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the deal with medicare
By | November 7, 2009
On Friday, Oct. 30, the Centers for Medicare and Medicaid Services (CMS) put the final rule on the 2010 Medicare physician fee schedule on display… In the final rule, CMS estimates that family physicians will experience a 4 percent increase in their Medicare allowed charges in 2010 as a result of the rule… [However,] under current law, the Medicare conversion factor, which translates Medicare’s relative value units into payment allowances, is scheduled to decrease 21.2 percent on Jan. 1, 2010, which would more than wipe out the potential gains… –Kent Moore
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On Monday, reporting on a conference call with aides to Senate Majority Leader Harry Reid, I wrote that there would be a vote this week to eliminate the mandated 21.5 percent reduction in Medicare reimbursement to physicians that is scheduled to go into effect on 1 January 2010… On Wednesday, the measure (S.1776) was defeated in a roll call vote 53 – 47.
…That got me wondering how much in dollar figures physicians are reimbursed by Medicare. Good luck finding it online. I couldn’t… But what I do have in my personal possession are three years of records… Here is an example of one charge from a visit at this time last year… The total paid [by Medicare/Medigap] for a $104 visit was $59.85 or about 57 percent of what was billed, and the physician eats the difference… Next year my doctor’s office will be paid only $47.28 for the same visit.
…78 million baby boomers start becoming eligible for Medicare in little more than a year, 2011. –Ronni Bennett
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here is the doctor’s-eye view of the happens with medicare. (please bear in mind that medicaid and other public insurances for adults and kids under 65 are even worse – from a small-business perspective.)
currently, payment to a doctor for a service usually begins with this medicare formula:
payment = RVUs x conversion factor
not only medicare uses this formula; private insurance companies use it, too; large medical practices use it to determine salaries for their doctor-employees, and independent doctors use it to set their fees.
what are RVUs? they’re “relative value units,” the number of “units” Medicare decides a particular medical service is “worth,” relative to all other medical services in the world. they were invented in 1992, to make medicine less surgical and more preventive. as you’ll see, they haven’t done this. one reason might be that RVUs are assigned by a committee of 29 AMA members, only 5 of which are primary care doctors (one each from family, internal medicine, geriatrics, pediatrics, and osteopathy). the remainder are surgeons and specialists. “values” are assigned by a 2/3 majority of the committee.
each RVU is made up of three elements: “physician work,” “practice expense,” and “malpractice risk.” “work” means how much time, effort, and ingenuity is required to provide the service. note the differential between some common physician “work” RVUs:
in the land of specialists:
removal of prostate, 19.62 RVUs
cesarean section, 18.26 RVUs
removal of uterus, 17.21 RVUs
lower back surgery, 13.03 RVUs
cataract surgery, 10.20 RVUs
in the land of primary care:
office visit, multiple health issues, 1.42 RVUs
well baby visit, 1.02 RVUs
hospice care supervision, 1.10 RVUs
counseling/planning for risk reduction, 0.98 RVUs
diabetes group visit, 0.25 RVUs
the “malpractice risk” RVU elements are different, as you’d expect:
specialist: cesarean section, 4.13 RVUs for malpractice (high risk! expensive malpractice insurance.)
family doc: office visit, multiple health issues, 0.05 RVUs for malpractice (low risk, cheaper malpractive insurance.)
as you guessed, “practice expense,” the presumed cost to a physician of providing a service, follows the same pattern: cesarean section (lots of sutures and knives and things), 6.49 RVUs; office visit (paper, computer time, headache medicine for billing and coding), 1.10 RVUs.
to arrive at the “value”of a doctor’s services, each of these RVU elements is adjusted by a number representing the cost of living (or the cost of practicing) in the specific geographical area. this number is called the GCPI. some parts of the nation are cheap to live and practice in; some are expensive.
for example, if you are a doctor in washington DC, your “work,” “expense,” and “malpractice” GCPIs are 1.047, 1.218, 1.032 – mostly more than 1 (more spendy). but in alabama, they are 1.000, 0.853, 0.496 – mostly less than 1 (cheaper).
so let’s run some numbers.
first, let’s go to alabama.
in alabama, more than 2/3 of adults and 1/3 of teens are obese or overweight, about a quarter are smokers, and there’s a high rate of diabetes, and of death from heart disease.
now, pretend you’re a cardiologist (or rather, a chest surgeon) in alabama, and you’re going to do a two-vessel coronary bypass operation on somebody who had a heart attack.
what is this medical service “worth”?
