard RBRVS study
• 1992 RVS Refinement Process
• AMA/Specialty Society RVS Update Process

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Physician Expense

• What it costs the Practice to run Rent, Wages,
  Equip. / Supplies
• Practice Expense Advisory Committee (PEAC)
• ACR Socioeconomic Monitoring System Supplemental
  Survey Data
• Clinical Practice Expert Panels (MDs)
• Data for constructing cost estimates
• In/Direct cost elements for a service
• Estimates extended to related codes in CPT family
• CPEP Technical Expert Group
• Monitor data collection process
• AMA Socioeconomic Monitoring System Data
• Common service provided only by X (Avg. Medicare
  1991 payment 100), the percentage of PE cost for
  the given specialty X (Y), multiply that number
  by the 100 cost and you get Y (Initial Dollar)
  RVUs.

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Equipment Utilization and Interest
Rate(Technical Component (Included in Physician
Expense RVU) )
1/(minutes per year 50 usage)) Price
((11 interest rate/1) - (1/(1 11 interest
rate) life of equipment)) 5 maintenance

Courtesy of Pam Kassing
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Physician Liability Insurance

• Initially Omnibus Budget Reconciliation Act 1989
• Now..
• Calc. average professional liability premium
• Calc. risk factor based on specialty
• Mult. of service (CPT based) by risk factor
• Mult. By Work RVU
• Rescale for budget neutrality ( x Fudge Factor)

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GPCI GypsieGeographic practice cost indexes

• AMA SMS 1987 survey
• Must be updated Q 3 years
• Changes phased in over a two year period
• Cost of living 1990 census college grads, 2000
  professional organizations, updates since.
• Inputs to medical practice varied by geographic
  locale
• Premiums for policy 1 mil/ 3 mil

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Conversion Factor

• Updated yearly based on BBA 1997
• CFx CFx-1 MEIx UAFx LCx BNx
• MEI Medical Economic Index
• Measures average price change for medical
  goods/services with respect to inflation
• UAF Update Adjustment Factor
• Comparison of actual and target Medicare
  expenditure. Designed to prevent unsustainable
  increases in Medicare expenditures.
• LC Legislation Change
• BN Budget Neutrality

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So, how does it all add up?
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Example CT Chest I 712602008

• (Work RVU x Work GPCI) (PE RVU x PE GPCI)
  (PLI RVU x PLI x GPCI) x CF
• Work ((1.24) x Budget Neutrality Adjuster
  (0.8816)) , PE(0.44), PLI (0.05), CF(34.0682)
• RI (((1.24 x 1.045 x 0.8816) ((0.44 x 0.991))
  ((0.05 x 0.895)) x (34.0682)) 55.36
• Ca (SF) (((1.24 x 1.060 x 0.8816)) ((0.44 x
  1.546)) ((0.05 x 0.640)) x (34.0682)) 63.71

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Technical Component

• MPFS (RVU PE GPCI(PE) RVU PLI GPCI(PLI)) CF
  
• RI (7.48 (0.991) 0.37(0.895)) 34.0682
  263.79
• CA(SF) (7.48 (1.546) 0.37(0.640)) 34.0682
  402.00
• HOPPS (APC 0283) Payment Rate Wage Index(2006)
  
• RI 289.71 1.0954 317.35
• CA(SF) 289.71 1.4974 433.81

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MPFS
RVU
WORK
PE
PLI
CPT
Global Billing
Professional Component
Technical Component
PAYMENT RATE
HOPPS
APC
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OK, now I understand But what is the big
picture?
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Adapted from Woody, I. O. JACR 2005
2(2)139-150
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Courtesy of CMS and H. Forman, MD
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Courtesy of CMS and H. Forman, MD
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What can we do

• Well, all politics is local . . .

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(No Transcript)
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MAC
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All politics is local..

• 90 Of Coverage And Payment Decisions Occur At
  The Local Level
• Each MAC is required by CMS to have a physician
  Contractor Medical Director (CMD), who must
  follow the Coverage Issues Manual, Program
  Memoranda and other transmittals from CMS
  defining the CMS national policy for Medicare
  reimbursement
• ACR involvement helps prevent the spread of
  reimbursement policy damaging to radiology
  between contractors
• CMS gives authority to the local contractors to
  determine under what conditions a service is
  considered medically necessary and claims may be
  denied if not appropriate.
• In most states the CMD has the ultimate authority
  to determine medical necessity

Adapted from John Patti, MD
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ACR
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Local Coverage Determination

