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Reimbursement for cardiac procedures: Past, present, and future
Reimbursement for Cardiac Procedures: Past, Present, and Future Sidney Levitsky, MD Department of Surgery, Harvard Medical School, and Division of Cardiothoracic Surgery, New England Deaconess Hospital, Boston, Massachusetts
Changes that are the consequences of the transformation of health care into an industry are reviewed. The primary focus is on the effects of this transformation and government funding policies on physician reimbursement for cardiac surgery. Also addressed are Relative Value Scales as the basis for physician reimbursement, physician payment reform under the Omnibus Budget Reconcilta-
tion Act of 1989, impact of Medicare policy on surgical volume and surgeon income over recent years, provisions of the Medicare plan under current consideration, and impact of the Congressional-mandated resource-based practice expense relative value scale study currently under way. (Ann Thorac Surg 1996;62:514-7)
T
during that time, before Medicare. With the advent of nonprofit health plans, such as Blue Cross/Blue Shield and union and local government payment groups, physicians continued to seek payment for services in accord with the CPR. Blue Cross/Blue Shield and commercial for-profit health insurers generally accepted these charges, simply passing the costs through to the insured. Thereafter, union and local government groups began to pay slightly less than the CPR. This trend was accelerated with the advent of Medicare and Medicaid; their payments since 1965 have been at progressively lower percentages of the CPR (Table 1). And over the last few years, the for-profit managed health-care corporations have taken a significant portion of the health-care dollar for their profit by further reducing the percent of CPR to arrive at a fee-for-service.
h e medical profession is undergoing its own industrial revolution. "After almost 2,500 years of clinical hegemony during which their activities were rarely questioned, physicians are becoming accountable production workers" [1]. In what is now described as the health-care industry, the nature of the modern medical team has changed tremendously. Physicians and nurses have been joined and often pushed aside by the discharge planner, insurance company, and billing supervisor, among other supernumerary personnel, who monitor their activities and reimbursement while consuming resources. As Kleinke notes, "Many physicians are understandably threatened by this watershed in the history of medicine" [1].
The changes taking place are driven basically by the tremendous increase in the percentage of gross domestic product consumed by health care, from less than 2% in 1965 to more than 14% in 1994. Federal funding of health care has kept pace. It is estimated that all federal programs, including Medicare and Medicaid, now account for about $500 billion of the total $900 billion annual cost of health care [2]. Clearly, government has become a major player. Background of Physician Reimbursement The standard for physician reimbursement has always been the customary prevailing rate (CPR). In the past, physician services were paid for with cash or by barter. Barter had a significant role even as late as the depression era of the 1930s; we all know physicians from that period who recall being paid with a chicken, a loaf of bread, or whatever. Also much free care was given Presented at Risk Management in CABG: A Continuing Perspective. Orlando. FL, Jan 27. 1996. Address reprint requests to Dr Levit sk y, Division of Cardiothoracic Surgery. New England Deaconess Ho spital. 110 Francis St. Suite 2C. Boston, MA 02215.
1996 by The Society of Thoracic Surgeons Published by Elsevier Science Inc
@
Health Care as a Business The insertion of the profit motive into health care and the advent of government funding have had many consequences. Community hospitals, formerly regarded as community resources, increasingly have become healthcare corporations. In the past, university medical cent~rs saw themselves as existing for the purposes of teaching and research, with patients there only to facilitate these ends. These centers now are seen as for-profit enterprises that only incidentally do teaching and research. Industry has profited from a flow of new devices and drugs, much of it paid for by federal government-funded research programs. And, of course, for-profit health-care corporations have proliferated. Due primarily to the funds provided through Medicare, physician income increased by 13.5% between 1975 and 1987; this compares with an income increase of 3% for the rest of the population. Physician reimbursement by Medicare was initially set at 90% of the CPR when the plan was enacted in 1965. As total dollar costs increased, reimbursement was lowered to 83% of the CPR in 1969 and 75% in 1971 (Table 1). With concern about rising costs accentuated by 1972, associ0003-49751961$15.00
PH 50003-4975(96)00819-3
RISK MANAGEMENT LEVITSKY CARDIAC SURGERY REIMBURSEMENT
Ann Thorac Surg 1996;62:514-7
Table 1. Declining Rate of Medicare Physician Reimbursement
Year
Fees (%CPR)
1965" 1969
83
1971 1972
MEl b
1984
Frozen
90 75
• Year of enactment. CPR
b
Implemented in 1975 based on 1971 fees .
