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FUTURE FINANCIAL NEONATAL SHOCK
0031-3955/98 $8.00
NEONATOLOGY UPDATE
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FUTURE FINANCIAL NEONATAL SHOCK Gilbert I. Martin, MD, Kevin Gattshall, BSBA, Frances MacPherson BSN, ARNP, and Susan Tiffany, BS
I have been a Neonatologist, for twenty years or so, And have always felt secure about the things I really know. At 600 grams with RDS. I could write a thesis, PFC or PDA and even Gastroschisis. I spend the time, put in the hours, sometimes without sleep, A multidisiplinary approach, the company I keep. The challenge remains, ideals still high, sometimes sad or funny, But somehow through this experience, I need to earn some money. As I grew up, I placed a charge and never did feel nervous, A UAC, an ET tube, simply ”Fee for Service.” Standby section, H & P, bill without confusion, Figure out a market price, for Exchange Transfusion. Then the task grew difficult, I can tell the tale, In 1970 came along, the “Relative Value Scale.” The AMA devised a term, which enlarged all my nodes, You are all familiar with the CPT word codes. 99431 or two, do these numbers jive? Do I charge for standby? When did I arrive? Was my original consultation, limited or not? Is 99252 the code? Tell me what I’ve got. The charge sheets are so complicated, brings out all my wrath, A simple task in ‘75 now takes a “Billing Staff.” Bills are sent, evaluated, with the proper guide, We wait and wait and wait and wait . . . finally, it‘s denied.
From the Neonatal Intensive Care Unit, Citrus Valley Medical Center, Queen of the Valley Campus, West Covina (GIM); University of California, Irvine (GIM); PEDIATRIX Medical Group, Orange, California (GIM, ST); and PEDIATRIX Medical Group, Fort Lauderdale, Florida (KG, FM)
PEDIATRIC CLINICS OF NORTH AMERICA VOLUME 45 NUMBER 3 * JUNE 1998
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Signed up too late, not eligible, tell me what to feel, It's OK, Doc, perhaps you'll win, on the third or fourth appeal. I charge this, and you pay that, who decides the rules? In the scheme of bill and pay, the Docs appear as fools. Discounted fees, per diem, bundling, RBRVS, Current Procedural Terminology, it really is a mess. Then IPAs and HMOs came upon the scene, Further discounts, what to do? Make us lean and mean. Lesser payments, more paperwork, should I cry or laugh? I hired a practice consultant and increased billing staff. Overhead goes up, employees too, life's become a wreck, Working harder, much less fun and with a dwindling check. A new word crops up, we will be saved, with great anticipation, Take weekend courses, learn the lingo known as "Capitation." How many lives are in your group? I need the enrollment disc, Length of stay turns my hair gray, for now I am at risk. The future doesn't seem too bright, what happened to the fees? Soon, neonatal care will develop many DRGs. At risk for one, and one for all, will be our battle cry, Bill correctly, with proper codes, promise you will try. Place the statement in the envelope, post it, do not fail, Hope that when you follow-up, you won't get a "voice mail." Try and try and try again, this isn't "Poppycock," A better term is FUTURE FINANCIAL NEONATAL SHOCK THE PERINATEZD
(From Martin G: Future financial neonatal shock. J Perinat 16:230, 1996; with permission.)
In years past, the economics of practicing medicine and "earning a living" was second to intellectual stimulation and personal satisfaction. Medical schools never taught economics, and it was believed that with dedication and service, financial rewards would be forthcoming. Many of these beliefs have changed as medical reimbursement to hospitals and physicians have decreased. Job and financial security are uncertain. Professional goals are in jeopardy, and the future is unclear. THE HISTORY OF PHYSICIAN REIMBURSEMENT
Although the Bible tells us that the Lord is the ultimate healer (Exodus 16:26),the Talmud includes doctor's fees among the five categories of compensation allowed (Mishnah Baba Kamma 8:l) and even remarks, "a physician for nothing is worth nothing." (Baba Kamma 85a). The healer often had to leave home and prepare medication and therefore was allowed a fee.14Aristotle (384-322 BC) objected to linking fees with medical practice: In 46 BC, Julius Caesar granted Roman citizenship to all foreign doctors working in Rome, and physicians in Ephesus were granted immunity from taxation. In 23 BC Antonius Musa used a cold water treatment to cure Emperor Augustus, and the Emperor was so grateful that he granted all physicians tax immunity." The Code of Hammurabi states that "if a doctor has healed a free man's broken limb
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and has revived his sick bowels, the patient is to pay the doctor five shekels of silver.27Maestro Polidoro d’htonio Bracali of Pistoia, Italy, received income in cash and in kind. In 1459, he was awarded six staia (bushels) of grain each year for his care of the Abbey of San Mi~he1e.l~ Physicians have been described as greedy as Chaucer noted in his Canterbury Tales.4In the mid-17th century, physicians were not to accept payment from the poor, were allowed to accept what the middle-class offered (but not request payment), and could request a reasonable and not exaggerated fee from the rich. There was an additional fee for night In fact, in 1639, the Colony of Virginia passed legislation to limit ~a1ls.I~ the size of physician’s fees.22In the same year, a physician took a couple to court for failure to pay his fees, and the judgment indentured the pair to him. In 1795, in Fakenham (England) a physician could make an income of 400 pounds a year.19 In Germany (1779), the Metz contract allowed the physician 400 pounds annually plus an additional 120 pounds for treating the poor. Note the futuristic thinking here, for the physician was able to ”charge 20 sols (a smaller denomination) for the first visit, 10 sols for each subsequent visit, but could not charge for more than two visits a day.”15 In the first part of the 19th century, the training of physicians became more formal, and physicians were paid in cash or goods and services. The passage of the Medical Act of 1858 in England established the Great Medical Council, which controlled admissions to the medical register and had a dominant influence over medical practice.6 Bartering became more popular, and fees were generated by either total ”family care” over a period of time or could be negotiated for single visits. Charges were personally created, and there was no organization of a fee schedule. Physicians who were more popular could charge more and had larger practices. In the early part of the 19th century in the United States, physicians often had to extend yearly credit. Fees would accumulate indefinitely until they were paid in kind.12 As the 20th century approached, medical education and an expanding curriculum became more organized following the example set by the Johns Hopkins Medical School in Baltimore, and by the creation in 1904 of the Council on Medical Education. In 1910, the Flexner report weeded out inadequate medical schools and paved the way for an improvement in medical education. Standards were set, training formalized, and a more structured economic system developed.’* In the 1940s, group health insurance had started, but there was little enrollment. Health insurance, or in fact health care at all, was not thought to be that effective. It was only after World War I1 with advances in technology, antibiotics, and therapeutics, that the need to establish a medical payment schedule emerged.3From 1955 to 1970, physicians were paid fee-for-service, and there was very little control. The subspecialty of neonatology emerged in the late 1960s. The ability to influence neonatal morbidity and mortality through regionalization, advances in technology, research, and therapy allowed the neonatologists to set their own fee schedules for specialized procedures. Patient visits could be modeled after adult intensive care practices, but suddenly as we were everpresent adjusting ventilator dials or fluids,
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”extended visits” became truly “extended.” This was the “golden age” of reimbursement for medicine; however in 1970, the Relative Value Scale (RVS) was devised, which was followed in 1977 by the Current Procedural Terminology (CPT) codes. Discounted fee-for-service was a term coined in 1985, and 1990 produced global per diem charges and bundling of multiple procedures. The Resource-Based Relative Value Scale (RBRVS) emerged in 1992 as a corollary, and terms such as managed care, diagnostic-rela ted groups (DRGs), and capitation became part of our daily vocabulary. Pediatrics and neonatology were at first far removed from this changing economic climate. As computerization and data collection began to slowly define the actual “costs” of neonatal intensive care, our practices and both hospital and personal reimbursement were scrutinized. As we review the history of physician fees over time, note that it took many centuries of slow progress under physician, government, and religious control to provide intellectual and economic incentives for students to consider the practice of medicine as a career. It has taken just 25 years to change this economic control to a ”third party” and hence affect physician satisfaction on a global scale. THE BASIS OF NEONATAL CHARGES
It was apparent that when neonatology emerged as a subspecialty that bartering ”two chickens” for an umbilical artery catherization would not be feasible. Fees were chosen and based on a system of customary, prevailing, and reasonable (CPR) charges. What was customary, reasonable, and prevailing achieved some degree of anecdotal national acceptance as neonatologists wondered with great curiosity, what do they charge for this or that? The definition of customary charges was the median of an individual’s charges for a particular service for a defined period of time. The ”prevailing” charge was set on the 90th percentile of the customary charge in a defined payment area. The “reasonable” charge was the lowest of the physician’s actual fee for that service.24 Charges went higher, reimbursement was rarely questioned, survival rates improved, and on the surface everyone seemed satisfied. A loose lid was affected in this system as there were adjustments to keep the government outlays predictable. The government and the health care providers in the early days after Medicare was established (1966) used the usual, customary, and reasonable (LICR) system. But there was a need for a more efficient structure, as it was soon apparent that there was a wide variation in both billing and payment levels for the same service. The range of charges for umbilical artery cannulation in different parts of the United States can vary as much as $150 to $250. An even larger discrepancy is noted in the range of charges for the first 24 hours of intensive care. In 1977, the American Medical Association (AMA) devised Current Procedural Terminology (CPT codes) to describe physician services and procedures. This is a listing of descriptive terms with five-digit numbers
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and modifiers for reporting medical services performed by physicians. An RVS had already been established in California in 1956, placing an objective and uniform value to determine physician payment and fees. There were concerns about geographic variation, antitrust, and the ”ranking” of these values that made the process complicated. In addition, the codes for neonatal services were often broad and not well defined and needed updating. Unfortunately, the process to formulate a new code or revise an existing code is herculean; however to establish a coding procedure that is acceptable and effective, there must be better access to the system.
