2. the physician work component includes the physicians’ time and mental effort.

Relative Value Units

The resource-based relative value scale (RBRVS) is a measure of work done by medical professions that is directly related to reimbursement (see Chapter 8). This scale is expressed in relative value units (RVUs). Reimbursement rates from third-party payers are typically expressed in terms of dollars per RVU, so that the greater the number of RVUs, the larger the payment. RVUs are therefore an obvious performance measure related to something important to any organization: money. With each report that a radiologist generates and signs off, RVUs become available for reimbursement. It might appear that RVUs would be an excellent performance measurement for radiologists. However, RVUs are related more to the total resources required to produce a radiologic report than to the actual amount of work performed only by the radiologist.

The original RBRVS was based on a combination of the physician's work input, the opportunity cost of specialty training, and the relative practice costs.1 The physician's work input was further estimated along four dimensions: time, mental effort and judgment, technical skill and physical effort, and psychological stress (Box 16-2).2 The radiology implementation of the RBRVS included physician work and practice costs but assumed that all radiologists had the same opportunity cost of specialty training. The inclusion of practice costs meant that studies that required a large capital investment in equipment with rapid obsolescence, such as MRI or CT, would have high RVUs, regardless of the effort required on the part of the radiologist. Studies that didn't require large capital investments would have low RVUs, like radiography and sonography.3 RVUs were created at a time when certain imaging technologies were newer and much more expensive than they are now, therefore magnifying the differences between activities that require high and low capital investments. Even within the context of expensive equipment, RVUs have not kept pace with newer technology, so that the RVUs generated by interpreting a digital mammogram are essentially the same as those generated by interpreting a film-screen mammogram, even though the difference in capital investment is quite large.

The use of RVUs as a performance measurement for radiologists also raises the issue of equity across subspecialty practices, some of which may be heavy with CT or MRI, while others may be heavy with radiography.4 Arenson et al's study of RVUs in academic practice indicated the need for an adjustment factor of 0.50 for angiography, 0.58 for CT, and 0.58 for MRI, relative to radiography.5 RVUs can also be adjusted for the proportion of time an individual spends doing clinical work, to derive a figure that represents RVUs per full-time equivalent (FTE) radiologist. This is particularly apropos to part-time workers or physicians whose salary is being covered in part by extramural funding.

A challenge is that as the RVUs are adjusted, their relationship to actual dollars generated and productivity weakens. For example, adjusting RVUs for percent of effort covered by NIH funding can be a challenge in that radiologists’ salaries often far exceed the NIH cap. While RVUs do have most of the attributes of an effective performance measurement, when applied to an individual radiologist, they fail to focus on the value drivers and the critical resources. For a radiologist, the key value driver is his or her ability to transform imaging studies and radiologic expertise into radiologic reports, and the critical resource is his or her time. The radiologist's knowledge, judgment, and skill are not critical resources because they are not depleted by use. RVUs would be a more suitable performance measurement for an entire radiology practice, or perhaps for a separate organizational or business unit that encompasses capital investment, operational costs, and labor. RVUs clearly do not reflect other value parameters of teaching, research, citizenship, and administrative duties.

Summary

This chapter reviews the basics of physician reimbursement under the federally directed resource-based relative value system. Federal and state governments, third-party payers, and professional societies are in constant search of improving reimbursement methodologies. Alterations in reimbursement structures and systems—to keep pace with increasing health care costs—are a continual process.

Dos and Don'ts of the Resource-Based Relative Value Scale

Time allocation in primary care office visits

Time is a scarce resource in a physician's office practice. How physicians use clinic time has important implications on quality of care, patient trust, and malpractice suits, and is one of the components of physician payments in the resource-based relative value scale. Primary care office visits are essentially communication events between patient (demand) and physician (supply) on which data and research methods from other scientific disciplines have made extensive efforts. Social psychologist Mishler views patient–physician conversations as complex, multidimensional, and multifunctional exchanges. Health services researchers recognize the unique and critical role of primary care physicians in providing patients with an ‘advanced medical home’ where complex comorbidities are diagnosed and treated. Despite previous research efforts on patient–physician interactions, however, the literature was silent on how physicians allocate time within a visit. The point of care exchanges that occur behind the closed door were considered hidden and noncontractible.