= cu stomary prevailing rate;
MEl = Medical Economic Index
ated with the onset of high inflation rates, the government developed the Medical Economic Index, a methodology designed to prevent the CPR from increasing too rapidly. When the Medical Economic Index, implemented in 1975 but based on 1971 fees, proved unsuccessful in containing costs, the CPR and all fees were frozen in 1984. Table 2 demonstrates what happened to levels of Medicare reimbursement for cardiac surgery at a California center between 1987 and 1992. The cumulative percentage decreases shown do not take inflation into account. With the incorporation of a possibly somewhat generous inflationary adjustment of 5%, the cumulative percentage decrease in Medicare reimbursement averaged over all coronary artery bypass graft procedures was about 50% over this 5-year period. An updating of these figures to 1995 would probably reflect a 60% to 70% reduction since 1987 in cardiothoracic surgeon income from Medicare reimbursement.
Alternative Approaches to Physidan Reimbursement The relative value scale (RVS) has been proposed as an alternative method of physician reimbursement. An RVS may be either charge-based or resource-based. California instituted a charge-based RVS in 1956 that was based on Blue Shield median charges. The program was terminated in 1983 when the Federal Trade Commission found it to be in violation of antitrust provisions. Since then, the Table 2. Cedars-Sinai Medical Center Cardiac Surgery Medicare Reimbureemeni":"
Procedure CABG2 CABG3 CABG4 CABG5 Average AVR MVR
1987 1991 1992 Paid Paid Announced 4,462 3,680 3,901 4,360 4,101 3,600
2,743 2,962 3,159 3,237 3,025< 2,660 4,488
2,320 2,489 2,601 2,644 2,514 2,196 3,804
1987-1992 1991-1992 Cumulative Difference Decrease (%)
(%)
- 15 -16 -18 -18 -17 -18 -15
-40 -32 -33 -39 -39 d -39
• Courtesy of jack Matloff, MD, Los Angeles. CA. b Reimbursement is 80'Y, of amount allowed. < Difference is -26%, 1987-1991. d No adju stment. A 15';' annual adjustment results in additional 13%decrease, ie, -52% from 1987. CARG AVR = aortic replacement; MVR = mitral valve replacement.
= coronary artery bypass grafting;
515
concept of a resource-based RVS has gained prominence. This approach uses, for the most part, physician time as a major factor to calculate reimbursement. However, the question as to whether or not all physicians are equal and should therefore be paid the same fee per hour for their time has not been resolved. The CPR concept remains an alternative. With this approach, charges are based on what physicians consider the worth of their procedures, the benefit of their procedures to society, and consumer willingness to pay. Theoretically, a competitive marketplace exerts constraints on fee increases. But for a marketplace to be competitive, the consumer must have both the knowledge and the time to shop and choose. A patient having an acute myocardial infarction does not have that time. A competitive marketplace further assumes that the consumer pays for services out of pocket, that sellers compete on price, and that there is no restriction on who can provide service. The absence of these characteristics in the medical marketplace explains why competition has not contained rising costs.