CPT CODING FOR NEONATOLOGY THE PROCESS
A new or revised code, which any individual, group, or organization can suggest, is submitted to the AMA CPT staff. If applicable, the proposal is referred to the appropriate CPT Advisory Committee. This group reviews the proposal and makes a recommendation to the CPT Editorial Board. If this board decides to add or revise the CPT code, it is then transmitted to the AMA/Specialty Society Relative Value Scale Update Committee (RUC). This panel develops the value for the physician work component of the RBRVS. The developed information is then referred to the RUC Advisory Committee. This body conducts a survey to ”assign” these relative work values and then submits its recommendation to the Health Care Financing Administration (HCFA). The HCFA panel reviews these recommendations and assigns a physician expense and malpractice expense as part of the physician fee schedule. The components are published in the Federal Register. A 60-day comment period ensues, and if no comments are received, the values become final. The final RVUs are again published in the Federal Register and cannot be changed for 5 years. For illustrative purposes, the above scenario has been simplified as if every step were without question or discussion. One can see how long and tedious the process can actually take for revision or establishment of a new CPT code.
NEONATAL CHARGES: THE RBRVS APPROACH
RBRVS is based on a study performed by the School of Public Health at Harvard University. This consists of an RVU assigned to physician services. The basis of the RBRVS approach is the descriptor CPT code for each procedure or physician service. These CPT codes are outlined in The American Medical Association’s Physicians’ Current Procedural Terminology. However, there have been some significant changes to these published codes in the past several years. These are as follows: 99440: Newborn Resuscitation Attendance to High Risk Deliveries. This code was recently approved by the CPT Editorial Board. In
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1996, the description of this code stated that positive pressure ventilation and/or chest compressions must be provided. 99238: Hospital discharge day management, 30 minutes or less 99239: Hospital discharge day management, more than 30 minutes 99435: History and examination of the normal newborn, including the preparation of medical records. Assessment and discharge occur on the same day. 99436: Attendance at delivery when requested by the delivering physician and inital stabilization of the newborn. NEONATAL INTENSIVE CARE CPT CODES These codes are used to report services provided by a physician to an infant in the NICU. They are bundled and include all procedures except exchange transfusion, the insertion of a chest tube, bronchoscopy and central line placement (other than an umbilical catherization). The codes may be reported once per day and include all care and reevaluations during a 24-hour period. In 1996, the wording of the codes was changed to clearly distinguish critical care codes from subsequent hospital care. 99295: This code is reserved for the date of admission for neonates. It is used for the evaluation and management of a critically ill neonate. 99296: Subsequent neonatal intensive care, per day, for the evaluation of a critically ill and unstable neonate. 99297: Subsequent neonatal intensive care, per day, for the evaluation and management of a critically ill though stable neonate. 99291: A Critical Care Code is defined as the care of a critically ill or unstable critically injured patient who requires constant physician attendance. This number is for the first hour of care in a 24-hour period. This is not a bundled code. 99292: A Critical Care Code which describes each additional 30 minutes of care. Ventilator management is bundled with this code. NON-CRITICALLY ILL NEWBORN CPT CODES 99221-3: Initial hospital care, per day, for the evaluation and management of a patient who requires a detailed or comprehensive history and examination and medical decision making that is straightforward or of low complexity. 99222: Initial hospital care, per day, for the evaluation and management of a patient who requires a comprehensive history and examination and medical decision making of moderate complexity. 99223: Initial hospital care, per day, for the evaluation and management of a patient who requires a comprehensive history and examination and medical decision making of high complexity.
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99231-3: These are subsequent daily codes that are based on a more focused interval history and examination and medical decision making that is of low complexity (99231); moderate complexity (99232) or high complexity (99233).
CONSULTATION NICU CODES 99251: Initial inpatient consultation that requires a problem focused history, examination and straightforward medical decision making. Counseling and coordination of care with other agencies are included in this code and the presenting problems(s) are self limited or minor. We believe that the ordering physician should document the request and the reason for the consultation. The consultant, in turn, should state the opinion regarding the problem and document this in the mother’s (if a prenatal consultation) and/or the infant’s chart. 99360: Physician standby service for each 30 minutes. This can be used as a stand-alone code but the physician during this period must be unable to care for other patients. 99356: The first hour of service in prolonged physician service with direct face-to-face contact in the inpatient setting. This code must be used with other services and is not a stand-alone code. 99357: Each additional 30 minutes of physician service with direct face-to-face contact in an inpatient setting. This code is used with other services and is not a stand-alone code.
CALIFORNIA 2 CODES These codes are used in California for physician services provided in a facility approved by California Children Services. The codes are labeled 20100-20108 and describe both initial and subsequent neonatal intensive care. USING RBRVS NEONATAL INTENSIVE CARE CHARGES The RBRVS system takes the CPT code for a specific procedure or service and describes a relative value for the service. This is dependent on the amount of work that goes into the service, the practice expense associated with the service, and the professional liability expense for the provision of the service. The relative value of each service is multiplied by a geographic adjustment factor and translated into a dollar amount by an annually adjusted conversion factor. The concept of using RBRVS codes for calculating reimbursement for neonatology is not new. Sequin and colleague^^^ determined that the RBRVS system did reimburse nonprocedural services better then other comparative systems; however,
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when all categories were evaluated, the RBRVS method paid at a lower rate. The adjustment conversion factors for 1996 are (see Addendum for 1997 conversion factors): Surgical services-$40.7986 Nonsurgical services-$34.6293 Primary care service-$35.4173 Anesthesia services-$15.2800 The relative values, updated payment policies, and the actual payment descriptors are published in The American Medical Association’s Medicare RBRVS Guidefor Physicians, and the Federal Register. An example follows detailing CPT Code 99295, initial critical NICU care in the state of Colorado. CPT Code 99295
Work Relative Value Unit (RVU)--16.03 Practice Relative Value Unit (RW)-5.08 Malpractice Relative Value Unit (RVU)--1.55 Work Cost of Living Index (Colorado)--0.989 Practice Cost Index (Colorado)--0.951 Malpractice Cost Index (Colorado)--0.827 Total Work RVU in Colorado = 16.03 X 0.989 = 15.85 Total Practice RVU in Colorado = 5.08 X 0.951 = 4.83 Total Malpractice RVU in Colorado = 1.55 X 0.827 = 1.28 STEP 1: Add together total R W s in Colorado: 15.85 + 4.83 1.28 = 21.96 STEP 2: Multiply this figure by the 1996 nonsurgical service conversion factor ($34.6293) TOTAL PHYSICIAN REIMBURSEMENT FOR CODE 99295 = 21.96 X $34.6293 = $760.46 This is the Medicare reimbursement in the state of Colorado. Other payors may adopt this fee schedule or suggest modifications. In New York State, where the work, practice, and malpractice geographic cost index is higher, the reimbursement for the same code is $904.17. In Los Angeles, California, the reimbursement for code 99295 is $839.06. We can convert all of our codes in this way and use an objective approach with contract negotiations. The amount of reimbursement received for this code varies from state to state and if provided by a state program (e.g., Medi-Cal in California) depends upon the allotted funds for that particular year. Most state Medicaid offices do not use the RBRVS system, and arbitrary RVUs will probably be used as Medicaid converts to capitation in an expanding managed care market; however, using the RBRVS system can still be important in negotiating contracts in this era of managed care. These companies can offer reimbursement at whatever levels necessary to affect their “bottom line.” The RBRVS values can be expanded to allocate fees to a 50th or 75th percentile so that comparisons
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can be made when contract negotiations are in progress.ls The final contract to determine reimbursement should primarily consider historical performance and prior utilization.
