Nothing Is Easy

March 1, 1999
Ronald A. Shellow, MD

Volume 16, Issue 3

Concerned about increasing medical costs, Congress began to tinker with physicians' fees under Medicare with the Omnibus Budget Reconciliation Act of 1989. The result, the Resource-Based Relative Value Scale (RBRVS), altered our fees in the Medicare system.

Concerned about increasing medical costs, Congress began to tinker with physicians' fees under Medicare with the Omnibus Budget Reconciliation Act of 1989. The result, the Resource-Based Relative Value Scale (RBRVS), altered our fees in the Medicare system. The relative fee was divided into three parts-work, practice expenses and expenses for liability insurance. The actual fee paid was determined by multipliers for each component. Use of the RBRVS, in a fundamental way, altered fees in other payment systems as well.

William Hsiao, Ph.D., a professor at the Harvard School of Public Health, achieved the preliminary goal of deriving a fee schedule based on the work-time, effort and intensity-which a physician accomplished in performing a medical service. Hsiao was unable to complete assessing practice expenses within his time constraints. Instead, he used earlier fee-based relative value scales to estimate practice expenses of a given physician service. Therefore, the practice expenses component of the Medicare fee under RBRVS has been based on a different system than the work component, until now. This RBRVS, with the anomaly, became the basis for Medicare Part B physician fees.

Refining and updating the work value fell to the Health Care Financing Administration (HCFA) of the U.S. Department of Health and Human Services (HHS). The American Medical Association's RBRVS Updating Committee (RUC) became an important advisor and consultant to HCFA in maintaining the relativity of the work value of the Relative Value Scale. The RUC has also worked with HCFA on revising fees based on changes in work, and on determining work values for fees for new procedures. In the Congressional Budget Act of 1995, the Secretary of HHS was required to develop a system of practice expenses for physicians' fees based on relative values, a task it delegated to HCFA.

The economics of practice expenses is not the practice of medicine but, if doctors left it solely in the hands of economists or bureaucrats, medicine might get an even worse shake than if physicians remain involved. Thus, a few psychiatric physicians have become dedicated to the esoteric world of estimating the practice expense component of codes to determine reimbursements for Medicare. While not perfectly responsive, HCFA has listened to our input, as has the RUC.

Procedures provided to patients are designated by a code on the billing information. These code numbers and descriptions are set by the editorial panel of Current Procedural Terminology (CPT), an AMA committee. If a doctor wishes to be reimbursed for a new service provided, his specialty society must petition the CPT editorial panel to add, describe and number the code for this new procedure in the next edition of CPT. For example, as we all know, the entire set of codes for psychotherapy was altered in the last edition of CPT. HCFA, by treaty, has agreed to use CPT as its coding source and will accept a new code proposed by the CPT editorial board. (HCFA is currently exploring other coding systems that may, in the future, supplant CPT.) Accepting the code does not mean HCFA will pay for the procedure.

The value in terms of work for a new or revised code is considered by the members of the RBRVS Updating Committee. The committee assigns a value for the code and advises HCFA. However, the HCFA administrator makes the final decision. This number, which must be budget-neutral, must be approved by the Secretary of HHS. The approved value is published in the next year's Federal Register as the Medicare fee schedule. Thus far, the work value has received careful consideration but the practice expense segment, which may amount to more than half of the total fee, has just tagged along.

How does one calculate the actual expense of a given code? If one separates out the time and effort of the physician work-as is required by law-one is left with office or other site of service time and its prorated expense, the cost of clinical personnel, the cost of clerical personnel, the cost of disposable material and the depreciation of longer-lasting material. Think about it. It would be difficult to estimate the exact expense for each and every procedure we do. It becomes even more complicated when these expenses must be related in a reasonable way to the practice expenses for other procedures that psychiatrists and other physicians perform. Additionally, we are now required to relate those values to work performed by nonphysician professionals paid under the same system.

HCFA first contracted with Abt Associates Inc. to convene a series of Clinical Practice Expert Panels (CPEP) to collect and evaluate the data necessary to estimate these expenses. Due to the lukewarm response to the formation of these panels, the data obtained did not make sense. Following input from the AMA, Congress extended the deadline for information gathering so that physicians would not be bound to a defective data set.

HCFA then proposed, without totally discrediting its CPEP results, to use data derived from the annual AMA Socioeconomic Monitoring Survey, a totally different data set. Taking into account the sampling problems of this source, the numbers at least appeared to come close to making sense when examined. This held true even if the figures were out of date by the time reported, and did not reflect expenses of professionals who were not physicians.

Every specialty in medicine then had the opportunity, through the RUC, to comment on the data and the methodology of deriving the practice expense values from these data. There were many errors, including sampling errors. Not only did we have to put values to the expense components of the procedures, but we also had to deal with changes in the definitions of the procedures themselves. During the data collection, psychiatry was changing many of the most heavily utilized codes, which further complicated the operation. As an example, an hour of medical psychotherapy went, in terms of coding numbers, from 90844 to G0076 to 90807.

Additionally, the descriptors changed, subtly but importantly. The exact requirement for documenting the Evaluation/Management component of the code has still not been defined. In addition, the practice of psychiatry, including medical psychotherapy, changed radically during this period. The changes needed to be reflected in the data if psychiatrists were to get any equity within this Byzantine system. This process is still ongoing.

Payers define the system. In order to be paid, physicians then must try to modify their system to conform with the payers' system. In the Medicare system, the rules are set by laws, and regulations that have the force of law. The goal is a standard of fairness within the context of the entire medical system that preserves equitable payment without harming our patients. In the managed care arena, the fees set by private insurers are frequently based on the Medicare fee schedule. We do not have to accept those fees unless we sign their contracts. However, if we see Medicare-eligible patients, we must, save for draconian exceptions, accept the maximum limiting Medicare charge as payment in full.

Under Part B, Medicare pays physicians a fixed amount that is set annually by a series of factors tied to defined economic indices. This amount merely determines which portion of the total pot each specialty and each individual physician will get. As an example, my own fees under Medicare are currently about 30% less than my individually determined fees for patients not eligible for Medicare.

When the first set of prospective figures for practice expenses for psychiatry was distributed, practitioners of psychiatry would have lost about 5% from Medicare fees. Truly magnificent staff work in analyzing the data by the American Psychiatric Association's Division of Government Relations and the judicious use of consultants convinced the HCFA to propose a 4% increase in the practice expense component for psychiatric fees. Additional refinements to the numbers, already sent to HCFA, may add slightly more. If a psychiatrist had an exclusively Medicare practice, these changes translate into about $15,000 of added gross income per year.

Whenever someone complains to me that organized medicine and organized psychiatry are doing nothing for them, I give the person that figure. Just in terms of money in the pocket, it is far more than the dues paid to the organization. And the effect is solely the result of a great deal of staff time and effort, and the additional work of a few who apparently enjoy trying to make some sense out of this perverse and bizarre world of fees, codes and reimbursements.