2-vessel bypass =
{work 38.34(1.000) + expense 15.20(0.853) + malpractice 4.56(0.496)}
= 54 RVUs.
but what if you moved to washington, DC?
(DC is thinner, doesn’t smoke as much, and has much less diabetes, but still has more heart disease death than alabama does.
while alabama has the 5th-lowest income in the US – only 4 states are poorer – DC has the 12th highest.)
now what is your work “worth”?
2-vessel bypass =
{38.34(1.047) + 15.20(1.218) + 4.56(1.032)}
= 63 RVUs.
the work itself the same, but its “value” is 18% more in washington, DC.
hmmmmm.
the geographical differential may help explain why DC has the highest number of physicians per capita in the nation, 8.6. alabama is 9th from the bottom at 2.5.
DC also has the highest number of primary-care doctors per capita, at 2.8. alabama’s second from the bottom, at 1.
now, pretend you’re a family doctor instead of a surgeon, working with a patient who has multiple health problems, to prevent their having a heart attack.
you help them quit smoking.
you help them lose weight and get their cholesterol under control.
you help them with their depression and anxiety.
you see them in the office. you talk to them on the phone.
you review their old office and hospital records. you talk to consultants and to their family members on the phone and by email.
you probably send them written explanations, reminders, and copies of their care plan.
how much is this service “worth”?
in alabama, 2 RVUs.
in DC, 3 RVUs.
(you can check my math, if you want to, with all the numbers i already gave you.)
again, bypass operation: 54-63 RVUs. preventive primary care: 2-3 RVUs.
now you can see why the american academy of family physicians is very pleased that medicare plans to increase primary-care RVUs this year, although 4% is not very much.
how do RVUs translate into dollars? hang onto your hat!
to arrive at dollar figures, the RVUs for any given service are multiplied by the medicare “conversion factor” – a dollar amount written into law by congress.
in 2009, the conversion factor was $36.0666 per RVU. this was a 5.3% decrease from the previous year. this means…
the alabama and DC surgeons’ work is “worth” $1,932 and $2285, respectively.
(note that these amounts are for the bypass surgery only, not the initial evaluation and testing, leg-vein harvesting, hospital admission, and other additional payments.)
the family doctors’ work is “worth” $86 and $104 this year in alabama and DC.
(note that these amounts are for the office visit only. family doctors are not reimbursed for hunting down and reviewing records, writing and mailing care plans, or taking phone calls/emails from patients, families, insurances, consultants, etc., etc.)
the plot thickens: in january of 2010, as noted above, the conversion factor is planned to decrease 21.2%. (new conversion factor, around $28.42.)
then the alabama and DC family docs’ work will be “worth” $68 and $82. (the cardiologists will be cut down to $1522 and $1801 each.) however, in real life, as in the example we started with, $47.28, for 45 minutes, might be closer to the truth.
this tells you why, here in Oregon (when last studied in 2006), one-quarter of family doctors do not take medicare patients at all.
if you add in the docs who limit the number of medicare private insurance patients they see (those who have medicare and also a medicare plan run by a private insurance corporation), it’s 46%, nearly half of all family doctors.
(and those figures are actually from 2006, the good old days, when the medicare conversion factor was $37.8975 – one-third higher than it will be two months from now.)
dropping medicare patients is very painful, especially for the patients. it’s getting harder and harder to find a new doctor. it’s also painful for the doctor, who entered the underappreciated field of family medicine in order to help and care for people of every age and income, and who often has extra training in geriatrics and chronic conditions. many of these family docs have already dropped obstetrics, in which they are trained, due to malpractice hikes, and have also stopped seeing babies and kids, because they can’t afford to buy or store vaccines. they feel increasingly forced to give up sophisticated skills they worked very hard to acquire, in order to pay the nurses and the office people who rely on them, and keep up with the rent and insurance, and pay for the medication, equipment, and supplies, and still take home enough to pay the mortgage. primary care doctors are not high rollers. they don’t usually even have nice cars. they’re kind of like, well… moms.
most family docs do not find this out until they enter practice. i merely remark.
although dropping medicare and other publicly insured patients can reduce some of the financial distress in a primary care practice, it will not eliminate it. why? because the RVU system, controlled by specialists, completely permeates american health care.
private insurance companies almost always base their reimbursements on the medicare rate – usually 100-150% of medicare. thus, an independent family doc in alabama might be paid $86-130 for a typical visit, without taking any medicare.