Physician Payment Reform Act Physician payment reform was enacted by the government under the Omnibus Budget Reconciliation Act (OBRA) of 1989 [3]. Under this act, physician payment is made on the basis of a resource-based RVS that is budget neutral and was phased in from 1992 to 1996. The act also provides for medical volume performance standards (MVPS), caps on balanced payments, and maximum allowable actual charges. The MVPS specifically applied to surgeons were enacted with the assistance of the American College of Surgeons. Although the MVPS constitute a cap on overall costs and procedures, they allow surgical fees to increase annually as long as the number of operations is kept fixed or reduced. Balanced payments are the fees charged by physicians beyond the Medicare fee. The cap on balanced payments is strongly disliked by physicians. Previously, physicians would charge whatever the market would bear, in some environments sometimes 100% to 300% above the allowable Medicare fee. In 1991, OBRA limited balanced payments to 25%, to 20% in 1992, and to 15% in 1993 and thereafter. This legislation had many advantages from the viewpoint of the federal government and public policy. It enabled the government to predict annual medical-care costs and provided a method of lowering costs by just decreasing the conversion factor. It also provided political cover for medical rationing, something no politician wanted to advocate openly. Furthermore, OBRA had the additional advantage of splitting the medical lobby, for although it decreased income for surgeons, it increased income for internists and general practitioners. As for problems, although it initially was widely feared that the provisions of the act would decrease the quality and number of medical school applicants, this has not occurred. However, the legislation does fail to address the health-care needs of the underclass.
S16
RISK MANAGEMENT LEVITSKY CARDIAC SURGERY REIMBURSEMENT
Ann Thorac Surg 1996;62:514-7
Table 3. Medicare Volume Performance Standards"
Year 1994 1995 1996
Surgical
Primary Care
Other Nonsurgical
(%)
(%)
(%)
9.1 9.2 -0.5
10.5 13.8 9.3
9.2 4.4 0.6
• Federal Register. December 5, 1995.
Impact on Physicians Medicare policy is of increasing concern to surgeons: In 1993, Medicare reimbursement accounted for only about 20% of our income; it now represents as much as 50% for most surgeons. Over the last few years, the quantity of surgical procedures has remained rather constant, so reimbursement has remained constant or increased. In contr~st, there h~s been a sharp increase in the charges submitted for reimbursement under the evaluation and ~~nagement c~des used by internists and general practitioners for office and hospital visits; the increase was 13% from 1993 to 1994. Because payments are made in accord with budget neutrality, this example of Medicare gaming resulted in approximately a billion-dollar transfer of income since 1993 from surgeons and procedurists to physicians who mostly use the evaluation and management codes. Health Care Financing Administration c~~nges the MVPS for surgeons and primary-care physrcians each year. In 1996, surgeons were required to decrease their volume of operations by 0.5%; in contrast, primary-care physicians were permitted to increase their volume of care by 9.3% (Table 3). However, surgeons have been more fortunate in terms of their fee updates (!able 4). Because surgeons, unlike primary-care physicrans, could not game the system by arbitrarily increasing their volume, their annual fee increases have been larger. The recent 1996 budget impasse between President Clinton and Congress has also been to surgeons' advantage during the last few months, because surgeons and primary-care physicians currently are reimbursed under two diHerent conversion factors. This is likely to change with the passage of a budget. The Clinton Plan The Medicare plan proposed by President Clinton in 1996 envisages a 2-year transition to a single conversion Table 4. Fee Updates Since 1992
Year 1992 1993 1994 1995 1996
All Primary Other Services Surgical Nonsurgical Care Nonsurgical (%)
(%)
1.9
(%)
(%)
Practice Costs Congress in 1994 mandated a resource-based practice expense relative value study that is to be implemented in 1998. Practice costs represent an important part of the reimbursement of thoracic surgeons; under OBRA 1989, they currently constitute about 46% of our total fees. The OBRA scale was based on the 1991 CPRs, which were purely arbitrary and never thoroughly researched. A contract was awarded to Abt Associates, Inc, Cambridge, MA, in 1995 to conduct the microcosting study mandated by Congress, with the objective of identifying all direct costs associated with particular services. The study now under way appears to be manifestly unfair to the universe, eg, cardiothoradc surgeons, in that the practices of only eight such surgeons will be analyzed, hardly reflecting the great diversity that exists in the field. It is estimated that the implementation of a revised scale derived from this study could possibly reduce thoracic surgeon fees by 10% to 21 %. The American College of Surgeons has contracted with the Lewin Group to conduct an alternative, more encompassing study. In this study, the practical costs of 30 to 90 practices in each specialty will be analyzed. Furthermore, analysis will be based on the current procedural terminology code rather than on entire practices, to account for the varying complexities relevant to specific subspecialties, eg, cardiothoracic surgeons, general thoracic surgery, adult cardiac surgery, and congenital heart surgery.
