Reimbursement, demystified

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Reimbursement, demystified. Charles William Bowkley, III MD 2007-8 James Moorefield Fellow, ACR Brown University – Warren Alpert Medical School

Transcript of Reimbursement, demystified

Page 1: Reimbursement, demystified

Reimbursement, demystified.

Charles William Bowkley, III MD

2007-8 James Moorefield Fellow, ACR

Brown University – Warren Alpert Medical School

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ACR

CMS

3rd PP

Radiologist

Patient Care

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P4P CMS

3rd PP

Industry

RUMC

Radiologist

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It’s really not that bad…

I promise

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Introduction

CMS defines rate at which you are paidVery complicated . . .

You negotiate with 3rd PPWhat you get paid for (Procedure, E/M)

How much you get paid

A complex series of events determines the final outcome…

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Let’s address the basics…

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MedicarePart A – Hospital insurance

• Inpt, SNF, Home Health, Hospice• Payroll taxes (FICA), Self Employed tax, RRA

Part B – Medical insurance (Physician Fees)• Otpt Hospital / Physician Office, ASC, “Health

prac.”, Lab/Dx services, etc.• Enrollee pymt, Fed. Revenues, Interest on B fund

Part C – Medicare Advantage (MA)• Entitled to A, enrolled in B, reside in area of MA• Capitated “HMO/PPO” insurance for qualified

Part D – Prescription Drug Plan

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Medicaid

Federal financing for low income• Stringent requirements• May require co-pay• $$ paid to state health care provider, not patient

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Let’s walk through a simple patient encounter…

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46 yo male with CC of Dyspnea

HPI: 36 ppd with new onset of SOB, cough, and hemoptysis.

PMH: NonePSH: Appy, CCYMeds: MVIALL: NKDAIn-office CXR “nl”, CBC nl

A/P: 46 yo smoker w/ hemoptysis, cough, and dyspnea. ? PNA ? CA

- CT Chest I+

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Follow the paper trail . . .

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ICD-9

International Classification of Diseases, 9thed

BBA 1997 physician ordering test MUST have signs, symptoms, and possibly diagnosis

786 (Cannot specify diagnosis) Symptoms involving respiratory system and other chest symptoms

786.2 Cough786.3 Hemoptysis

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CPT

99203 Detailed history, office/outpt visit

Primary care physician billing

71260 CT Chest I+

Radiologist billing

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Gray Shield - RI

C.A.

71260

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CPT

Current Procedural Terminology

Codes and modifiers used to report services performed by healthcare providers

Chosen as national standard code set

Maintained by AMA CPT Editorial Panel

http://www.ama-assn.org/ama/pub/category/3882.html

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CPTCategory I

Widespread use.Peer reviewed literature.Advisor support.

Referred to AMA-RUC for valuation*

Category IIOptional, Performance measurementDecreased need to manually audit chartsNone created to dateNo payment

Category IIILimited disseminationLiterature suggests future growth and utility.Primarily for tracking new procedures.NOT referred to AMA-RUC for valuation.

• Carrier priced if covered.

http://www.ama-assn.org/ama/pub/category/3882.html

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CPT Editorial PanelChair: William T. Thorwarth Jr., M.D., (Former president of the ACR and former chair

of the ACR Economics Commission)

18 Members

11 nominations by AMA

2 Vice-Chairmen and representative of Health Care Professionals Advisory Committee (HCPAC)

1 Blue Cross Blue Shield Association

1 Health Insurance Association of America

1 CMS

1 American Hospital Association

1 Performance Measures

http://www.ama-assn.org/ama/pub/category/3882.html

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April 11, 2023 18

Code Application

Staff Review

Panel has already addressed the issue

New Issue or SignificantNew Information Received

Specialty Advisors

Advisor(s) Agree No New Code or Revision Needed

Advisors Say Give ConsiderationOr 2 Specialty Advisors Disagree onCode Assignment or Nomenclature

Staff Letter to Requestor Informing Him/Her of Correct Coding Interpretation

or Action Taken by the PanelEditorial Panel

Table for Further Study

Reject Proposal Change

Add New Code/DeleteExisting Code/or Revise Current Terminology

CPT Editorial Panel RUC Panel

Advisory Committee Advisory Committee

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RUC

29 members23 appointed by special societies

Chair

American Medical Association Representative

CPT Editorial Panel Representative

American Osteopathic Association Representative

Health Care Professionals Advisory Committee Representative

Practice Expense Review Committee Representative

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RUC CycleCoordinated with CPT Editorial Panel schedule

Required to Survey at least 30 practicing physicians **(Essential)**

Recommendations presented to RUC

RUC may adopt or modify before submitting to CMS

RUC recommendations forwarded to CMS in May

CMS meets with Carrier Medical Directors (MAC) to review recommendations

Medicare Physician Fee Schedule (includes CMS’s review of RUC Recommendations) published late Fall. Valued codes from May submission reflected January 1 following year.

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April 11, 2023 21

CPT Editorial Panel RUC Panel

Advisory Committee Advisory Committee

CPT Editorial Panel AdoptsCoding Changes

Specialty Society AdvisorsReview New and Revised

CPT Codes

Codes Do Not Require New Values

No CommentComment on OtherSocieties’ Proposals

Survey Physicians Recommended Values

Specialty Society RVS Committee

RVS Update Committee

CMS

Medicare Payment Schedule

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What is relative value ?