• LCDs are produced by CMDs to inform providers of
  the local Medicare reimbursement rules and the
  medically necessary reasons for an examination or
  procedure
• LCDs are created for certain CPT codes or a
  group of CPT codes (with associated ICD-9 codes
  and established diagnoses) required when
  submitting a Medicare claim
• Procedure Description, Reasons For Denial, and
  Coding Guidelines are omitted from LCDs and
  published in separate supporting articles by the
  Contractor
• New LCDs and supporting articles must be posted
  for public comment prior to integration this
  period is 45 days
• Traditionally contractors have been receptive to
  comment on both the LCDs and supporting articles

Adapted from of John Patti, MD
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Lines of communication
Managed Care Committee / Network
3rd Party Payer
Courtesy of Bibb Allen, MD
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Carrier Advisory Committee Network

• Diagnostic Radiology, Radiation Oncology,
  Nuclear Medicine, SIR CAC, RBMA CAC Network
• Link between Medicare Carrier and general
  membership by ensuring that local policies
  appropriately represent practice of radiology
• CPT III Codes specifically
• Staff assist CAC representative in evaluating
  Local Coverage Determinations (LCDs)

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Why all the doom and gloom?
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The Perfect Storm

• DRA
• Contiguous Body Part Imaging
• 5 Year Review
• The calm _____________ the storm..

Before / After
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Deficit Reduction Act of 2005 Section 5102(b)
limits TC payment for imaging in physician
offices or imaging centers on/after January 1,
2007.

• TC capped at the lesser of the Medicare
  physician fee schedule payment rate or the
  Ambulatory Payment Category (APC) rate under the
  hospital outpatient prospective payment system
  (HOPPS).
• Includes X-ray, ultrasound (including
  echocardiography), nuclear medicine (including
  PET), MRI, CT, and fluoroscopy,
• Excludes diagnostic and screening mammography
• Professional Component is not affected
• Congressional Budget Office (CBO) 2.8B savings
  over the next 5 years
• ACR staff 1.2 B savings in first year alone
• CBO new score at 13B over 10 years

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Deficit Reduction Act

• The imaging provisions are a public policy
  disaster
• FALSE Wide variance of payment between hospital
  outpatient based imaging services and imaging
  provided in physicians offices/imaging centers
• TRUTH Study done by The Moran Company shows a
  variance across all imaging modalities of 3
• Provisions written without input from the
  imaging community, without Congressional hearing,
  without accountability to its authors
• No one takes responsibility for authorship
• Eliminates RBRVS and takes lower of payment
  between the MPFS and HOPPS

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DRA Impact

• Financial Impact Breakdown By Procedure
• Percent Reduction Lost Imaging
  Revenue
• MRI 35
  490 M
• US 30
  300 M
• Nuc Med 16 136
  M
• CT 9
  69 M
• MRA 25
  24 M
• CTA 37
  10 M

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DRA Impact

• Biggest Hits by Lost Revenue
• MRI Brain
  162 M
• MRI Spine
  90 M
• Myocardial Perfusion SPECT 132 M
• Carotid Artery Duplex 87 M
• Echocardiography Color Doppler 83 M
• PET and PET/CT ??

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Multiple Procedure Discount For Contiguous Body
Parts

• CMS Regulation
• Continues the reduction for the second and
  subsequent examinations at 25 in 2007
• At the urging of ACR, CMS did not increase the
  reduction to 50
• Any savings from multiple examinations goes back
  to the federal fund
• Application of the reductions to the HOPPS rate
  would result in 75 reductions for the second
  procedure in some cases
• CMS will apply the 25 reduction to the MFS
  payment rate and if that payment is higher than
  the HOPPS payment, the HOPPS payment is paid

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The Third 5 Year Review

• Budget Neutrality
• Section 1848 (c) (2) (B) (ii) (II) of the
  Social Security Act requires that adjustments in
  RVUs may not cause total Medicare Physician Fee
  Schedule payments to differ by more than 20
  million
• When this tolerance is exceeded CMS must make a
  budget neutral adjustment

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The Third 5 Year Review

• Mandated process for Medicare to review
  overvalued and undervalued CPT codes (Via
  evaluation of RVUs).
• Over 160 high utilization codes were reviewed,
  40 pertaining to radiology
• Major change was 20 increase in E/M value,
  resulting in greater than 4 billion budget
  neutral effect
• Incidentally, Anesthesia work value inc. 32 -
  this is reflected in the Budget Neutrality
  Adjustment in 2008 Final Rule

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The Third 5 Year Review

• Budget Neutrality Adjustment For Physician Work
  RVUS
• Vigorously opposed by the ACR
• Vigorously opposed by the RUC and almost all
  medical specialties
• Reasons For ACR Opposition
• Major impact on hospital based physicians
• This is a historical precedent for changing the
  CF

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The Third 5 Year Review

• Enter the Budget Neutrality Adjustment
• Professional Component (PC) Payment
• (RVUxGPCI) (RVUxGPCI) (RVUGPCI) CF
• (RVUxGPCIx.8816) (RVUxGPCI) (RVUGPCI) CF
• CMS has finalized its 32 increase for
  anesthesiology physician work values as part of
  the third 5 year review. 
• The physician work adjustor will cause the 10.1
  cut in physician work values for 2007 (with a
  work adjustor of .89896) to be increased to a
  11.94 cut (changing the work adjustor to .8816)
  to all physician work values in the physician fee
  schedule for 2008.

