Question

Chapter 7-Payment Methods

Pick one of the payment methods (RBRVS, Ambulance, HOPPS, ASC, ESRD PPS, Hospice) in Ch.7 and summarize how it works including the following as a title on your paper:

Background/History
Development
Structure
Calculation/Payment
Issues
Implementation

Answer 1

RBRVS PAYMENT

Back Ground:

In 1992, Medicare reformed its physician payment method by implementing the Medicare fee schedule (MFS), of which the resource-based relative value scale (RBRVS) is a major component. ... Prospects for expanded use of Medicare's RBRVS appear favourable.

The resource-based relative value scale (RBRVS) is the physician payment system used by the Centres for Medicare & Medicaid Services (CMS) and most other payers. ... Instead of basing payments on charges, the federal government established a standardized physician payment schedule based on RBRVS.

The resource-based relative value scale (RBRVS) is the physician payment system used by the Centres for Medicare & Medicaid Services (CMS) and most other payers.

Principle:

The RBRVS is based on the principle that payments for physician services should vary with the resource costs for providing those services and is intended to improve and stabilize the payment system while providing physicians an avenue to continuously improve it.

Payments are calculated by multiplying the combined costs of a service times a conversion factor (a monetary amount determined by CMS) and adjusting for geographical differences in resource costs

Development:

Since the introduction of the RBRVS, the AMA has worked with national medical specialty societies to provide recommended updates and changes directly to CMS. The vehicle for this influence is the AMA/Specialty Society RVS Update Committee (RUC), which provides relative value recommendations to CMS annually.

In 1992, Medicare significantly changed the way it pays for physician services. Instead of basing payments on charges, the federal government established a standardized physician payment schedule based on RBRVS

Structure \ Components:

In this system, payments are determined by the resource costs needed to provide them, with each service divided into three components:

• Physician work
• Practice expense
• Professional liability insurance (PLI)

Annual updates to the physician work, practice expense and professional liability insurance relative values are based on recommendations from the AMA/Specialty Society Relative Value Scale Update Committee (RUC), which was formed in 1991 to make recommendations to CMS on the relative values to be assigned to new or revised codes in the Current Procedural Terminology (CPT®) code book. The relative values in the RBRVS were originally developed to correspond to the approximately 10,000 CPT procedure codes. The RBRVS is updated annually to reflect new and revised CPT codes.

Physician work component:

The physician work component accounts for an average of 51% of the total relative value for each service. The factors used to determine physician work include the time it takes to perform the service, the technical skill and physical effort, the required mental effort and judgment and stress due to the potential risk to the patient. The physician work relative values are updated each year to account for changes in medical practice. Also, CMS must review the whole scale at least every 5 years.

Practice expense component:

The practice expense component accounts for an average of 45% of the total relative value for each service. The values were based on a formula using average Medicare-approved charges from 1991 (the year before the RBRVS was implemented) and the proportion of each specialty's revenues attributable to practice expenses. In January 1999, CMS began a transition to resource-based practice expense relative values for each CPT code, which differ based on the site of service.

Professional liability insurance (PLI):

On Jan. 1, 2000, CMS implemented the PLI relative value units. The PLI component of the RBRVS accounts for an average of 4% of the total relative value for each service. With this implementation and the final transition of the resource-based practice expense relative units on Jan. 1, 2002, all components of the RBRVS are resource-based.

CPT is a registered trademark of the American Medical Association.

Calculation\Payment:

As with other physician services, payment varies depending on locality. The locality adjustment is made by using different anesthesia conversion factors in different parts of the country. The set of anesthesia relative values is the same everywhere.

Lab Services:

The RBRVS is not used to pay for clinical lab tests, such as a complete blood count or

a urinalysis. These services are paid using Medicare’s clinical lab fee schedule, which is also typically used by Medicaid programs.

For most lab tests, physicians are not paid separately for their interpretation of results. For some more-complicated tests, separate payment is made using an RBRVS-based fee (for example, CPT 83912-26, interpretation of a genetic examination).