MANAGED CARE REIMBURSEMENT-NEONATOLOGY
In order to curb expenses, health maintenance organizations (HMOs) are ”negotiating tighter contracts with hospitals and physicians for these ser~ices.’”~ Managed care influence in markets throughout the United States is rapidly expanding, but the managed care groups are in different phases of maturity. Not all markets follow the same growth curve. Hybrids of reimbursement schedules are also appearing. Examples of the more common reimbursement methods include discounted fee-for-service, per diem, case rates, and capitation.
Discounted Fee-for-Service
In areas where there is little managed care penetration, a discount of billed charges is quite common. Hospital-based neonatologists typically have no incentive to participate in these plans, and the managed care organizations will aggressively target other subspecialties for their health plan savings and hope to keep a lid on neonatal costs. These contracts stipulate that the physician’s fee schedule is attached to the contract at the time of execution and that increases can only be made on an annual basis, not to exceed the medical component of the consumer price index. A variation of this method is for the payor to use the RBRVS amount, using a conversion factor that is less than Medicaid, and offer this figure in a payment schedule. Some organizations mix and match their percentile offers. That is, they will reimburse a higher percentage on the acute care codes (99295-7) but lower percentage for the “growing premature” infant. To calculate which method is best for your situation, use the historical information, average length of stay (ALOS), and numbers and types of procedures performed to create a contract that will have incentives for profit and growth while shortening length of stay. An approach might include allowing a greater discount for daily charges at the back end of the hospital stay. Be proactive with the managed care company’s nurse home care organization to achieve these goals. Remember that the managed care organization’s administration has the time to spend analyzing all of the information. The neonatologist busy with clinical practice often doesn’t take the time to “do the homework” necessary to effect a contract that will not leave him or her with a “dwindling check.”
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Per Diem
This method is used to eliminate the fluctuations in variable costs, as well as defuse the debate over the “unbundling” of procedure codes. Although per diems do reduce variable costs, they do not create an incentive to reduce the ALOS. Since daily rates are determined by utilization review, costs, and ALOS, per diems can be tailored. Levels of control and routine hospital care can be created and treated differently. For example, the first several days of hospitalization can be charged at a higher rate with a change to a lower rate after this time. The physician would then have a financial incentive to discharge patient A earlier so that higher-paying patient B could take the place of patient A. The attractiveness of the per diem approach is that it is very simple. The billing statement is a daily rate with everything included. The costs that the physician uses for billing services can be decreased, and thus overhead declines and profits increase. Case Rates
This method controls variable costs and can influence length of stay because the reimbursement is the same whether the patient stays in the hospital 1 day or 10 days. The incentive to discharge patient A is that patient B can take his or her place immediately. The case rate approach seems simple; however, the variations and complications of neonatal diagnoses make each case unique and different. That is, respiratory distress syndrome (RDS) could not be a simple diagnosis for case rate reimbursement unless gestational age, weight, the need for surfactant, and the presence of a patent ductus arteriosis (PDA) were taken into consideration. This system requires an accurate and reliable cost accounting system. Capitation
This is a reimbursement method found predominantly in large, mature markets. It is stereotyped as being the “sophisticated” form of reimbursement. If capitation is to be considered, the neonatologist must perform a detailed analysis of his or her own practice costs and include hospital, home health, and back transport costs. The neonatologist needs to also understand and be able to monitor the number and the type of patients in the capitated group. The provider must have the experience, data, utilization management, and reporting capabilities necessary to operate efficiently under capitation. Questions to address in contracting negotiations include: What is the scope of the services to be provided? What services are included? What services are excluded (carve-outs)?
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Is the historical utilization information reliable? What has been the payor’s experience capitating other specialties? Is there a provision to handle stop-loss conditions if there are significant changes in referral patterns? How will the payor control the provision of services? How are authorizations handled? How frequently do authorizations have to be renewed? In what format is eligibility information provided? How are additions and deletions handled? Who are the contact people for eligibility, clinical, and administrative issues? What is the frequency of encounter reports? Who is responsible for payment of care when a more specialized service is required, such as extracorporeal membrane oxygenation (ECMO), laser surgery for retinopathy of prematurity (ROP), or cardiac surgery? How is the capitation rate calculated (age, sex, case mix)? What is the payment method used to determine historical costs and charges? Capitated reimbursement is normally calculated on a per-member, per-month basis. Neonatologists may choose to be capitated at a higher rate but only to include reimbursement based upon child-bearing females per month, the regional fertility rate, or the number of deliveries per month. Narrowing the scope of the identified population (excluding late enrollees or no prenatal care) requires the payor to have the ability to implement an enhancement to their systems and administrative reporting capabilities. Although the attention to detail is much greater in establishing a capitated relationship with a payor, the overall financial reward is worth the time. This approach provides for a steady revenue stream and reduces administrative conflicts. But when neonatologists are busy taking care of patients, do we have the time and energy to spend creating and continuously monitoring and modifying a capitated system? A TIMELY SCENARIO
The neonatologist is asked by the obstetrician to attend the cesarean section for an infant at 33-weeks’ gestation that was complicated by pregnancy-induced hypertension. The obstetrician requested that the neonatologist meet with the parents before delivery to discuss the prognosis for the infant. The neonatologist arrived at 2 AM and waited until 3 AM, when the team was available for the cesarean section to begin. At delivery, the infant required full resuscitation, which included endotracheal intubation. The infant was admitted to the NICU, placed on mechanical ventilation, and an umbilical artery catheter was placed. Surfactant was necessary, as were multiple blood gas determinations for the first 24 hours. The presence of a neonatologist was constantly re-
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quired. Because of a difficult social and family situation, the neonatologist spent two half-hour sessions and two 1-hour meetings with the family. On day 4 of life, the infant was off the ventilator but was in an oxygen hood and had several apneic episodes. Hyperalimentation was started. The neonatologist spent two half-hour periods with the family. The patient was discharged on day 33. The neonatologist met with the parents, outlined future care, notified the appropriate consultants, and completed the discharge summary. An alternative method of CPT coding for the above example would include: Maternal care 99251: Maternal consult. Twenty minutes. Formal consult ordered by obstetrician and results placed on chart. Delivery room attendance 99360: One hour standby care awaiting arrival of anesthesia/ obstetrics 99440 Newborn resuscitation. Cannot bill for endotracheal intubation if subsequent NICU codes are used. Can bill for intubation using the 99255 code and separate procedure codes. First day of life 99295: Admission to the NICU of a critically ill neonate. All procedures, including meetings with family, are included in this one time daily code. or 99291: First hour of critical care of a neonate. Procedure codes are added to this code. 99292: Each additional 30 minutes of care. Procedure codes are added to this code. Fourth day of life 99296: Subsequent care of a critically ill but unstable neonate. All procedures and meetings are included. Discharge date 99233: This includes physical examination, discharge planning meeting with family, notification of follow-up physicians, and discharge summary. For each of these codes, the RBRVS method can be used to produce a dollar reimbursement fee. The actual payment schedules can be developed as follows: Fee-for-Service The charges are paid at 100% of the allowable by the insurance company. The parents are responsible for the balance of the billed charges that are not covered by the insurance company. Reimbursement with a Negotiated Managed Care Contract (great variations may occur depending on individual circumstances) Flat Fee Percentage/ Allowable Fee Schedule A contract is arranged with the managed care company to accept an agreed percentage of the billed charges for each code. The percentage paid can vary with each code and/or can be tied to a
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percentile rank for each code. The parents cannot be billed for the balance. Therefore, 99251, 99254, 99440, 99295, 99296, and 99233 can be reimbursed at the same or varying percentages. If using such a fee schedule, be sure to understand your individual situation. The history and ALOS in your own unit will dictate what you need to bill and collect in order not to lose money. Percentage of Fee Schedule A contract is arranged with the payor to pay all of the codes at a percentage of billed charges. Under the contract, the negotiated discount cannot be billed to the parents. It is a simple matter to decide on a percentage fee schedule. Once again, proper homework sufficient to justify charges to avoid losses is an important pre-negotiating step. Per Diem A contract is designed to establish a flat rate of daily service regardless of how much time is spent or what procedures are performed. With the above scenario, 99251, 99254, 99440, 99295, 99296, and 99233 would be reimbursed using a single fee/day. This fee can vary depending on the agreement. This approach is quite simple and requires less paperwork and staff billing time. These per diem charges can sometimes be designed to allow higher payment schedules for the first few days and lesser reimbursement for the end of the hospital stay. Capitation If in the above example, the capitated contract is based on a fee per member per month, an insurance group with 80,000 members paying "X" amount/member/month would be 80,000 multiplied by the capitation rate for each member. Whatever the choice of reimbursement, the contract should clearly state when the fee will be paid so that cash flow remains more stable. Medicaid and Medi-Cal Each state has its own rules and guidelines. Some states accept the CPT billing codes, whereas others, such as California, have established their own set of numerical equivalents. In addition, each state determines its reimbursement fee schedule based on accumulated revenues. For example, Florida Medicaid accepts the NICU CPT codes 99295 (First day admission to the NICU; the 99254 and 99440 presented in the scenario above are included with the admission CPT code; the published Medicaid reimbursement for this code is $460.00) and 99296 (Unstable neonate-subsequent days. Only six unstable NICU days can be billed). California does not accept the NICU CPT codes. It has established its own codes for critical care services: ZOlOO (admission to the NICU [replaces 992951; the published Medi-Cal reimbursement for this code is $240.00) and 20102 (subsequent care of the unstable neonate).