(%)
0.8 3.1 10.0 12.2 3.8
factor. The granting of 2 years for completion of the changeover occurred only because of the efforts of the American College of Surgeons and The Society of Thoracic Surgeons and has recently been supported by the American Medical Association. The changeover will result in a 5% decrease in surgeon income for each year. The plan discontinues the MVPS and ties fee increases to annual increases in gross domestic product plus 1 %. There will be no payment made for surgical assistants, so their reimbursement will have to come out of the fees surgeons receive. Maximum practice expenses will be decreased from 128% to 115% of work payment, possibly further decreasing surgeon income by 3% to 5%. Health Care Financing Administration will adopt a regulation designed to curtail any unnecessary activity or practice, including length of stay in the intensive care unit and medical consultations, that tends to prolong hospital stays. Fifteen percent of payment to physicians practicing in hospitals whose volume and intensity of services per admission exceeds 120% of the national median for urban hospitals will be withheld. It remains to be seen to what extent this practice will affect the income of cardiothoracic surgeons.
Other Problems 7.9 7.9 -2.3
5.3 5.2 0.4
There are 43.4 million people with no health insurance in the United States. Most belong to the category of working poor; 18.7% are less than 65 years of age. The Medicaid population continues to grow; it increased from 21 mil-
RISK MANAGEMENT LEVITSKY CARDIAC SURGERY REIMBURSEMENT
Ann Thorac Surg 1996 ;62:514-7
Table 5. Health Maintenance Organization-Proposed Standards for Number of Physicians Required for Managed Care" (Mature Market) Area
Number
Cardiology
2.4
General surgery Thoracic surgery Anesthesia
8.7 1.5
5.4
• 150,000 lives .
lion people in 1989 to 31 million in 1993. Contributing factors include employers no longer providing health insurance, job layoffs as the result of downsizing, and the working poor dropping out of insurance plans because they are unable to afford copayments. In a mature market the for-profit health maintenance organizations are setting standards for the number of physicians required to provide managed care for specified populations. Under the standards shown in Table 5, the number of cardiac surgeons in Boston will be reduced from 44 cardiothoracie su rgeons to at most 15, even with the assumption that some will occupy part of their time with academic activities, leaving 30 surgeons looking for employment elsewhere. Another example is a Florida health maintenance organization capitation for cardiac surgeons that reduced the volume of a particular cardiac surgery group from 200 to 20 coronary artery bypass grafts per annum. Although the limits imposed by this particular health maintenance organization are likely to be eased somewhat, because the resulting coronary artery bypass grafting volume was 50% below the East Coast health maintenance organization average, there Is no doubt that this cardiac surgery group must contend with a significant decrease in its volume of surgery.
517
Experience with lung-reduction surgery illustrates that we cannot find the solution to existing problems by "getting the government off our backs." Lung-reduction surgery is approved but not covered by Medicare. Therefore, physicians and hospitals may legally bill Medicare recipients for this service. Although this decision was greeted by physicians as a welcome reversion to the cash-and-barter reimbursement system, they soon found that very few patients can afford the $50,000 to $60,000 cost of the operation and its required postoperative hospital stay of 15 to 20 days. We need the government's participation in health care because our society cannot afford to pay for required care. Predictions In summary, the effects of the "health-care revolution" will continue to adversely affect physician reimbursement. In the future, government will have to develop the political will to legislate a fair and equitable health-care system for all United States citizens that will take into consideration our shared cultural and economic values. My personal prediction is a government-supported, single-payer system with a separate "cash only (no insurance)-upper class system" for those who wish to purchase private care. The lung-reduction surgery experience is a cautionary tale that suggests that a private cash-only system will be extremely limited. References 1. Kleinke JD. Wall Street Journal, Aug 21, 1995. 2. Ginzberg E. A cautionary note on market reforms in health care. JAMA 1995;274:1633-4. 3. Omnibus Budget Reconciliation Act of 1989, Public Law 101-239.
