August 30, 2010

On July 13, 2010, the Centers for Medicare and Medicaid Services (CMS) published its proposed rule for the 2011 Physician Fee Schedule in the Federal Register.  The proposed rule indicated that the Sustainable Growth Rate (SGR) formula and other changes would dictate a decrease of approximately 6.1 percent in the Medicare conversion factor effective January 1, 2011, as we noted in our Alert regarding the proposed fee schedule rule. This 6.1 percent reduction would be in addition to the 23 percent deferred cumulative SGR cuts scheduled for December 1^st of this year.

The numbers get worse.  On top of the SGR cuts, CMS has proposed to reduce the conversion factor by 7.9 percent in order to implement a much-needed revision and rebasing of the Medicare Economic Index (MEI), CMS’s tool for estimating the effect of inflation on practice costs.

The annual update to the conversion factor is based on the interaction of the SGR and the MEI. Until 2010, the MEI used data categories established in 1973 and not updated since 2000.  Newer data, obtained through 2006, came from the AMA Physician Practice Information Survey (PPIS) and were incorporated in revised practice expense relative values that began a four-year phase-in in 2010.

The American Society of Anesthesiologists (ASA), like most medical associations, had and has long supported the calculation of more recent – that is to say, more realistic --practice cost inputs and specifically the PPIS.  It vehemently opposes CMS’s proposed rebasing of the relative weights given to the physician “work,” practice expense and professional liability insurance expense components of the MEI, however.

This rebasing would increase the weighting of practice expense and professional liability insurance costs, but the weight for physician work would remain unchanged.  To offset the increased practice expense and professional liability expense weights,  CMS proposed to cut the 2011 conversion factor by another 7.9 percent. The practical effects of this change would be increases to payments for services with higher relative practice expense values and decreases to services with higher relative work values. Certain specialties would see sufficient increases in their practice expense and professional liability insurance expense relative values to come out ahead from the change.

Physician work accounts for roughly 80 percent of the payment for anesthesia services, though, and ASA rightly rejects a revised methodology under which “provision of cost-effective, high quality care, a goal shared by the Administration and all providers, may be eclipsed by a drive to provide PE-intensive services." (Letter to CMS dated August 24, 2010, commenting on the proposed fee schedule rule. The Medical Group Management Association’s letter makes the same point.)

The table below shows the impact of these various proposed cuts on the conversion factors for both anesthesia services and all other services including pain management and critical care:

The dollar values in the far right-hand column are simply unthinkable.  The 7.9 percent cut is CMS’ own creation, not mandated by any statute, and CMS may keep or kill the cut in its sole discretion. Indeed, CMS itself proposed to convene a MEI technical advisory panel later this year to review all aspects of the MEI, including the inputs, input weights, price-measurement proxies, and productivity adjustments. Both ASA and MGMA support the CMS MEI technical advisory panel proposal and strongly encourage CMS to leave the MEI rebasing alone until after the panel has had time to make recommendations. It is hard to argue with the recommendation that the Agency hear from its expert panel before implementing changes – but we will not know the outcome of the medical associations’ appeal until the final fee schedule rule is published in November.

The bulk of the potential conversion factor reductions are attributable to Congress – which created the SGR and has repeatedly failed to fix it. Medical associations and their individual members are stepping up their lobbying efforts as Congress returns to Washington. The AMA, for one, does not expect any results before the lame-duck session that will begin after the elections. (American Medical News, July 26, 2010.)

Congress has found a way to try to pass the buck to the Administration, however.  The Affordable Care Act, the health reform package signed into law last March, authorizes the Secretary of Health and Human Services to review and adjust “misvalued” codes under the Medicare Fee Schedule.  In May, 75 Republican and Democratic members of the House of Representatives sent a letter to Secretary Kathleen Sebelius asking her to review the totality of anesthesia services. They suggested that anesthesia might be misvalued given the well-known report from the Government Accountability Office indicating that Medicare payments represent only 33 percent of commercial insurance payments for the same service.  On August 23, a bipartisan group of 16 Senators sent Secretary Sebelius a similar letter.

ABC thanks ASA and the many anesthesiologists who lobbied their Representatives and Senators to ask for the Secretary’s review. We urge our readers and especially our clients to keep up the pressure until the SGR is finally repealed.

With best wishes,

Tony Mira
President and CEO

If you have any questions or would like additional information please call 517-787-6440 x 4113, send an email to info@anesthesiallc.com, or visit our website at www.anesthesiallc.com.