Applying Medicare Methods to Medicaid

For Medicaid programs, the great benefit of an RBRVS-based payment method is that the federal government and the professional associations have already spent millions of dollars developing and updating the RBRVS. Though the RBRVS has its critics, there is no denying the fact that it is widely accepted. A state that adopts an RBRVS-based approach

can also make relatively easy comparisons of its payment levels with Medicare and other payers.

Although the RBRVS was developed for Medicare, the RVUs reflect the population in general. The Medicare RVUs for obstetrics, for example, are applicable to a Medicaid population.

Medicare also estimates RVUs even for some services it doesn’t cover but that Medicaid programs typically do, such as preventive care (e.g., CPT 99392). The number of CPT-4

services for which a Medicaid program cannot obtain RVUs is about 250. In these cases, a Medicaid program can estimate its own RVUs by comparison with other codes or use “fill-in” RVUs made available by a commercial publisher.

Issues:

In today's rapidly changing health care environment, it is crucial to understand the genesis and concepts of the Medicare Resource-based Relative Value Scale (RBRVS) physician fee schedule. Many third-party payers, including state Medicaid programs, Blue Cross–Blue Shield agencies, and managed care organizations are using variations of the Medicare RBRVS to determine physician reimbursement and capitation rates. Because the RBRVS fee schedule was originally created for Medicare only, paediatric-specific Current Procedural Terminology codes and paediatric practice expense issues were not included. The American Academy of Paediatrics agrees with the use of the Current Procedural Terminology codes and the RBRVS physician fee schedule and continues to work to rectify the inequities of the RBRVS system as they pertain to paediatrics.

The American Academy of Paediatrics recognizes the efforts of the Physician Payment Review Commission (as of 1998, the Physician Payment Review Commission is the Medicare Payment Advisory Committee, or Med Pac), organized medicine, and the Health Care Financing Administration (HCFA) to reduce health care spending in the United States, while ensuring access to health care services for Medicare recipients. The Medicare Resource-based Relative Value Scale (RBRVS) physician fee schedule was established to recognize objective measures of physician work, while creating equity in reimbursement for all physician services across specialties. The RBRVS system, which is based on uniform definitions of physician work, has eliminated many of the more dramatic reimbursement irregularities within the Medicare physician fee schedule. Each year, Congress establishes a budget for Medicare by setting a single, so-called conversion factor (CF; in previous years, there were three separate CFs). This CF is a national dollar value that converts the total relative value units (RVUs) into payment amounts (RVU × CF dollar amount = payment) for the purposes of reimbursing physicians for services provided.

Over the past few years, the Academy has initiated many paediatric-specific Current Procedural Terminology (CPT) code proposals, some of which have been accepted by the American Medical Association's (AMA) CPT editorial panel and have been incorporated into the CPT manual. The Academy has worked actively within the AMA/Specialty Society Relative Value Scale Update Committee (RUC) process to provide the HCFA with RVU recommendations that reflect accurately the work involved in providing services to children for these paediatric-specific CPT codes. Although the HCFA has assigned values to these paediatric-specific CPT codes within the Medicare RBRVS physician fee schedule, the current Medicare RBRVS physician fee schedule has yet to assign specific reimbursement for a number of services commonly or uniquely associated with paediatric care (eg, vision screening, child abuse services). The present Medicare-based system also has not recognized completely many of the unique aspects of providing care to infants and children; some services for children require increased physician work compared with similar services for adults.