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REIMBURSEMENT FOR NEONATAL INTENSIVE CARE-THE FUTURE The prediction of future trends in NICU reimbursement is difficult, for the environment is constantly changing. The small specialty practice “lacks the resources and capital to generate the data necessary to support its claim^."'^ Critical protocol guidelines that are ”cost effective” are being developed that have and will change the way we care for patients. The adage for the rest of this century may be ”the more the risk, the more the profit.” Is this much different than what our colleagues in the business world experience? The survival of the neonatal group will depend on an understanding of practice costs (reducing overhead), decreasing length of stay, and providing supporting data while at the same time maintaining quality. Managed care groups will demand certification, accountability, and even issue ”report cards” to follow utilization and quality. We talk about ”working with third-party payors as colleagues instead of enemies,”gyet some secretly gloat when newspaper headlines announce legislation curbing HMO practices. Hartlinelo describes “turfdefenders” and asks us to show the business world the ”value of perinatal care.” Neonatologists need to be concerned about the requests for change from outside sources if this change conflicts with the best interests of our patients.13Bowen2 remarks that physicians must acquire managerial skills, information systems come on-line, care plans initiated, risk shared, and care managed by a multidisciplinary team that should be held accountable. All of the above must be accomplished at the same time that the prediction of the need for neonatologists and neonatal beds is decreasing. Presently, there are between 17,000 and 18,000 level 2 and level 3 NICU beds in the United States. It is predicted that, in a wellmanaged system, the number of beds needed by the year 2000 would decrease to 7800.7As of 1991, the United States had more than 300,000 excess bed days in NICUs and only a 74% overall occupancy ~ate.2~ Goldsmith,B believes that by decreasing illness load and altering treatment patterns, perinatal costs will decrease. Prevention of prematurity is the key to decreasing illness and hence effecting a predictable cost saving. These are changing times. Neonatologists can no longer focus only on patient care because outcomes, costs, and quality will also be continuously measured. Anecdotal-based therapies are being replaced by evidence-based, multicentered trials. More physicians will find it necessary to acquire MBAs to understand the business of medical care. All of this . . . at what cost? ACKNOWLEDGMENTS We thank D. Cunningham, MD, R. Medel, MD, R. Molteni, MD, L. Mullen, and K. Taff for their critical review of this manuscript. In addition, CPT @ 1997 American Medical Association. All rights reserved.
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References 1. American Academy of Pediatrics: RBRVS: What it is and how does it affect pediatrics. Elk Grove Village, Illinois, 1996 2. Bowen FW Neonatology in a managed care environment. J Perinatol 15:403-405, 1995 3. Campion F The elements of change. The AMA and US Health Policy since 1984. AMA, 1984, pp 1-8 4. Chaucer: ”The Prologue,” Canterbury Tales 5. Edelstein L: The professional ethics of the Greek physician. In Tempkin 0, Tempkin CL (eds): Ancient Medicine: Selected Paper of Ludwig Edelstein. Baltimore, Johns Hopkins Press, 1967 6. Encyclopedia Britannica: Practice of Medicine and Surgery, ed 15. Chicago, 1984, p 842 7. Gagnon DE: Managed care’s impact on perinatal services. market analysis. The Medici Report, vol I. In press 8. Goldsmith JP: Real managed care (from Kubler-Ross to better outcomes). J Perinata, 1793 9. Hageman J: The future of neonatology in the managed care era. J Perinatol15:413,1995 10. Hartline J: Managing to find value. J Perinatol 15:412, 1995 11. Jackson R Doctors and Diseases in the Roman Empire. London, University of Oklahoma Press, 1988, p 56 12. Kett J: The Formation of the American Medical Profession: The Role of Institutions. London, Yale University Press, 1968, pp 144115 13. Keyes WG, Adler S M The future of neonatology in the managed care era. J Perinatol 15:401402, 1995 14. Kottek S: Gems from the Talmud. Public health in Jewish lore: Physician’s fees. Israel J Med Sci 321147-1149, 1996 15. Kottek S Jewish social medicine: Contracts between physicians and Jewish communities (17th and 18th centuries). Israel J Med Sci 32265-268, 1996 16. Martin GI: FNSFinancial neonatal shock. J Perinat 16:165, 1996 17. Medici Report: Information technology. Princeton, New Jersey, 1996 18. Medicode: RBRVS Converter. Salt Lake City, 1995, pp 1-13 19. Park K: Doctors and medicine in early renaissance Florence. Princeton, Princeton University Press, 1985, pp 140-141 20. The Perinate: Future financial neonatal shock. J Perinatol 16:230, 1996 21. Porter R: The Doctor Scolds Me: The Diaries and Correspondence of Patients in Eighteenth Century England. In Patients and Practitioners. New York, Cambridge University Press, 1985, p 125 22. Schiedermayer D, McCarty D: A l h i s m , professional decorum, and greed: Perspectives on physician compensation. Perspect Biol Med 38:23&253, 1955 23. Schwartz RM: Supply and demand for neonatal intensive care: Trends and implications J Perinatol 16:483, 1996 24. Segal MJ, Heald RB (eds): Medicare: RBRVS. The Physician’s Guide. Chicago, American Medical Association, 1996 25. Seguin JH, Claflin KS, Topper W H Impact of a resource-based relative value scale fee schedule on reimbursement to neonatologists. J Perinatol 13217-222, 1993 26. Taff KA: CPT coding for perinatal pediatrics. J Perinatol 16:208-210, 1996 27. Thorwald J: Science and the Secrets of Early Medicine. Thames and Hudson, 1962, p 25 28. Wirtschafter D D Perinatal services in the era of managed care: A Kaiser Permanente physician’s perspective. J Perinatol 15:414-417, 1995
Address reprint requests to Gilbert I. Martin, MD Neonatal Intensive Care Unit Citrus Valley Medical Center Queen of the Valley Campus Suite 406 1135 South Sunset Avenue West Covina, CA 91790
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ADDENDUM
The adjustment conversion factors for 1997 are: Surgical Services-$40.9603 Nonsurgical Services-$33.8454 Primary Care Services-$35.7671 Anesthesia Services-$16.68 These figures can be used to calculate the 1997 and 1998 reimbursement based on RBRVS intensive care charges. In addition, in the near future there may be a code that will allow for reporting of non critically ill low birth weight infants (less than 1500 grams) which require intensive care management. The adjustment conversion factor for 1998 is: $36.6873 (a single conversion factor).