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Conversion Factor

• Calculated each year based on a statutory
  formula that centers around the
• Sustainable Growth Rate - a.k.a. SGR
• SGR components
• Medical economic index - a.k.a. MEI
• Volume of services in prior years
• Target volume of services based on the Medicare
  population
• Gross domestic product
• SGR now demanding decreases in the conversion to
  achieve the target rates
• Five years of fixes leaves a large amount to
  repay to the system
• We are at the cliff and if the SGR formula is
  not changed double digit reductions in the CF
  will occur
• Decreases 10.1 for 2008 to 34.0682

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ACR Policy Priorities

• Co-founder of Access to Medical Imaging
  Coalition (AMIC), ACR will urge AMIC to support
  Accreditation as a means to address rapid growth
  in utilization http//www.imagingaccess.org/
• ACR will support participation in Accreditation
  programs BY ANY PHYSICIAN SPECIALTY who commits
  to quality and appropriate use of imaging studies
  and further, the ACR will support Medicare
  development of Accreditation requirements/Appropri
  ateness criteria based on private
  sector/physician specialty societies programs
• AMA and medical community pushing for
  comprehensive legislation to fix or replace the
  SGR focusing on those changes not adversely
  affecting radiology
• Because the increase in imaging utilization by
  14 is seen as a driver of SGR spending,
  radiology remains in the crosshairs
• Extensive congressional lobbying with bipartisan
  co-sponsors re DRA moratorium bills filed in
  2006 and 2007
• Advocacy to CMS on contiguous imaging reduction
  prevented a 50 cut for 2007, continue to
  defend TC from attack
• Advocacy to CMS on need for valid survey data on
  equipment utilization rate CMS proposed to hold
  rate steady for 2008

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Final Rule for 2008

• Conversion Factor for HOPPS payments will
  increase by 3.3
• CMS is proposing not to pay separately for the
  hospital TC of codes that they describe as
  dependent items and services
• All imaging guidance, supervision, and
  interpretation (SI) codes would be bundled into
  the procedure codes and, also Intraoperative
  services such as ultrasound would be bundled into
  the procedure code
• Image processing services 3-D post processing
  would not be paid separately
• Contrast material and radiopharmaceutical cost
  will not be paid separately
• Conversion Factor for MPFS payments will
  decrease by 10.1
• Anti-Markup Language if you bill Medicare 50,
  they will ONLY pay you 50.
• Under Arrangements no joint venture
  participation by hospitals and referring MDs
• ACR lobbied heavily for the Radiology Practice
  Expense / Hour increase to 204.86

HOPPS
MPFS
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MPFS Final Rule for 2008Practice Expense
Methodology

• Practice expense per hour (PE/hr) is amount it
  costs radiology practices in indirect/overhead to
  run an office or imaging center per hour.
• One of only a few specialties to conduct an
  alternate survey to re-calculate PE/hr original
  CMS Socioeconomic Monitoring Survey assigned
  54/hr to radiology
• ACR survey to replace SMS survey was
  miscalculated by CMS contractor (Lewin) at 174
  PE/hr
• ACR vigorously challenged Lewin CMS agreed
• In 2008 CMS will correct the radiology PE/hr to
  204
• 100m shift to radiology
• Will partially balance the DRA effects and CF
  changes

Courtesy of Pam Kassing
69
Future

• Equipment Utilization
• Interest rate for equipment debt
• Practice Expense
• CF
• P4P
• Radiology Utilization Management Companies
• Steerage, Pre-Auth.
• Assume no DRA moratorium
• Comparative Effectiveness

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Future

• Leasing Arrangements
• Resolve Reimbursement Issues for use of RAs
• More self-referral regulations and Stark III
• Fixing the SGR formula and how the conversion
  factor is calculated
• Continue to work with private payers to address
  similar issues

Courtesy of Pam Kassing
71
Special Thanks and Attributes to

• John Patti, MD
• Bibb Allen, MD
• Howard Forman, MD
• Pam Kassing
• Maurine Spillman-Dennis
• Diane Hayek
• Anita Pennington
• Kathryn Keysor
• Helen Olkaba
• Evelyn GIlbert

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Thank You !

• Thoughts, Questions, Concerns. . .
• Cbowkley_at_gmail.com