Anesthesia Business Consultants

Weekly eAlerts Covering Regulatory Changes, Compliance Reminders &
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Anesthesia Industry eAlerts

Sent to subscribers every Monday morning, our eAlerts deliver timely updates on regulatory, legislative and practice management developments of interest to anesthesia professionals.

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December 4, 2017


The 2018 Physician Fee Schedule contains significant reductions in the work values for several flat-fee ancillary services.  Anesthesia groups should review the percentage of collections in their practices that come from these services in order to assess the potential impact of the reductions when the changes go into effect on January 1, 2018.  ABC Clients:  your account executive can assist in preparing an analysis on request.

The 2018 Physician Fee Schedule (PFS) (published in the Federal Register on November 15, 2017) contains significant reductions in the work values for several flat-fee ancillary services.  Flat-fee services are those for which payment is determined under the Resource Based Relative Value Scale (RBRVS) and for which time is not a factor in determining the fee.

Now would be a good time to review the percentage of collections in your practice that typically come from the affected flat-fee services in order to assess the potential impact of the reductions on your practice when the changes go into effect on January 1, 2018.  (ABC clients:  your account executive will be glad to assist in preparing an analysis on request.) 

Since January 1, 1992, the Centers for Medicare and Medicaid Services (CMS) has used the PFS to determine reimbursements for approximately 7,500 physician services.  The PFS replaced the traditional “customary, prevailing, and reasonable” (CPR) charge system that had been in use for many years.

Using the RBRVS, Medicare determines the Relative Value Units (RVUs) for medical services for three types of resources: 

Work RVUs, which consider the time, technical skill, effort, mental effort, judgment and stress involved in the service.

Practice expense RVUs, which account for the nonphysician clinical and nonclinical labor involved in the service, as well as expenses for building space, equipment and supplies.

Malpractice insurance RVUs, which account for the cost of malpractice insurance premiums.

(Although the actual percentages vary from service to service, physician work and practice expenses comprise 52 and 44 percent of total Medicare expenditures on physician services, respectively, according to an article in Health Care Financing Review.) 

Under the PFS, each of the three elements is assigned an RVU for each CPT code.  The RVUs are then adjusted based on the geographic practice cost index (GPCI) for various areas of the country.  The conversion factor is multiplied by the total geographically adjusted RVU to determine the payment for a given medical service.  (See our November 20, 2017 eAlert for a table showing 2018 anesthesia conversion factors by locality.)

CMS is required to develop RVUs for new services and to review RVUs no less than every five years.  In addition, CMS examines RVUs for services that it has identified as being potentially “misvalued” and in need of modification.  The relevant specialty societies survey their members to gather data on the time, effort and expenses involved in providing the flagged service.  The American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) reviews this data and develops recommendations, and CMS reviews these recommendations and publishes the proposed RVUs in the Federal Register for comment before making a final determination and publishing the PFS.  

In 2017, placement of a non-tunneled centrally inserted central venous catheter in patients age 5 and older (CPT code 36556) had been marked by CMS as potentially misvalued due to high expenditures for this service.  The agency’s concerns regarding the code’s value also led to a review of three additional codes in the same code family:  1) 36555:  insertion of a non-tunneled centrally inserted central venous catheter, younger than 5 years; 2) 36620: arterial catheterization or cannulation for sampling, monitoring or transfusion (separate procedure); percutaneous; and 3) 93503: insertion and placement of a flow directed catheter (e.g., Swan Ganz) for monitoring.  As a result of the review, CMS reduced the work RVUs for all four codes in the final rule, with reductions ranging from 13 to 31 percent (see table below).

For example, the CMS payment for CPT code 36556 would have been approximately $125.00 in 2017 and will be $102.00 in 2018, a decrease of 19 percent. (Calculation based on the sum of the work value, practice expense value and malpractice insurance value multiplied by the conversion factor.)

Although reimbursements for these flat-fee services have been relatively stable for some time, in the past couple of years, we’ve seen clouds on the horizon in the form of fee erosion in some commonly performed services.  The reductions in the work values for the flat-fee procedures discussed here are the most recent example of a pattern we’ve observed in the economics of medical reimbursement, in which frequently performed services that have gained widespread acceptance and are frequently performed eventually come to be seen as misvalued.  Almost all but the smallest anesthesia groups now perform arterial catheterizations, central venous catheterizations and Swan Ganz catheter placements.  As it has in the past when a procedure becomes the standard of care, CMS has responded by questioning—and then reducing—the valuation for these procedures. (Also see our eAlerts on ultrasound guidance and screening colonoscopy.)

What’s happening here?  Anesthesia practices seem to be taking a one-two punch in: 1) the erosion in work values used to calculate payment rates, and 2) the bundling of services into procedures, such as the use of ultrasonic guidance in nerve block placement for postoperative pain.  For the past five years, the fastest growing service line for virtually every practice of which we are aware has been the use of blocks in pain management.  These earlier changes and the current ones for certain flat-fee services are a double-whammy that has anesthesia groups concerned.

With best wishes,

Tony Mira
President and CEO