NEONATOLOGY UPDATE
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FUTURE FINANCIAL NEONATAL SHOCK Gilbert I. Martin, MD, Kevin Gattshall, BSBA, Frances MacPherson BSN, ARNP, and Susan Tiffany, BS
I have been a Neonatologist, for twenty years or so, And have always felt secure about the things I really know. At 600 grams with RDS. I could write a thesis, PFC or PDA and even Gastroschisis. I spend the time, put in the hours, sometimes without sleep, A multidisiplinary approach, the company I keep. The challenge remains, ideals still high, sometimes sad or funny, But somehow through this experience, I need to earn some money. As I grew up, I placed a charge and never did feel nervous, A UAC, an ET tube, simply ”Fee for Service.” Standby section, H & P, bill without confusion, Figure out a market price, for Exchange Transfusion. Then the task grew difficult, I can tell the tale, In 1970 came along, the “Relative Value Scale.” The AMA devised a term, which enlarged all my nodes, You are all familiar with the CPT word codes. 99431 or two, do these numbers jive? Do I charge for standby? When did I arrive? Was my original consultation, limited or not? Is 99252 the code? Tell me what I’ve got. The charge sheets are so complicated, brings out all my wrath, A simple task in ‘75 now takes a “Billing Staff.” Bills are sent, evaluated, with the proper guide, We wait and wait and wait and wait . . . finally, it‘s denied.
From the Neonatal Intensive Care Unit, Citrus Valley Medical Center, Queen of the Valley Campus, West Covina (GIM); University of California, Irvine (GIM); PEDIATRIX Medical Group, Orange, California (GIM, ST); and PEDIATRIX Medical Group, Fort Lauderdale, Florida (KG, FM)
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Signed up too late, not eligible, tell me what to feel, It's OK, Doc, perhaps you'll win, on the third or fourth appeal. I charge this, and you pay that, who decides the rules? In the scheme of bill and pay, the Docs appear as fools. Discounted fees, per diem, bundling, RBRVS, Current Procedural Terminology, it really is a mess. Then IPAs and HMOs came upon the scene, Further discounts, what to do? Make us lean and mean. Lesser payments, more paperwork, should I cry or laugh? I hired a practice consultant and increased billing staff. Overhead goes up, employees too, life's become a wreck, Working harder, much less fun and with a dwindling check. A new word crops up, we will be saved, with great anticipation, Take weekend courses, learn the lingo known as "Capitation." How many lives are in your group? I need the enrollment disc, Length of stay turns my hair gray, for now I am at risk. The future doesn't seem too bright, what happened to the fees? Soon, neonatal care will develop many DRGs. At risk for one, and one for all, will be our battle cry, Bill correctly, with proper codes, promise you will try. Place the statement in the envelope, post it, do not fail, Hope that when you follow-up, you won't get a "voice mail." Try and try and try again, this isn't "Poppycock," A better term is FUTURE FINANCIAL NEONATAL SHOCK THE PERINATEZD
(From Martin G: Future financial neonatal shock. J Perinat 16:230, 1996; with permission.)
In years past, the economics of practicing medicine and "earning a living" was second to intellectual stimulation and personal satisfaction. Medical schools never taught economics, and it was believed that with dedication and service, financial rewards would be forthcoming. Many of these beliefs have changed as medical reimbursement to hospitals and physicians have decreased. Job and financial security are uncertain. Professional goals are in jeopardy, and the future is unclear. THE HISTORY OF PHYSICIAN REIMBURSEMENT
Although the Bible tells us that the Lord is the ultimate healer (Exodus 16:26),the Talmud includes doctor's fees among the five categories of compensation allowed (Mishnah Baba Kamma 8:l) and even remarks, "a physician for nothing is worth nothing." (Baba Kamma 85a). The healer often had to leave home and prepare medication and therefore was allowed a fee.14Aristotle (384-322 BC) objected to linking fees with medical practice: In 46 BC, Julius Caesar granted Roman citizenship to all foreign doctors working in Rome, and physicians in Ephesus were granted immunity from taxation. In 23 BC Antonius Musa used a cold water treatment to cure Emperor Augustus, and the Emperor was so grateful that he granted all physicians tax immunity." The Code of Hammurabi states that "if a doctor has healed a free man's broken limb
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and has revived his sick bowels, the patient is to pay the doctor five shekels of silver.27Maestro Polidoro d’htonio Bracali of Pistoia, Italy, received income in cash and in kind. In 1459, he was awarded six staia (bushels) of grain each year for his care of the Abbey of San Mi~he1e.l~ Physicians have been described as greedy as Chaucer noted in his Canterbury Tales.4In the mid-17th century, physicians were not to accept payment from the poor, were allowed to accept what the middle-class offered (but not request payment), and could request a reasonable and not exaggerated fee from the rich. There was an additional fee for night In fact, in 1639, the Colony of Virginia passed legislation to limit ~a1ls.I~ the size of physician’s fees.22In the same year, a physician took a couple to court for failure to pay his fees, and the judgment indentured the pair to him. In 1795, in Fakenham (England) a physician could make an income of 400 pounds a year.19 In Germany (1779), the Metz contract allowed the physician 400 pounds annually plus an additional 120 pounds for treating the poor. Note the futuristic thinking here, for the physician was able to ”charge 20 sols (a smaller denomination) for the first visit, 10 sols for each subsequent visit, but could not charge for more than two visits a day.”15 In the first part of the 19th century, the training of physicians became more formal, and physicians were paid in cash or goods and services. The passage of the Medical Act of 1858 in England established the Great Medical Council, which controlled admissions to the medical register and had a dominant influence over medical practice.6 Bartering became more popular, and fees were generated by either total ”family care” over a period of time or could be negotiated for single visits. Charges were personally created, and there was no organization of a fee schedule. Physicians who were more popular could charge more and had larger practices. In the early part of the 19th century in the United States, physicians often had to extend yearly credit. Fees would accumulate indefinitely until they were paid in kind.12 As the 20th century approached, medical education and an expanding curriculum became more organized following the example set by the Johns Hopkins Medical School in Baltimore, and by the creation in 1904 of the Council on Medical Education. In 1910, the Flexner report weeded out inadequate medical schools and paved the way for an improvement in medical education. Standards were set, training formalized, and a more structured economic system developed.’* In the 1940s, group health insurance had started, but there was little enrollment. Health insurance, or in fact health care at all, was not thought to be that effective. It was only after World War I1 with advances in technology, antibiotics, and therapeutics, that the need to establish a medical payment schedule emerged.3From 1955 to 1970, physicians were paid fee-for-service, and there was very little control. The subspecialty of neonatology emerged in the late 1960s. The ability to influence neonatal morbidity and mortality through regionalization, advances in technology, research, and therapy allowed the neonatologists to set their own fee schedules for specialized procedures. Patient visits could be modeled after adult intensive care practices, but suddenly as we were everpresent adjusting ventilator dials or fluids,
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”extended visits” became truly “extended.” This was the “golden age” of reimbursement for medicine; however in 1970, the Relative Value Scale (RVS) was devised, which was followed in 1977 by the Current Procedural Terminology (CPT) codes. Discounted fee-for-service was a term coined in 1985, and 1990 produced global per diem charges and bundling of multiple procedures. The Resource-Based Relative Value Scale (RBRVS) emerged in 1992 as a corollary, and terms such as managed care, diagnostic-rela ted groups (DRGs), and capitation became part of our daily vocabulary. Pediatrics and neonatology were at first far removed from this changing economic climate. As computerization and data collection began to slowly define the actual “costs” of neonatal intensive care, our practices and both hospital and personal reimbursement were scrutinized. As we review the history of physician fees over time, note that it took many centuries of slow progress under physician, government, and religious control to provide intellectual and economic incentives for students to consider the practice of medicine as a career. It has taken just 25 years to change this economic control to a ”third party” and hence affect physician satisfaction on a global scale. THE BASIS OF NEONATAL CHARGES
It was apparent that when neonatology emerged as a subspecialty that bartering ”two chickens” for an umbilical artery catherization would not be feasible. Fees were chosen and based on a system of customary, prevailing, and reasonable (CPR) charges. What was customary, reasonable, and prevailing achieved some degree of anecdotal national acceptance as neonatologists wondered with great curiosity, what do they charge for this or that? The definition of customary charges was the median of an individual’s charges for a particular service for a defined period of time. The ”prevailing” charge was set on the 90th percentile of the customary charge in a defined payment area. The “reasonable” charge was the lowest of the physician’s actual fee for that service.24 Charges went higher, reimbursement was rarely questioned, survival rates improved, and on the surface everyone seemed satisfied. A loose lid was affected in this system as there were adjustments to keep the government outlays predictable. The government and the health care providers in the early days after Medicare was established (1966) used the usual, customary, and reasonable (LICR) system. But there was a need for a more efficient structure, as it was soon apparent that there was a wide variation in both billing and payment levels for the same service. The range of charges for umbilical artery cannulation in different parts of the United States can vary as much as $150 to $250. An even larger discrepancy is noted in the range of charges for the first 24 hours of intensive care. In 1977, the American Medical Association (AMA) devised Current Procedural Terminology (CPT codes) to describe physician services and procedures. This is a listing of descriptive terms with five-digit numbers
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and modifiers for reporting medical services performed by physicians. An RVS had already been established in California in 1956, placing an objective and uniform value to determine physician payment and fees. There were concerns about geographic variation, antitrust, and the ”ranking” of these values that made the process complicated. In addition, the codes for neonatal services were often broad and not well defined and needed updating. Unfortunately, the process to formulate a new code or revise an existing code is herculean; however to establish a coding procedure that is acceptable and effective, there must be better access to the system.