To examine how clinic time was actually spent during patients' visits to primary care physicians and to identify the factors that influence time allocations, a novel approach was developed to analyze video recordings of routine office visits in primary care practices. Currently, audio recordings of period health examinations (PHEs) are being analyzed in an integrated health delivery system which provides supplemental data on service utilization before and after the recorded visits. The findings have been rather thought provoking.

Specifically, not only the length of visits but also, more importantly, the content of visits in terms of units of clinical decision making referred to as ‘topics,’ operationalized as clinical issues raised by either participant was examined. An interaction was coded directly from an audio or video recording of the visit, along with transcripts of the interaction, based on topics sequentially introduced by patient or physician. After partitioning a visit into topics, the amount of time spent on each topic by patient and physician was further recorded. In the PHE study, the quality of communication on each topic was also measured. Figure 1 illustrates the flow of conversation in one visit, from topic to topic, over time. It is evident that the exchange took a rather free flow form, consistent with general conversation patterns in casual conversations, despite training in medical school and residencies on how to structure an office visit.

This approach of using microlevel data collected at the point of care allows the authors to examine how much time is dedicated to specific topics, the cognitive and emotional efforts invested in the exchanges across topics, and the factors that influenced how clinical time and efforts are allocated. It has been found that primary care office visits vary not only in length but also in the division of time among topics. Patients typically present multiple complaints during an office visit requiring physicians to divide time and resources during a visit to deal with competing demands. Very limited amount of time was dedicated to specific topics. In the video study, it was found that the median visit length was 15.7 min covering a median of six topics. Approximately 5 min were spent on the longest topic, whereas the remaining topics each received 1.1 min. Although time spent by patient and physician on a topic responded to many factors, length of the visit overall varied little even when contents of visits varied widely. Macrofactors associated with each site (e.g., academic medical center where physicians are paid by salary vs. physicians in fee-for-service solo practices or in a managed care group practice) had more influence on visit and topic length than the nature of the problem patients presented.

Fees and Third-Party Reimbursement

In the United States, treatment with needle acupuncture that is delivered by a licensed health care practitioner such as an acupuncturist, physical therapist, physician, or chiropractor can be delivered using CPT codes 97810 (first 15 minutes), 97811 (each additional 15 minutes), 97813 (with electrical stimulation, first 15 minutes), or 97814 (with electrical stimulation, each additional 15 minutes).

Although relative value units (RVUs) have been established using the Resource Based Relative Value Scale (RBRVS) for these Category 1 CPT codes, there is currently no Medicare reimbursement for those procedures. Medicare has a longstanding national coverage policy that does not consider Medicare reimbursement for acupuncture as reasonable and necessary.75 However, the RVUs can be used to assist in establishing a baseline fee schedule, by applying an appropriate conversion factor. In 2010, the Medicare conversion factor was $36.08.

These procedures are often covered by other third-party payers such as health insurers and worker's compensation insurance. Third-party payers will often reimburse a limited number of visits if they are supported by adequate documentation deeming them medically necessary. Prior authorization is recommended. Although acupuncture is not covered by Medicare or Medicaid, an increasing number of commercial health plans and State and Provincial Worker's Compensation Boards now include coverage for acupuncture.76,77

Although some payers continue to base their reimbursements on usual, customary, and reasonable payment methodology, the majority have developed reimbursement tables based on the RBRVS used by Medicare. Fees for these services typically range from $50 to $100 per session in the United States.67

Fees for related services based on the Medicare RVUs are summarized in Table 20-5.