(since in most cases this includes the patient’s cash co-pay and co-insurance, not to mention deductible, the insurance company itself usually pays from zero to half of the bill, but that’s another rant.)
doctors who work in large “corporate” groups receive salaries based on how many RVUs they “produce.” a family doctor who mainly takes histories, does exams, and makes individualized care plans, will “produce” (and therefore earn) nowhere near as much as the family doctor next door who biopsies a lot of moles, does a lot of EKGs and stress tests, and injects a lot of joints. office procedures – many of which are quick and cheap to perform – are worth about twice as many RVUs per hour.
it begs the question: is it really more “productive” to do a stress test, than to help a patient quit smoking? is it more “productive” to place an IUD, than to counsel a woman on sexual and menstrual issues? who says so, and why?
(note: the examples i am choosing – IUDs, joint injections, stress tests, etc. – are office procedures that family doctors are constantly exhorted to incorporate into our practices, to “boost your bottom line.”)
it begs another question: how many procedures are performed without much discussion, simply because they reimburse well? example: newborn male circumcision, with no medical indication whatsoever*, is still uncontroversial. in alabama, it’s “worth” 3.95051 RVUs, or $143 at rock-bottom medicare-level rates (in DC, $171). a family doctor can do about three or four of them in an hour. compare this to the RVUs for counseling about the risks of this procedure (since there aren’t any benefits): zero. this may be one reason why the only counseling most parents receive is in the context of being handed a consent form. * dr leigh is skeptical of studies claiming lower transmission of hiv.
it begs the biggest question of all: if primary care is treated as so “unproductive,” and therefore is so poorly reimbursed, how will we ever persuade young doctors to enter the field in the first place, and to see medicare, medicaid, schip, uninsured and under-insured patients, once they’re in it?
we already have a severe primary-care doctor shortage, worse by the year, and worse in some places than others (alabama loses, DC wins). we have an even worse shortage of primary doctors who can afford to sign contracts with public insurances.
what will happen when our national movement toward “universal coverage” succeeds? what if we get a “public option”? who’s going to see all those patients, for $47.28 each?
[note: in oregon, medicaid - for people under retirement age - reimburses physicians at 78% of the medicare rate.
11% of oregon residents are on medicaid (26% of all kids).
17% have no insurance (12% of all kids).]
if you can think of a way that dr. leigh could afford to see patients who are on public insurance, while still providing the same standard of care her other patients receive (no 10-minute appointments, please, and she’s not going hire any employees, either), do comment. please keep in mind that she lives in a state with a “real” unemployment rate of more than 20%, and has no rich patients who can subsidize the poor ones!
Topics: Uncategorized | 3 Comments »
November 16th, 2009 at 6:27 pm
Hi Dr. Leigh
Outstanding and troubling expose on reimbursement. Got to you through IMP listserve and appreciate your effort and your caring.
I’m a retired surgeon finding it necessary to return to medicine and plan to start an “cash only” IMP doing monor surgery and primary care. Your comments support my “cash only” plans and it will be well worth the decrease in patient contact fee to eliminate the insurance issues. Just reapplying (considering it) for Medicare is a daunting and time consuming effort.
I’m amazed that with all the discussion on “reform” I have not heard once the introduction of IMP as a solution to the crisis. It seems to me the only solution.
Thanks again,
Paul
November 16th, 2009 at 8:36 pm
thanks! i concur!
for newer listeners at home, “IMP” stands for “ideal medical practice,” a movement dr ferenchak and i are both part of. ideal medical practice embraces ideals of high accessibility and medical excellence, employing high technology (for example, electronic medical records and e-communications) to maintain low overhead costs that enable us to deliver “care that matters” to patients. see http://bit.ly/wGNyM for more.
January 14th, 2010 at 2:59 pm
I really enjoyed reading this. I am a Certified Coding Specialist (coding 20+ years) coding now for 23 different specialties and roughly just under 300 different physicians.
I am self employed and opt to not carry insurance except for my youngest son who has cystic fibrosis. Reason being, I needed the help with his prescriptions which were running me on average 5K out of pocket per month.
My primary care physician does not take any health insurance plans and is a cash only business. I LOVE IT. I do not have any problems being seen, I don’t need to ask for permission to have tests run…and generally have no problem negotiating cash fee rates for tests (lab/xray).
Medicare reimbursement never seems to be enough and it seems to be a game of sorts that Dr’s. have to play with regards to documentation. I know it was done, you know it was done…but it has to be documented in a certain way in order for you (the Dr) to get paid for it.
Gah!
Thank you for a great blog and for this one in particular.