CPT CODING FOR NEONATOLOGY THE PROCESS
A new or revised code, which any individual, group, or organization can suggest, is submitted to the AMA CPT staff. If applicable, the proposal is referred to the appropriate CPT Advisory Committee. This group reviews the proposal and makes a recommendation to the CPT Editorial Board. If this board decides to add or revise the CPT code, it is then transmitted to the AMA/Specialty Society Relative Value Scale Update Committee (RUC). This panel develops the value for the physician work component of the RBRVS. The developed information is then referred to the RUC Advisory Committee. This body conducts a survey to ”assign” these relative work values and then submits its recommendation to the Health Care Financing Administration (HCFA). The HCFA panel reviews these recommendations and assigns a physician expense and malpractice expense as part of the physician fee schedule. The components are published in the Federal Register. A 60-day comment period ensues, and if no comments are received, the values become final. The final RVUs are again published in the Federal Register and cannot be changed for 5 years. For illustrative purposes, the above scenario has been simplified as if every step were without question or discussion. One can see how long and tedious the process can actually take for revision or establishment of a new CPT code.
NEONATAL CHARGES: THE RBRVS APPROACH
RBRVS is based on a study performed by the School of Public Health at Harvard University. This consists of an RVU assigned to physician services. The basis of the RBRVS approach is the descriptor CPT code for each procedure or physician service. These CPT codes are outlined in The American Medical Association’s Physicians’ Current Procedural Terminology. However, there have been some significant changes to these published codes in the past several years. These are as follows: 99440: Newborn Resuscitation Attendance to High Risk Deliveries. This code was recently approved by the CPT Editorial Board. In
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1996, the description of this code stated that positive pressure ventilation and/or chest compressions must be provided. 99238: Hospital discharge day management, 30 minutes or less 99239: Hospital discharge day management, more than 30 minutes 99435: History and examination of the normal newborn, including the preparation of medical records. Assessment and discharge occur on the same day. 99436: Attendance at delivery when requested by the delivering physician and inital stabilization of the newborn. NEONATAL INTENSIVE CARE CPT CODES These codes are used to report services provided by a physician to an infant in the NICU. They are bundled and include all procedures except exchange transfusion, the insertion of a chest tube, bronchoscopy and central line placement (other than an umbilical catherization). The codes may be reported once per day and include all care and reevaluations during a 24-hour period. In 1996, the wording of the codes was changed to clearly distinguish critical care codes from subsequent hospital care. 99295: This code is reserved for the date of admission for neonates. It is used for the evaluation and management of a critically ill neonate. 99296: Subsequent neonatal intensive care, per day, for the evaluation of a critically ill and unstable neonate. 99297: Subsequent neonatal intensive care, per day, for the evaluation and management of a critically ill though stable neonate. 99291: A Critical Care Code is defined as the care of a critically ill or unstable critically injured patient who requires constant physician attendance. This number is for the first hour of care in a 24-hour period. This is not a bundled code. 99292: A Critical Care Code which describes each additional 30 minutes of care. Ventilator management is bundled with this code. NON-CRITICALLY ILL NEWBORN CPT CODES 99221-3: Initial hospital care, per day, for the evaluation and management of a patient who requires a detailed or comprehensive history and examination and medical decision making that is straightforward or of low complexity. 99222: Initial hospital care, per day, for the evaluation and management of a patient who requires a comprehensive history and examination and medical decision making of moderate complexity. 99223: Initial hospital care, per day, for the evaluation and management of a patient who requires a comprehensive history and examination and medical decision making of high complexity.
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99231-3: These are subsequent daily codes that are based on a more focused interval history and examination and medical decision making that is of low complexity (99231); moderate complexity (99232) or high complexity (99233).
CONSULTATION NICU CODES 99251: Initial inpatient consultation that requires a problem focused history, examination and straightforward medical decision making. Counseling and coordination of care with other agencies are included in this code and the presenting problems(s) are self limited or minor. We believe that the ordering physician should document the request and the reason for the consultation. The consultant, in turn, should state the opinion regarding the problem and document this in the mother’s (if a prenatal consultation) and/or the infant’s chart. 99360: Physician standby service for each 30 minutes. This can be used as a stand-alone code but the physician during this period must be unable to care for other patients. 99356: The first hour of service in prolonged physician service with direct face-to-face contact in the inpatient setting. This code must be used with other services and is not a stand-alone code. 99357: Each additional 30 minutes of physician service with direct face-to-face contact in an inpatient setting. This code is used with other services and is not a stand-alone code.
CALIFORNIA 2 CODES These codes are used in California for physician services provided in a facility approved by California Children Services. The codes are labeled 20100-20108 and describe both initial and subsequent neonatal intensive care. USING RBRVS NEONATAL INTENSIVE CARE CHARGES The RBRVS system takes the CPT code for a specific procedure or service and describes a relative value for the service. This is dependent on the amount of work that goes into the service, the practice expense associated with the service, and the professional liability expense for the provision of the service. The relative value of each service is multiplied by a geographic adjustment factor and translated into a dollar amount by an annually adjusted conversion factor. The concept of using RBRVS codes for calculating reimbursement for neonatology is not new. Sequin and colleague^^^ determined that the RBRVS system did reimburse nonprocedural services better then other comparative systems; however,
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when all categories were evaluated, the RBRVS method paid at a lower rate. The adjustment conversion factors for 1996 are (see Addendum for 1997 conversion factors): Surgical services-$40.7986 Nonsurgical services-$34.6293 Primary care service-$35.4173 Anesthesia services-$15.2800 The relative values, updated payment policies, and the actual payment descriptors are published in The American Medical Association’s Medicare RBRVS Guidefor Physicians, and the Federal Register. An example follows detailing CPT Code 99295, initial critical NICU care in the state of Colorado. CPT Code 99295
Work Relative Value Unit (RVU)--16.03 Practice Relative Value Unit (RW)-5.08 Malpractice Relative Value Unit (RVU)--1.55 Work Cost of Living Index (Colorado)--0.989 Practice Cost Index (Colorado)--0.951 Malpractice Cost Index (Colorado)--0.827 Total Work RVU in Colorado = 16.03 X 0.989 = 15.85 Total Practice RVU in Colorado = 5.08 X 0.951 = 4.83 Total Malpractice RVU in Colorado = 1.55 X 0.827 = 1.28 STEP 1: Add together total R W s in Colorado: 15.85 + 4.83 1.28 = 21.96 STEP 2: Multiply this figure by the 1996 nonsurgical service conversion factor ($34.6293) TOTAL PHYSICIAN REIMBURSEMENT FOR CODE 99295 = 21.96 X $34.6293 = $760.46 This is the Medicare reimbursement in the state of Colorado. Other payors may adopt this fee schedule or suggest modifications. In New York State, where the work, practice, and malpractice geographic cost index is higher, the reimbursement for the same code is $904.17. In Los Angeles, California, the reimbursement for code 99295 is $839.06. We can convert all of our codes in this way and use an objective approach with contract negotiations. The amount of reimbursement received for this code varies from state to state and if provided by a state program (e.g., Medi-Cal in California) depends upon the allotted funds for that particular year. Most state Medicaid offices do not use the RBRVS system, and arbitrary RVUs will probably be used as Medicaid converts to capitation in an expanding managed care market; however, using the RBRVS system can still be important in negotiating contracts in this era of managed care. These companies can offer reimbursement at whatever levels necessary to affect their “bottom line.” The RBRVS values can be expanded to allocate fees to a 50th or 75th percentile so that comparisons
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can be made when contract negotiations are in progress.ls The final contract to determine reimbursement should primarily consider historical performance and prior utilization.