Inadequate Resource Allocation

Experts believe that the most important challenge to goal-oriented care in the management of older adults with comorbidities is a health system that currently supports and incentivizes disease-oriented practice of medicine (Reuben & Tinetti, 2012). Unless health policies are refined to acknowledge that care processes that focus on society’s older, sicker members are as important as those that focus on the younger and healthier population, health providers will continue to emphasize adherence to disease-specific guidelines and the achievement of individual disease quality metrics in clinical care. Additionally, the Resource Based Relative Value Scale (RBRVS) historically used by CMS in calculating payment to clinicians does not adequately capture the complexity involved in the quality care of frail, multimorbid older adults (Resnick & Radulovich, 2014). Specifically, it does not recognize the importance of eliciting patients’ values and goals of care, counseling, conducting family meetings, and care coordination among various agencies and specialties. Recently, however, CMS did add the Transitional Care Management (TCM) codes to the physician fee schedule allowing primary care physicians to be reimbursed for such time spent coordinating care for patients discharged from hospitals and skilled nursing facilities back to the community (Centers for Medicare & Medicaid Services, 2012).

Public health resources directed at advancing the science of multimorbidity management and supporting alternative care approaches are vital to the delivery of patient-centered, clinically sound health care for the growing older adult population.

Section 5—Costs

In addition to efficacy and safety, costs are also an important but often overlooked consideration when contemplating various treatment options for LBP. Costs are borne not only by third-party payers such as private insurers and the government, but also by health care providers, patients, and their families, friends, and employers. The societal costs associated with common LBP are substantial, making it one of the most expensive medical conditions in the United States. This section discusses general charges associated with an intervention, as well as gives some indication of third-party reimbursement policies. Because costs must always be evaluated in conjunction with outcomes, evidence related to cost effectiveness is also reviewed where available.

Costs

Medicare Parts A, B, and C

Most of Medicare spending is through Part A, or hospital insurance. Part A is funded primarily by a dedicated payroll tax of 1.45% paid by employers and 1.45% paid by employees on earnings up to a specified ceiling ($90 000 in 2005). Over the long run, some critics contend, this rate will not be high enough to cover the Baby Boom retirees and the expected rise in health costs at a pace faster than the growth of the economy.

Part A eligibility typically is established automatically at age 65 for persons with a specified record of payroll contributions made in parallel with Social Security (pension) contributions. Older persons lacking full Social Security status (because they had insufficient payroll credits) may buy into Part A.

In addition to hospitalization, Part A pays for posthospital care in a skilled nursing home or home-care program (for rehabilitation and convalescence), and for hospice care (for patients near death who require treatment for comfort and pain relief). Admission to a Medicare-participating hospital triggers a Part A deductible set by national formula ($912 in 2005). Only one deductible is charged for 60 days, even if there is a readmission for the same diagnosis after a brief interval at home or in the community. After 60 days of hospitalization, the patient incurred in 2005 a per diem charge of $228 until day 90, and thereafter until day 150 a per diem of $465.

The designers of Medicare were advised by private insurers to adopt this approach as a deterrent to long and unnecessary hospitalizations. Almost all Medicare hospitalizations nowadays are for less than 30 days. More in keeping with the finances of older people would have been a 30-day benefit, budget neutral, with no deductible. Part A provides for a limited amount of care (20 days) in a skilled nursing home at no cost to the beneficiary after a hospital stay of 3 days. From day 20 to day 100, the per diem charge in 2005 was $114. Home care was at no cost to the patient as long as medically needed and provided by a Medicare-approved agency.

Parts A and B constitute traditional Medicare. Hospitals are paid on the basis of costs generated in diagnosis-related groups of services (DRGs). Physicians are paid mainly by fee-for-service using resource-based relative value scales (RBRVSs), derived mainly from studies of time with patients for interviews and for conducting procedures.

In addition to physician services, Medicare Part B provides for clinical laboratory services, outpatient clinical services, and medically necessary equipment, such as wheelchairs. Part B is technically a voluntary program, but virtually all Part A beneficiaries choose it, pay a monthly premium, and meet an annual deductible before being reimbursed. In 2006, the Part B premium was $88.50 per month and the deductible was $124 per year. The law fixes Part B financing as 75% from federal general revenues and 25% from patient payments, such as premiums and coinsurance.