Changes that are the consequences of the transformation of health care into an industry are reviewed. The primary focus is on the effects of this transformation and government funding policies on physician reimbursement for cardiac surgery. Also addressed are Relative Value Scales as the basis for physician reimbursement, physician payment reform under the Omnibus Budget Reconcilta-
tion Act of 1989, impact of Medicare policy on surgical volume and surgeon income over recent years, provisions of the Medicare plan under current consideration, and impact of the Congressional-mandated resource-based practice expense relative value scale study currently under way. (Ann Thorac Surg 1996;62:514-7)
T
during that time, before Medicare. With the advent of nonprofit health plans, such as Blue Cross/Blue Shield and union and local government payment groups, physicians continued to seek payment for services in accord with the CPR. Blue Cross/Blue Shield and commercial for-profit health insurers generally accepted these charges, simply passing the costs through to the insured. Thereafter, union and local government groups began to pay slightly less than the CPR. This trend was accelerated with the advent of Medicare and Medicaid; their payments since 1965 have been at progressively lower percentages of the CPR (Table 1). And over the last few years, the for-profit managed health-care corporations have taken a significant portion of the health-care dollar for their profit by further reducing the percent of CPR to arrive at a fee-for-service.
h e medical profession is undergoing its own industrial revolution. "After almost 2,500 years of clinical hegemony during which their activities were rarely questioned, physicians are becoming accountable production workers" [1]. In what is now described as the health-care industry, the nature of the modern medical team has changed tremendously. Physicians and nurses have been joined and often pushed aside by the discharge planner, insurance company, and billing supervisor, among other supernumerary personnel, who monitor their activities and reimbursement while consuming resources. As Kleinke notes, "Many physicians are understandably threatened by this watershed in the history of medicine" [1].
The changes taking place are driven basically by the tremendous increase in the percentage of gross domestic product consumed by health care, from less than 2% in 1965 to more than 14% in 1994. Federal funding of health care has kept pace. It is estimated that all federal programs, including Medicare and Medicaid, now account for about $500 billion of the total $900 billion annual cost of health care [2]. Clearly, government has become a major player. Background of Physician Reimbursement The standard for physician reimbursement has always been the customary prevailing rate (CPR). In the past, physician services were paid for with cash or by barter. Barter had a significant role even as late as the depression era of the 1930s; we all know physicians from that period who recall being paid with a chicken, a loaf of bread, or whatever. Also much free care was given Presented at Risk Management in CABG: A Continuing Perspective. Orlando. FL, Jan 27. 1996. Address reprint requests to Dr Levit sk y, Division of Cardiothoracic Surgery. New England Deaconess Ho spital. 110 Francis St. Suite 2C. Boston, MA 02215.
1996 by The Society of Thoracic Surgeons Published by Elsevier Science Inc
@
Health Care as a Business The insertion of the profit motive into health care and the advent of government funding have had many consequences. Community hospitals, formerly regarded as community resources, increasingly have become healthcare corporations. In the past, university medical cent~rs saw themselves as existing for the purposes of teaching and research, with patients there only to facilitate these ends. These centers now are seen as for-profit enterprises that only incidentally do teaching and research. Industry has profited from a flow of new devices and drugs, much of it paid for by federal government-funded research programs. And, of course, for-profit health-care corporations have proliferated. Due primarily to the funds provided through Medicare, physician income increased by 13.5% between 1975 and 1987; this compares with an income increase of 3% for the rest of the population. Physician reimbursement by Medicare was initially set at 90% of the CPR when the plan was enacted in 1965. As total dollar costs increased, reimbursement was lowered to 83% of the CPR in 1969 and 75% in 1971 (Table 1). With concern about rising costs accentuated by 1972, associ0003-49751961$15.00
PH 50003-4975(96)00819-3
RISK MANAGEMENT LEVITSKY CARDIAC SURGERY REIMBURSEMENT
Ann Thorac Surg 1996;62:514-7
Table 1. Declining Rate of Medicare Physician Reimbursement
Year
Fees (%CPR)
1965" 1969
83
1971 1972
MEl b
1984
Frozen
90 75
• Year of enactment. CPR
b
Implemented in 1975 based on 1971 fees .