MANAGED CARE REIMBURSEMENT-NEONATOLOGY
In order to curb expenses, health maintenance organizations (HMOs) are ”negotiating tighter contracts with hospitals and physicians for these ser~ices.’”~ Managed care influence in markets throughout the United States is rapidly expanding, but the managed care groups are in different phases of maturity. Not all markets follow the same growth curve. Hybrids of reimbursement schedules are also appearing. Examples of the more common reimbursement methods include discounted fee-for-service, per diem, case rates, and capitation.
Discounted Fee-for-Service
In areas where there is little managed care penetration, a discount of billed charges is quite common. Hospital-based neonatologists typically have no incentive to participate in these plans, and the managed care organizations will aggressively target other subspecialties for their health plan savings and hope to keep a lid on neonatal costs. These contracts stipulate that the physician’s fee schedule is attached to the contract at the time of execution and that increases can only be made on an annual basis, not to exceed the medical component of the consumer price index. A variation of this method is for the payor to use the RBRVS amount, using a conversion factor that is less than Medicaid, and offer this figure in a payment schedule. Some organizations mix and match their percentile offers. That is, they will reimburse a higher percentage on the acute care codes (99295-7) but lower percentage for the “growing premature” infant. To calculate which method is best for your situation, use the historical information, average length of stay (ALOS), and numbers and types of procedures performed to create a contract that will have incentives for profit and growth while shortening length of stay. An approach might include allowing a greater discount for daily charges at the back end of the hospital stay. Be proactive with the managed care company’s nurse home care organization to achieve these goals. Remember that the managed care organization’s administration has the time to spend analyzing all of the information. The neonatologist busy with clinical practice often doesn’t take the time to “do the homework” necessary to effect a contract that will not leave him or her with a “dwindling check.”
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Per Diem
This method is used to eliminate the fluctuations in variable costs, as well as defuse the debate over the “unbundling” of procedure codes. Although per diems do reduce variable costs, they do not create an incentive to reduce the ALOS. Since daily rates are determined by utilization review, costs, and ALOS, per diems can be tailored. Levels of control and routine hospital care can be created and treated differently. For example, the first several days of hospitalization can be charged at a higher rate with a change to a lower rate after this time. The physician would then have a financial incentive to discharge patient A earlier so that higher-paying patient B could take the place of patient A. The attractiveness of the per diem approach is that it is very simple. The billing statement is a daily rate with everything included. The costs that the physician uses for billing services can be decreased, and thus overhead declines and profits increase. Case Rates
This method controls variable costs and can influence length of stay because the reimbursement is the same whether the patient stays in the hospital 1 day or 10 days. The incentive to discharge patient A is that patient B can take his or her place immediately. The case rate approach seems simple; however, the variations and complications of neonatal diagnoses make each case unique and different. That is, respiratory distress syndrome (RDS) could not be a simple diagnosis for case rate reimbursement unless gestational age, weight, the need for surfactant, and the presence of a patent ductus arteriosis (PDA) were taken into consideration. This system requires an accurate and reliable cost accounting system. Capitation
This is a reimbursement method found predominantly in large, mature markets. It is stereotyped as being the “sophisticated” form of reimbursement. If capitation is to be considered, the neonatologist must perform a detailed analysis of his or her own practice costs and include hospital, home health, and back transport costs. The neonatologist needs to also understand and be able to monitor the number and the type of patients in the capitated group. The provider must have the experience, data, utilization management, and reporting capabilities necessary to operate efficiently under capitation. Questions to address in contracting negotiations include: What is the scope of the services to be provided? What services are included? What services are excluded (carve-outs)?
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Is the historical utilization information reliable? What has been the payor’s experience capitating other specialties? Is there a provision to handle stop-loss conditions if there are significant changes in referral patterns? How will the payor control the provision of services? How are authorizations handled? How frequently do authorizations have to be renewed? In what format is eligibility information provided? How are additions and deletions handled? Who are the contact people for eligibility, clinical, and administrative issues? What is the frequency of encounter reports? Who is responsible for payment of care when a more specialized service is required, such as extracorporeal membrane oxygenation (ECMO), laser surgery for retinopathy of prematurity (ROP), or cardiac surgery? How is the capitation rate calculated (age, sex, case mix)? What is the payment method used to determine historical costs and charges? Capitated reimbursement is normally calculated on a per-member, per-month basis. Neonatologists may choose to be capitated at a higher rate but only to include reimbursement based upon child-bearing females per month, the regional fertility rate, or the number of deliveries per month. Narrowing the scope of the identified population (excluding late enrollees or no prenatal care) requires the payor to have the ability to implement an enhancement to their systems and administrative reporting capabilities. Although the attention to detail is much greater in establishing a capitated relationship with a payor, the overall financial reward is worth the time. This approach provides for a steady revenue stream and reduces administrative conflicts. But when neonatologists are busy taking care of patients, do we have the time and energy to spend creating and continuously monitoring and modifying a capitated system? A TIMELY SCENARIO
The neonatologist is asked by the obstetrician to attend the cesarean section for an infant at 33-weeks’ gestation that was complicated by pregnancy-induced hypertension. The obstetrician requested that the neonatologist meet with the parents before delivery to discuss the prognosis for the infant. The neonatologist arrived at 2 AM and waited until 3 AM, when the team was available for the cesarean section to begin. At delivery, the infant required full resuscitation, which included endotracheal intubation. The infant was admitted to the NICU, placed on mechanical ventilation, and an umbilical artery catheter was placed. Surfactant was necessary, as were multiple blood gas determinations for the first 24 hours. The presence of a neonatologist was constantly re-
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quired. Because of a difficult social and family situation, the neonatologist spent two half-hour sessions and two 1-hour meetings with the family. On day 4 of life, the infant was off the ventilator but was in an oxygen hood and had several apneic episodes. Hyperalimentation was started. The neonatologist spent two half-hour periods with the family. The patient was discharged on day 33. The neonatologist met with the parents, outlined future care, notified the appropriate consultants, and completed the discharge summary. An alternative method of CPT coding for the above example would include: Maternal care 99251: Maternal consult. Twenty minutes. Formal consult ordered by obstetrician and results placed on chart. Delivery room attendance 99360: One hour standby care awaiting arrival of anesthesia/ obstetrics 99440 Newborn resuscitation. Cannot bill for endotracheal intubation if subsequent NICU codes are used. Can bill for intubation using the 99255 code and separate procedure codes. First day of life 99295: Admission to the NICU of a critically ill neonate. All procedures, including meetings with family, are included in this one time daily code. or 99291: First hour of critical care of a neonate. Procedure codes are added to this code. 99292: Each additional 30 minutes of care. Procedure codes are added to this code. Fourth day of life 99296: Subsequent care of a critically ill but unstable neonate. All procedures and meetings are included. Discharge date 99233: This includes physical examination, discharge planning meeting with family, notification of follow-up physicians, and discharge summary. For each of these codes, the RBRVS method can be used to produce a dollar reimbursement fee. The actual payment schedules can be developed as follows: Fee-for-Service The charges are paid at 100% of the allowable by the insurance company. The parents are responsible for the balance of the billed charges that are not covered by the insurance company. Reimbursement with a Negotiated Managed Care Contract (great variations may occur depending on individual circumstances) Flat Fee Percentage/ Allowable Fee Schedule A contract is arranged with the managed care company to accept an agreed percentage of the billed charges for each code. The percentage paid can vary with each code and/or can be tied to a
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percentile rank for each code. The parents cannot be billed for the balance. Therefore, 99251, 99254, 99440, 99295, 99296, and 99233 can be reimbursed at the same or varying percentages. If using such a fee schedule, be sure to understand your individual situation. The history and ALOS in your own unit will dictate what you need to bill and collect in order not to lose money. Percentage of Fee Schedule A contract is arranged with the payor to pay all of the codes at a percentage of billed charges. Under the contract, the negotiated discount cannot be billed to the parents. It is a simple matter to decide on a percentage fee schedule. Once again, proper homework sufficient to justify charges to avoid losses is an important pre-negotiating step. Per Diem A contract is designed to establish a flat rate of daily service regardless of how much time is spent or what procedures are performed. With the above scenario, 99251, 99254, 99440, 99295, 99296, and 99233 would be reimbursed using a single fee/day. This fee can vary depending on the agreement. This approach is quite simple and requires less paperwork and staff billing time. These per diem charges can sometimes be designed to allow higher payment schedules for the first few days and lesser reimbursement for the end of the hospital stay. Capitation If in the above example, the capitated contract is based on a fee per member per month, an insurance group with 80,000 members paying "X" amount/member/month would be 80,000 multiplied by the capitation rate for each member. Whatever the choice of reimbursement, the contract should clearly state when the fee will be paid so that cash flow remains more stable. Medicaid and Medi-Cal Each state has its own rules and guidelines. Some states accept the CPT billing codes, whereas others, such as California, have established their own set of numerical equivalents. In addition, each state determines its reimbursement fee schedule based on accumulated revenues. For example, Florida Medicaid accepts the NICU CPT codes 99295 (First day admission to the NICU; the 99254 and 99440 presented in the scenario above are included with the admission CPT code; the published Medicaid reimbursement for this code is $460.00) and 99296 (Unstable neonate-subsequent days. Only six unstable NICU days can be billed). California does not accept the NICU CPT codes. It has established its own codes for critical care services: ZOlOO (admission to the NICU [replaces 992951; the published Medi-Cal reimbursement for this code is $240.00) and 20102 (subsequent care of the unstable neonate).