The model for physician payment, in brief: a Medicare-participating physician agrees to accept a Medicare approved charge as the full charge for a service. The approved charge represents a Medicare fee schedule using the RBRVS. Based on empirical research into what physicians actually do, this methodology established a Medicare fee schedule considered to be more fair than payment under the loose concept of ‘reasonable and customary fees.’ The method was said to improve payment for primary care services and usefulness in controlling costs.

If the patient's Part B deductible has been met ($124), Medicare sends 80% of the approved charge directly to the physician. The patient, or the patient's private Medigap insurance (see below), pays the remaining 20%. If the physician does not accept this method (called assignment), the physician sends the patient a bill. A physician may not legally collect more than the approved charge plus 15% from the patient. Medicare sends the patient a check for 80% of the approved charge. The patient pays the 20% plus the 15%. Most physicians take assignment because payment is quicker and more reliable. For patients, there is less paperwork and postage.

Medicare Part C covers managed-care systems, which are private insurance plans that provide hospital, physician, and other services under central management for an annual sum. Beneficiaries who join a system give up the option they have under traditional Medicare to obtain service from any participating hospital, physician, or other unit. The beneficiaries are limited to the system's providers, unless the plan has an option allowing provider choice outside the plan; the beneficiary pays extra for it.

An annual contract is negotiated between Medicare and a managed-care system, which can be an HMO (health maintenance organization) or a PPO (preferred provider organization). This contract limits the government's spending. The managed-care system takes the financial risk for costs beyond the payment negotiated with the CMS. The beneficiary continues to pay the monthly Part B premium. A system may charge an additional premium for benefits beyond those of Part A and Part B.

Medicare Part C aims to attract beneficiaries from traditional fee-for-service Medicare by offering them improved controls on costs and quality of service. Private insurance companies sponsor managed-care benefits, called Medicare Advantage. Previously, the benefits were called Medicare+Choice. Medicare+Choice began with an assumption that the plans, because of their cost controls, would readily average 5% less than per-beneficiary costs under traditional Medicare. Savings above 5% could be applied to additional benefits (such as dental care, eyeglasses, or prescribed drugs) or reduction in the managed-care premium. In 2004, significant numbers of beneficiaries returned to traditional Medicare because of dissatisfaction with administrative restraints on service use. Meanwhile, some plans proved more costly than traditional Medicare and dropped out of Part C. In Congress, higher Medicare payments were authorized to keep plans going in Medicare. Calculations by the Commonwealth Fund indicated that the plans cost $2.72 billion more than traditional Medicare.

Coding and Reimbursement

Physicians use CPT codes to communicate their services to payers. This is not just by convention but also by statute. The Health Insurance Portability and Accountability Act (HIPAA) mandates CPT as the standard code set for physician services nationwide.6 CPT codes then form the basis for the Resource Based Relative Value Scale (RBRVS), which is the prospective payment system Medicare uses to reimburse physicians. Each CPT code is assigned a point value, which represents its worth. Each point is called a Relative Value Unit (RVU), and there are three components to the RVUs for each code: physician work, practice expense, and malpractice. The American Medical Association's (AMA's) Relative Value Updating Committee (RUC) determines the point value of each CPT code through the use of physician surveys, although CMS makes the final determination. Each year, CMS sets a flat dollar amount called the conversion factor to represent what each point is worth. The payment to the implanting physician is essentially the product of the total RVUs for the code multiplied by the conversion factor. The RVUs for each code and the conversion factor are standard nationwide. However, payment is also adjusted by a Geographic Practice Cost Index, designed to reflect variations in physician expenses among localities. The result is that, in 2010, Medicare paid a physician in Manhattan more than $100 more for implanting an infusion pump than it paid a physician in Tulsa, Oklahoma.