= cu stomary prevailing rate;
MEl = Medical Economic Index
ated with the onset of high inflation rates, the government developed the Medical Economic Index, a methodology designed to prevent the CPR from increasing too rapidly. When the Medical Economic Index, implemented in 1975 but based on 1971 fees, proved unsuccessful in containing costs, the CPR and all fees were frozen in 1984. Table 2 demonstrates what happened to levels of Medicare reimbursement for cardiac surgery at a California center between 1987 and 1992. The cumulative percentage decreases shown do not take inflation into account. With the incorporation of a possibly somewhat generous inflationary adjustment of 5%, the cumulative percentage decrease in Medicare reimbursement averaged over all coronary artery bypass graft procedures was about 50% over this 5-year period. An updating of these figures to 1995 would probably reflect a 60% to 70% reduction since 1987 in cardiothoracic surgeon income from Medicare reimbursement.
Alternative Approaches to Physidan Reimbursement The relative value scale (RVS) has been proposed as an alternative method of physician reimbursement. An RVS may be either charge-based or resource-based. California instituted a charge-based RVS in 1956 that was based on Blue Shield median charges. The program was terminated in 1983 when the Federal Trade Commission found it to be in violation of antitrust provisions. Since then, the Table 2. Cedars-Sinai Medical Center Cardiac Surgery Medicare Reimbureemeni":"
Procedure CABG2 CABG3 CABG4 CABG5 Average AVR MVR
1987 1991 1992 Paid Paid Announced 4,462 3,680 3,901 4,360 4,101 3,600
2,743 2,962 3,159 3,237 3,025< 2,660 4,488
2,320 2,489 2,601 2,644 2,514 2,196 3,804
1987-1992 1991-1992 Cumulative Difference Decrease (%)
(%)
- 15 -16 -18 -18 -17 -18 -15
-40 -32 -33 -39 -39 d -39
• Courtesy of jack Matloff, MD, Los Angeles. CA. b Reimbursement is 80'Y, of amount allowed. < Difference is -26%, 1987-1991. d No adju stment. A 15';' annual adjustment results in additional 13%decrease, ie, -52% from 1987. CARG AVR = aortic replacement; MVR = mitral valve replacement.
= coronary artery bypass grafting;
515
concept of a resource-based RVS has gained prominence. This approach uses, for the most part, physician time as a major factor to calculate reimbursement. However, the question as to whether or not all physicians are equal and should therefore be paid the same fee per hour for their time has not been resolved. The CPR concept remains an alternative. With this approach, charges are based on what physicians consider the worth of their procedures, the benefit of their procedures to society, and consumer willingness to pay. Theoretically, a competitive marketplace exerts constraints on fee increases. But for a marketplace to be competitive, the consumer must have both the knowledge and the time to shop and choose. A patient having an acute myocardial infarction does not have that time. A competitive marketplace further assumes that the consumer pays for services out of pocket, that sellers compete on price, and that there is no restriction on who can provide service. The absence of these characteristics in the medical marketplace explains why competition has not contained rising costs.