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REIMBURSEMENT FOR NEONATAL INTENSIVE CARE-THE FUTURE The prediction of future trends in NICU reimbursement is difficult, for the environment is constantly changing. The small specialty practice “lacks the resources and capital to generate the data necessary to support its claim^."'^ Critical protocol guidelines that are ”cost effective” are being developed that have and will change the way we care for patients. The adage for the rest of this century may be ”the more the risk, the more the profit.” Is this much different than what our colleagues in the business world experience? The survival of the neonatal group will depend on an understanding of practice costs (reducing overhead), decreasing length of stay, and providing supporting data while at the same time maintaining quality. Managed care groups will demand certification, accountability, and even issue ”report cards” to follow utilization and quality. We talk about ”working with third-party payors as colleagues instead of enemies,”gyet some secretly gloat when newspaper headlines announce legislation curbing HMO practices. Hartlinelo describes “turfdefenders” and asks us to show the business world the ”value of perinatal care.” Neonatologists need to be concerned about the requests for change from outside sources if this change conflicts with the best interests of our patients.13Bowen2 remarks that physicians must acquire managerial skills, information systems come on-line, care plans initiated, risk shared, and care managed by a multidisciplinary team that should be held accountable. All of the above must be accomplished at the same time that the prediction of the need for neonatologists and neonatal beds is decreasing. Presently, there are between 17,000 and 18,000 level 2 and level 3 NICU beds in the United States. It is predicted that, in a wellmanaged system, the number of beds needed by the year 2000 would decrease to 7800.7As of 1991, the United States had more than 300,000 excess bed days in NICUs and only a 74% overall occupancy ~ate.2~ Goldsmith,B believes that by decreasing illness load and altering treatment patterns, perinatal costs will decrease. Prevention of prematurity is the key to decreasing illness and hence effecting a predictable cost saving. These are changing times. Neonatologists can no longer focus only on patient care because outcomes, costs, and quality will also be continuously measured. Anecdotal-based therapies are being replaced by evidence-based, multicentered trials. More physicians will find it necessary to acquire MBAs to understand the business of medical care. All of this . . . at what cost? ACKNOWLEDGMENTS We thank D. Cunningham, MD, R. Medel, MD, R. Molteni, MD, L. Mullen, and K. Taff for their critical review of this manuscript. In addition, CPT @ 1997 American Medical Association. All rights reserved.
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References 1. American Academy of Pediatrics: RBRVS: What it is and how does it affect pediatrics. Elk Grove Village, Illinois, 1996 2. Bowen FW Neonatology in a managed care environment. J Perinatol 15:403-405, 1995 3. Campion F The elements of change. The AMA and US Health Policy since 1984. AMA, 1984, pp 1-8 4. Chaucer: ”The Prologue,” Canterbury Tales 5. Edelstein L: The professional ethics of the Greek physician. In Tempkin 0, Tempkin CL (eds): Ancient Medicine: Selected Paper of Ludwig Edelstein. Baltimore, Johns Hopkins Press, 1967 6. Encyclopedia Britannica: Practice of Medicine and Surgery, ed 15. Chicago, 1984, p 842 7. Gagnon DE: Managed care’s impact on perinatal services. market analysis. The Medici Report, vol I. In press 8. Goldsmith JP: Real managed care (from Kubler-Ross to better outcomes). J Perinata, 1793 9. Hageman J: The future of neonatology in the managed care era. J Perinatol15:413,1995 10. Hartline J: Managing to find value. J Perinatol 15:412, 1995 11. Jackson R Doctors and Diseases in the Roman Empire. London, University of Oklahoma Press, 1988, p 56 12. Kett J: The Formation of the American Medical Profession: The Role of Institutions. London, Yale University Press, 1968, pp 144115 13. Keyes WG, Adler S M The future of neonatology in the managed care era. J Perinatol 15:401402, 1995 14. Kottek S: Gems from the Talmud. Public health in Jewish lore: Physician’s fees. Israel J Med Sci 321147-1149, 1996 15. Kottek S Jewish social medicine: Contracts between physicians and Jewish communities (17th and 18th centuries). Israel J Med Sci 32265-268, 1996 16. Martin GI: FNSFinancial neonatal shock. J Perinat 16:165, 1996 17. Medici Report: Information technology. Princeton, New Jersey, 1996 18. Medicode: RBRVS Converter. Salt Lake City, 1995, pp 1-13 19. Park K: Doctors and medicine in early renaissance Florence. Princeton, Princeton University Press, 1985, pp 140-141 20. The Perinate: Future financial neonatal shock. J Perinatol 16:230, 1996 21. Porter R: The Doctor Scolds Me: The Diaries and Correspondence of Patients in Eighteenth Century England. In Patients and Practitioners. New York, Cambridge University Press, 1985, p 125 22. Schiedermayer D, McCarty D: A l h i s m , professional decorum, and greed: Perspectives on physician compensation. Perspect Biol Med 38:23&253, 1955 23. Schwartz RM: Supply and demand for neonatal intensive care: Trends and implications J Perinatol 16:483, 1996 24. Segal MJ, Heald RB (eds): Medicare: RBRVS. The Physician’s Guide. Chicago, American Medical Association, 1996 25. Seguin JH, Claflin KS, Topper W H Impact of a resource-based relative value scale fee schedule on reimbursement to neonatologists. J Perinatol 13217-222, 1993 26. Taff KA: CPT coding for perinatal pediatrics. J Perinatol 16:208-210, 1996 27. Thorwald J: Science and the Secrets of Early Medicine. Thames and Hudson, 1962, p 25 28. Wirtschafter D D Perinatal services in the era of managed care: A Kaiser Permanente physician’s perspective. J Perinatol 15:414-417, 1995
Address reprint requests to Gilbert I. Martin, MD Neonatal Intensive Care Unit Citrus Valley Medical Center Queen of the Valley Campus Suite 406 1135 South Sunset Avenue West Covina, CA 91790
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ADDENDUM
The adjustment conversion factors for 1997 are: Surgical Services-$40.9603 Nonsurgical Services-$33.8454 Primary Care Services-$35.7671 Anesthesia Services-$16.68 These figures can be used to calculate the 1997 and 1998 reimbursement based on RBRVS intensive care charges. In addition, in the near future there may be a code that will allow for reporting of non critically ill low birth weight infants (less than 1500 grams) which require intensive care management. The adjustment conversion factor for 1998 is: $36.6873 (a single conversion factor).