The RBRVS physician fee schedule was implemented initially by the HCFA as a mechanism for the reimbursement of physician services provided to Medicare recipients. It was not designed as a universal system of reimbursement for the provision of services to all patient populations, including those commonly covered by state Medicaid agencies and private payers. Despite these design limitations, private payers have moved rapidly to adopt this method of reimbursement. A recent report by Med Pac revealed that nearly half of the private plans surveyed in 1995 reported some use of a RBRVS payment system. The work estimates within the RBRVS Medicare physician fee schedule were developed primarily to reflect the services rendered to the typical Medicare patient and, as such, they often do not reflect accurately the breadth and scope of work expended in the provision of care for new-borns, infants, and children. In fact, many Medicaid programs determined that the HCFA's original valuation of paediatric services was low and, if left uncorrected, would ultimately impede beneficiary access to care. Consequently, a few Medicaid programs that adopted the Medicare RBRVS physician fee schedule to reimburse physicians instituted a separate CF for some paediatric services. A few of these Medicaid programs have maintained higher CFs or established auxiliary fee schedules or case management fees to augment physician reimbursement for children's care.

Despite the limitations of the RBRVS fee schedule used currently, the Academy does advocate the use of an RBRVS physician fee schedule expanded for paediatric patients as the optimal mechanism of reimbursement for paediatric services. The Academy believes that this fee schedule, based on an objective estimate of physician work, is more consistent and equitable than the customary, prevailing, and reasonable system under which physicians historically have been reimbursed for the provision of each service. If ease of access to health care is to be ensured for children, Medicaid programs and other payers must be educated on the current disparity in reimbursement for some paediatric services within this system and work with the Academy, the AMA, and the HCFA to correct these deficiencies. Additionally, all payers (most importantly, Medicaid) must recognize the importance of incorporating and reimbursing all services listed under RBRVS, while refining their payment schedules to correspond to the HCFA's annual updates and revisions. State-specific payment methodologies are not adequate because they are often arbitrary and do not recognize objective measures of work across specialties. Payers also must acknowledge and embrace the HCFA's 5-year review of the relative work values and the HCFA's recent efforts to implement an accurate resource-based approach to the practice expense portion of total RVUs. The Academy recognizes that the HCFA's yearly budget neutrality adjustments to the RVUs are necessary to comply with Congressional requirements placed on the Medicare fee schedule; however, private payers and state Medicaid programs must recognize that these adjustments are merely attributable to budgetary constraints imposed by Congress (budget neutrality) and do not reflect changes in the provision of care or the amount of work expended in providing a specific physician service.

The HCFA does recognize that a Medicare-driven reimbursement tool may underrepresent or undervalue paediatric work. To account for this, Congress mandated that the HCFA revisit this paediatric work issue as part of a normal 5-year review process, specifically to evaluate whether codes for paediatric services are valued correctly. Although the Academy appreciates the attempts by the HCFA to account for paediatric work more equitably, it is still important to note that paediatricians were severely underrepresented in the original Hsiao studythat led to the creation of the original RVUs for physician work. Despite this fact, the overall fairness of the system that was created led rapidly to its incorporation into reimbursement formulas for children's health care services by many third-party payers as well as by state Medicaid agencies. Although these surveyed work values may be comparable with those required in evaluation and management (E/M) services provided to children, this hypothesis has not yet been studied adequately. In some paediatric subspecialties (eg, paediatric cardiology, paediatric nephrology), in which valid survey data have been collected, there is quantifiable proof of underestimation of total physician work, particularly in situations in which major physiologic and developmental differences exist.

The Academy believes that the unique characteristics of children's health care services have not yet been incorporated fully into the universe of medical and surgical procedural codes and services to children despite Congress' admonition to the HCFA. The Academy supports the continued efforts of the AMA CPT and the HCFA, through the CPT and RUC processes, to address this payment anomaly. The Academy also appreciates their commitment to represent more effectively, through the CPT process, the diversity of CPT codes specific to children and to assign appropriate work values to these procedures and services.

It is essential that the RBRVS process use adequate sample size and valid survey questions. The Academy must ensure survey completion by physicians who deliver health care services to children and are knowledgeable about the RBRVS system. It is inappropriate and not in the best interest of paediatrics simply to extrapolate work values assigned for services to children from those values determined by surveying physicians who primarily provide adult services. Some of the differences between adult and paediatric services can be demonstrated in each of the following components of the RBRVS system.