Physician Payment Reform Act Physician payment reform was enacted by the government under the Omnibus Budget Reconciliation Act (OBRA) of 1989 [3]. Under this act, physician payment is made on the basis of a resource-based RVS that is budget neutral and was phased in from 1992 to 1996. The act also provides for medical volume performance standards (MVPS), caps on balanced payments, and maximum allowable actual charges. The MVPS specifically applied to surgeons were enacted with the assistance of the American College of Surgeons. Although the MVPS constitute a cap on overall costs and procedures, they allow surgical fees to increase annually as long as the number of operations is kept fixed or reduced. Balanced payments are the fees charged by physicians beyond the Medicare fee. The cap on balanced payments is strongly disliked by physicians. Previously, physicians would charge whatever the market would bear, in some environments sometimes 100% to 300% above the allowable Medicare fee. In 1991, OBRA limited balanced payments to 25%, to 20% in 1992, and to 15% in 1993 and thereafter. This legislation had many advantages from the viewpoint of the federal government and public policy. It enabled the government to predict annual medical-care costs and provided a method of lowering costs by just decreasing the conversion factor. It also provided political cover for medical rationing, something no politician wanted to advocate openly. Furthermore, OBRA had the additional advantage of splitting the medical lobby, for although it decreased income for surgeons, it increased income for internists and general practitioners. As for problems, although it initially was widely feared that the provisions of the act would decrease the quality and number of medical school applicants, this has not occurred. However, the legislation does fail to address the health-care needs of the underclass.
S16
RISK MANAGEMENT LEVITSKY CARDIAC SURGERY REIMBURSEMENT
Ann Thorac Surg 1996;62:514-7
Table 3. Medicare Volume Performance Standards"
Year 1994 1995 1996
Surgical
Primary Care
Other Nonsurgical
(%)
(%)
(%)
9.1 9.2 -0.5
10.5 13.8 9.3
9.2 4.4 0.6
• Federal Register. December 5, 1995.
Impact on Physicians Medicare policy is of increasing concern to surgeons: In 1993, Medicare reimbursement accounted for only about 20% of our income; it now represents as much as 50% for most surgeons. Over the last few years, the quantity of surgical procedures has remained rather constant, so reimbursement has remained constant or increased. In contr~st, there h~s been a sharp increase in the charges submitted for reimbursement under the evaluation and ~~nagement c~des used by internists and general practitioners for office and hospital visits; the increase was 13% from 1993 to 1994. Because payments are made in accord with budget neutrality, this example of Medicare gaming resulted in approximately a billion-dollar transfer of income since 1993 from surgeons and procedurists to physicians who mostly use the evaluation and management codes. Health Care Financing Administration c~~nges the MVPS for surgeons and primary-care physrcians each year. In 1996, surgeons were required to decrease their volume of operations by 0.5%; in contrast, primary-care physicians were permitted to increase their volume of care by 9.3% (Table 3). However, surgeons have been more fortunate in terms of their fee updates (!able 4). Because surgeons, unlike primary-care physicrans, could not game the system by arbitrarily increasing their volume, their annual fee increases have been larger. The recent 1996 budget impasse between President Clinton and Congress has also been to surgeons' advantage during the last few months, because surgeons and primary-care physicians currently are reimbursed under two diHerent conversion factors. This is likely to change with the passage of a budget. The Clinton Plan The Medicare plan proposed by President Clinton in 1996 envisages a 2-year transition to a single conversion Table 4. Fee Updates Since 1992
Year 1992 1993 1994 1995 1996
All Primary Other Services Surgical Nonsurgical Care Nonsurgical (%)
(%)
1.9
(%)
(%)
Practice Costs Congress in 1994 mandated a resource-based practice expense relative value study that is to be implemented in 1998. Practice costs represent an important part of the reimbursement of thoracic surgeons; under OBRA 1989, they currently constitute about 46% of our total fees. The OBRA scale was based on the 1991 CPRs, which were purely arbitrary and never thoroughly researched. A contract was awarded to Abt Associates, Inc, Cambridge, MA, in 1995 to conduct the microcosting study mandated by Congress, with the objective of identifying all direct costs associated with particular services. The study now under way appears to be manifestly unfair to the universe, eg, cardiothoradc surgeons, in that the practices of only eight such surgeons will be analyzed, hardly reflecting the great diversity that exists in the field. It is estimated that the implementation of a revised scale derived from this study could possibly reduce thoracic surgeon fees by 10% to 21 %. The American College of Surgeons has contracted with the Lewin Group to conduct an alternative, more encompassing study. In this study, the practical costs of 30 to 90 practices in each specialty will be analyzed. Furthermore, analysis will be based on the current procedural terminology code rather than on entire practices, to account for the varying complexities relevant to specific subspecialties, eg, cardiothoracic surgeons, general thoracic surgery, adult cardiac surgery, and congenital heart surgery.
