HCFA to soften impact of physician fee schedule - Health Care Financing Administration - Washington Report - Column

HCFA to soften impact of physician fee schedule

Details are sketchy, but the Health Care Financing Administration has apparently agreed to revisions that will ease the sting of a proposed Medicare fee schedule for pathologists and other physicians.

As Washington returned to the office after Labor Day, news reports surfaced suggesting that substantial revisions were being made in the resource-based relative value scale (RBRVS). Pressure had been applied by organized medicine and members of Congress who viewed HCFA's June 5 proposed fee schedule as a deal buster.

Ironically, it was Rep. Pete Stark--the California Democrat noted for opposing physician ownership of clinical labs--who began the push for changes on Capitol Hill. Doctors may thus find themselves in the unusual position of supporting a Stark proposal, this time one that offers a legislative remedy to the perceived RBRVS flaws.

As proposed by HCFA, the system scheduled to begin Jan. 1 would have reduced average physician fees by an estimated 16%, or nearly $7 billion over a five-year phase-in. That flew in the face of Congress's stated intent for a "budget-neutral" RBRVS, Washington parlance meaning that the realignment of payment rates should not increase or decrease the total project amount of physician reimbursement. The system was designed primarily to better reward doctors' cognitive skills at the expense of more costly, procedure-oriented services.

Physicians charged immediately that HCFA was operating in bad faith as they flooded the agency with some 95,000 public comments. Stung by the criticism, Agency Administrator Gail Wilensky, Ph.D., insisted that the overall reduction resulted from technical problems in implementing the law, not from an attempt to cut the Federal deficit.

At this writing, however, it was unclear how HCFA would rectify the situation. One agency source conceded that he was "not sure how the revisions will be accomplished" but indicated the fundamental concept of the RBRVS would not change.

The paucity of details suggests changes are being discussed at the highest levels within the Department of Health and Human Services. Even the most powerful physician lobbies in Washington are uncertain what revisions will be made; thus they are leery of media reports that HCFA is back-tracking.

Robert Graham, M.D., executive vice president of the American Academy of Family Physicians, said, "It's too early to say we are optimistic. We are cautiously curious."

Similarly, officials of the American Medical Association and the American Society of Internal Medicine--an early backer of the RBRVS--are withholding comment until they have more specific information.

The College of American Pathologists, meanwhile, is hoping the Government heeds revisions it suggested during the public comment period that ended Aug. 5.

HCFA estimated that its proposed fee schedule would reduce pathology payments between 6% and 30%. But due to anticipated changes in the volume and intensity of services delivered, the agency said the net decrease would probably be more like 2% to 14%.

CAP has offered several amendments that could influence the discretionary elements of the way HCFA implements the law. One involves estimates of pathology practice cost expressed as the percent of total revenue that goes to net practice expenses (exclusive of malpractice insurance).

Those expenses are a key component in the calculation that ultimately determines fee schedule amounts. In its June proposal, HCFA estimated that the mean pathology practice cost is 28.5%.

CAP sponsored an additional review by Abt Associates of Cambridge, Mass., which surveyed costs from a list of doctors in an AMA database. The researchers concluded that the practice cost factor for hospital-based pathologists is 33.4%. That's nearly five points higher than HCFA's estimate, which was also based on a survey of AMA physicians but which included non-pathologists.

In requesting a change to the 33.4% level, CAP told the agency, "We believe the Abt data more accurately represent pathologists' practice costs because the survey instrument was designed specifically to capture costs incurred by pathologists, whereas the AMA survey instrument is, out of necessity, general to all specialties."

For example, Abt asked for billing expenses including payments to a billing service, while the AMA survey asked more general questions about office expenses and non-physicians payroll items. CAP says that's significant because a substantial portion of a hospital-based pathologist's costs stems from billing expense.

CAP also supplied data HCFA had requested to set the technical component allowed for furnishing services through an independent laboratory.

Based on Congressional precedent, and in the absence of other analysis, HCFA proposed a rate of 15% of the 1991 adjusted historical charge. But as part of the same study of practice costs, Abt concluded that a technical component of 35% to 50% is more appropriate, and CAP requested the change accordingly.

A third CAP recommendation centers on assumptions behind the fee schedule "conversion factor," the multiplier that turns relative values into dollar amounts for each medical service.

In assessing the probable response of various "winners" and "losers" under RBRVS, HCFA considered it likely that some doctors would be motivated to protect their revenues by increasing the volume and/or complexity of services they deliver.

Based on experience, the agency judged the incentive would be to try to replace 50% of lost income. That is, if a physician previously received $100,000 from Medicare and earned $90,000 under the fee schedule, he would seek to replace half the difference: $5,000.

Anticipating such reaction, HCFA proposed a "behavioral offset" that would reduce the conversion factor 10.5%, not 50%, as misinterpreted by some doctors.

Still, CAP and other physician groups objected to the suggestion that doctors would make any effort to pump up billings in response to the RBRVS.

"There is no evidence to support this assumption," CAP said in its written comment. "In fact, available research leads us to the conclusion that no one can predict what effect this totally new relative value system will have on volume and intensity of services.

"Since pathologists do not control the volume of surgeries, consultations, or other events that produce the need for pathology services, there is no way for our specialty to respond by increasing services provided."

Accordingly, CAP has asked HCFA to drop the behavioral offset. At press time, however, it was uncertain whether HCFA would comply.

If the agency fails to make satisfactory changes, it's likely physician groups will support a legislative push. Congressman Stark, for example, has already sponsored a bill, H.R. 3070, that would prohibit use of a behavioral offset. An aide to Stark said the measure has gained considerable bipartisan support, and prospects for passage appear good if push comes to shove.

Interestingly, Stark's intervention clearly does not represent a new-found affection for the nation's physicians. The author of legislation cracking down on laboratory self-referrals says he is more concerned about the credibility of his House committee that worked on the RBRVS law.

A deal is a deal, he is quoted as saying. "I don't care if it's with the Administration or the AMA or the Devil or the good Lord."

COPYRIGHT 1991 Nelson Publishing
COPYRIGHT 2004 Gale Group