Hospitals also use CPT codes to bill outpatient services. Similar to RBRVS for physicians, CPT codes are the basis for Ambulatory Payment Classifications (APCs), Medicare's prospective payment system for hospital outpatient department (HOPD) reimbursement. Although some services are bundled and not paid separately, codes for significant procedures and services are assigned to specific APCs based on similarities in clinical nature as well as hospital resource use. Each APC has a relative weight reflecting its worth. The weight is then multiplied by a standard conversion factor to determine the hospital payment for each procedure. Ambulatory surgery centers (ASCs), which also use CPT codes for their services, are paid by Medicare under a prospective payment system that is based on hospital outpatient APCs but using a lower conversion factor that is a percentage of the HOPD payment.

All providers, physicians, hospitals, and ASCs currently use ICD-9-CM diagnosis codes to document the reason for the service provided. This is also mandated by HIPAA. Use of specific CPT codes and ICD-9-CM diagnosis codes is governed by various coding guidelines. Particularly when an outside audit is involved, physicians must be able to point to the guidelines they followed in making their code choices. The most defensible coding guidelines to follow are those in writing from an impeccable source. For CPT, the most credible guidelines are issued by the AMA, for example, in its monthly coding publication CPT Assistant. Medical specialty societies also usually have coding publications as well as coding answer services available to members.

For ICD-9-CM diagnosis coding, HIPAA mandates that the ICD-9-CM Official Guidelines for Coding and Reporting be followed. Among many other guidelines, this reference sets requirements for assignment and sequencing of diagnosis codes for pain-related disorders. The organizations that develop the annual ICD-9-CM Official Guidelines, which include CMS and the Centers for Disease Control and Prevention, also publish Coding Clinic, a quarterly journal of updated guidelines that are considered definitive.

The National Correct Coding Initiative (NCCI) also functions as a de facto coding standard for physicians, hospitals, and ASCs. NCCI is a set of more than 110,000 CPT coding edits that is updated quarterly. Although developed for Medicare, health care payers throughout the country have almost universally adopted NCCI edits. The edits are primarily designed to indicate which CPT codes are considered components of others and therefore cannot be assigned, billed, or paid separately. Overrides are permitted for some NCCI edits, but this must be approached with care. In general, overrides are appropriate only when the component code represents a procedure performed at a different anatomical site or at different patient encounters. NCCI's definition of different anatomical sites includes different organs or different lesions in the same organ but does not include treatment of contiguous structures of the same organ.7 The NCCI edits are backed by a multi-chapter policy manual, updated annually, that articulates the rationale for many edits. The NCCI policy manual and the complete set of edits are available via the CMS website. The edits are also usually built into coding software and electronic “scrubbers” at billing clearinghouses.

Other sources for coding guidance, such as reimbursement consultants, are useful but not definitive, and consultant suggestions cannot be cited as justification for a coding practice judged to be improper by an outside auditor. Ultimately, the physician—and only the physician—bears responsibility for the choice of codes submitted to the payer.

Because the hardware associated with IDDS is expensive, the facility in which these devices are implanted will be understandably concerned about reimbursement. The programmable infusion pump, spinal catheter, and associated system components such as the tunneling device may cost the facility in the range of $10,000 to $15,000, and this cost must be paid by the facility in advance, independent of any reimbursement. So the facility is at significant financial risk if the device is not adequately reimbursed, and neither the technology vendor nor the implanting physician shares this risk. Therefore, to maintain a sustainable implant program, the implanting physician needs to be cognizant of the financial issues faced by the facility. Under a prospective payment system for Medicare or contracted rates for private payers, it is common for a hospital operating room to make money on certain surgeries and to lose money on others. For IDDS, the hospital administrator is interested in net revenues created by the implant service from an overall perspective. If a physician performs IDDS trials at the hospital and uses various hospital services such as imaging and laboratory services, the hospital may be able to make a net profit on the implant business even if it loses money on a specific surgical implant procedure. The implanting physician should facilitate discussions and cooperation between the administration and the technology vendor so the implant program can survive and prosper rather than generating net financial losses for the facility.