(%)
0.8 3.1 10.0 12.2 3.8
factor. The granting of 2 years for completion of the changeover occurred only because of the efforts of the American College of Surgeons and The Society of Thoracic Surgeons and has recently been supported by the American Medical Association. The changeover will result in a 5% decrease in surgeon income for each year. The plan discontinues the MVPS and ties fee increases to annual increases in gross domestic product plus 1 %. There will be no payment made for surgical assistants, so their reimbursement will have to come out of the fees surgeons receive. Maximum practice expenses will be decreased from 128% to 115% of work payment, possibly further decreasing surgeon income by 3% to 5%. Health Care Financing Administration will adopt a regulation designed to curtail any unnecessary activity or practice, including length of stay in the intensive care unit and medical consultations, that tends to prolong hospital stays. Fifteen percent of payment to physicians practicing in hospitals whose volume and intensity of services per admission exceeds 120% of the national median for urban hospitals will be withheld. It remains to be seen to what extent this practice will affect the income of cardiothoracic surgeons.
Other Problems 7.9 7.9 -2.3
5.3 5.2 0.4
There are 43.4 million people with no health insurance in the United States. Most belong to the category of working poor; 18.7% are less than 65 years of age. The Medicaid population continues to grow; it increased from 21 mil-
RISK MANAGEMENT LEVITSKY CARDIAC SURGERY REIMBURSEMENT
Ann Thorac Surg 1996 ;62:514-7
Table 5. Health Maintenance Organization-Proposed Standards for Number of Physicians Required for Managed Care" (Mature Market) Area
Number
Cardiology
2.4
General surgery Thoracic surgery Anesthesia
8.7 1.5
5.4
• 150,000 lives .
lion people in 1989 to 31 million in 1993. Contributing factors include employers no longer providing health insurance, job layoffs as the result of downsizing, and the working poor dropping out of insurance plans because they are unable to afford copayments. In a mature market the for-profit health maintenance organizations are setting standards for the number of physicians required to provide managed care for specified populations. Under the standards shown in Table 5, the number of cardiac surgeons in Boston will be reduced from 44 cardiothoracie su rgeons to at most 15, even with the assumption that some will occupy part of their time with academic activities, leaving 30 surgeons looking for employment elsewhere. Another example is a Florida health maintenance organization capitation for cardiac surgeons that reduced the volume of a particular cardiac surgery group from 200 to 20 coronary artery bypass grafts per annum. Although the limits imposed by this particular health maintenance organization are likely to be eased somewhat, because the resulting coronary artery bypass grafting volume was 50% below the East Coast health maintenance organization average, there Is no doubt that this cardiac surgery group must contend with a significant decrease in its volume of surgery.
517
Experience with lung-reduction surgery illustrates that we cannot find the solution to existing problems by "getting the government off our backs." Lung-reduction surgery is approved but not covered by Medicare. Therefore, physicians and hospitals may legally bill Medicare recipients for this service. Although this decision was greeted by physicians as a welcome reversion to the cash-and-barter reimbursement system, they soon found that very few patients can afford the $50,000 to $60,000 cost of the operation and its required postoperative hospital stay of 15 to 20 days. We need the government's participation in health care because our society cannot afford to pay for required care. Predictions In summary, the effects of the "health-care revolution" will continue to adversely affect physician reimbursement. In the future, government will have to develop the political will to legislate a fair and equitable health-care system for all United States citizens that will take into consideration our shared cultural and economic values. My personal prediction is a government-supported, single-payer system with a separate "cash only (no insurance)-upper class system" for those who wish to purchase private care. The lung-reduction surgery experience is a cautionary tale that suggests that a private cash-only system will be extremely limited. References 1. Kleinke JD. Wall Street Journal, Aug 21, 1995. 2. Ginzberg E. A cautionary note on market reforms in health care. JAMA 1995;274:1633-4. 3. Omnibus Budget Reconciliation Act of 1989, Public Law 101-239.