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RBRVSRBRVS: resource based relative value scale

• Pressure to change Part B expenditure

Phased in January 1, 1996

“Customary, Prevailing, Reasonable”• Specialty specific• C: Median of individual charges for a specified time• P: 90th %ile of all peers in a defined area• R: Lowest of the Actual, Customary, Prevailing fee

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RVS1

California 1956• Based on median charges reported by C. BS

Harvard RBRVS, third iteration 1985• W. C. Hsiao, MD & P. Braum, MD• Phase I

» 18 medical specialties

• Phase II» 15 additional specialties

• Phase III / IV» Include remaining services coded by CPT

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RVS2

Include 3 main variables1. Relative Physician Work (52%)2. Practice Expenses (44%)3. Professional Liability Insurance Costs (4%)

Modifiers1. Adjust for geographic locale

2. Different specialty, same service = same payment3. “Budget Neutral” conversion factor (CF)

(Would not change Medicare spending -/+)4. Include process for annual update in CF5. Limits on Balance billing6. Medicare Volume Performance Standard (SGR)

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ICD-9 CPT PC/TC

786.2

71260 55.36 / 263.79

786.3

Black Box

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PAYMENT (Physician Component)

Total RVU = Conversion Factor * (_____)

Work: (Work RVU x Work GPCI)

+

CF * PE: (PE RVU x PE GPCI) +

PLI: (PLI RVU x PLI GPCI) +

CF * [(Work RVU * Work GPCI) + (PE RVU * PE GPCI) + (PLI RVU * PLI GPCI)]

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Technical Component

MPFS (RVU PE *GPCI(PE) + RVU PLI *GPCI(PLI)) * CF

HOPPS (APC) Payment Rate * Wage Index (Regionally Calculated like the GPCI)

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How did we arrive at these calculations?

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“Lawmakers See Red Over Meat Packaging”

“…warn consumers to discard any product with an unpleasant odor, slime, or a bulging package.”

- USA Today, 10/31/2007

Pretty Good Advice!!!

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HOPPS

MPFS

WORK PE

RVU

PLICPT

APCPAYMENT

RATE

Global Billing

Professional Component

Technical Component“Attempt to devise the best payment system”

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Physician Work

Time to perform service

Technical skill and effort

Mental effort and judgment

Psychological stress of iatrogenesis

Currently Based on: ACR Socioeconomic Supplemental Survey Data

Historically Based on:Harvard RBRVS study1992 RVS Refinement ProcessAMA/Specialty Society RVS Update Process

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Physician ExpenseWhat it costs the “Practice” to run: Rent, Wages, Equip. / Supplies

Practice Expense Advisory Committee (PEAC)

ACR Socioeconomic Monitoring System Supplemental Survey Data

Clinical Practice Expert Panels (MD’s)• Data for constructing cost estimates• In/Direct cost elements for a service• Estimates extended to related codes in CPT family

CPEP Technical Expert Group• Monitor data collection process

AMA Socioeconomic Monitoring System Data

Common service provided only by X (Avg. Medicare 1991 payment $100), the percentage of PE cost for the given specialty X (Y%), multiply that number by the $100 cost and you get Y (Initial Dollar) RVU’s.

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Equipment Utilization and Interest Rate

(Technical Component (Included in Physician Expense RVU) )

[1/(minutes per year * 50% usage)) * Price * ((11% interest rate/1) -

(1/(1+ 11% interest rate) * life of equipment)) + 5% maintenance]

Courtesy of Pam Kassing

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Physician Liability Insurance

Initially: Omnibus Budget Reconciliation Act 1989

Now..• Calc. average professional liability premium• Calc. risk factor based on specialty• Mult. % of service (CPT based) by risk factor• Mult. By Work RVU• Rescale for budget neutrality ( x Fudge Factor)

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GPCI “Gypsie”Geographic practice cost indexes

AMA SMS 1987 survey

Must be updated Q 3 years

Changes phased in over a two year period

Cost of living: 1990 census college grads, 2000 professional organizations, updates since….

Inputs to medical practice varied by geographic locale

Premiums for policy 1 mil/ 3 mil

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Conversion Factor

Updated yearly based on BBA 1997

CFx = CFx-1 * MEIx * UAFx * LCx * BNx

MEI: Medical Economic IndexMeasures average price change for medical goods/services with respect to inflation

UAF: Update Adjustment Factor

Comparison of actual and target Medicare expenditure. Designed to prevent unsustainable increases in Medicare expenditures.

LC: Legislation Change

BN: Budget Neutrality

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So, how does it all add up?

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Example: CT Chest I+ 712602008

[(Work RVU x Work GPCI) + (PE RVU x PE GPCI) + (PLI RVU x PLI x GPCI)] x CF

Work ((1.24) x Budget Neutrality Adjuster (0.8816)) , PE(0.44), PLI (0.05), CF(34.0682)

RI = (((1.24 x 1.045 x 0.8816) + ((0.44 x 0.991)) + ((0.05 x 0.895)) x (34.0682)) = $ 55.36

Ca (SF) = (((1.24 x 1.060 x 0.8816)) + ((0.44 x 1.546)) + ((0.05 x 0.640)) x (34.0682)) = $ 63.71

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Technical Component

MPFS (RVU PE *GPCI(PE) + RVU PLI *GPCI(PLI)) * CF

RI: (7.48 (0.991) + 0.37(0.895)) * 34.0682 * = 263.79

CA(SF): (7.48 (1.546) + 0.37(0.640)) * 34.0682 * = 402.00

HOPPS (APC 0283): Payment Rate * Wage Index(2006)

RI: 289.71 * 1.0954 = 317.35

CA(SF): 289.71 * 1.4974 = 433.81

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HOPPS

MPFS

WORK PE

RVU

PLICPT

APCPAYMENT

RATE

Global Billing

Professional Component

Technical Component

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OK, now I understand…

But what is the big picture?

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Adapted from Woody, I. O.

JACR 2005; 2(2):139-150

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Courtesy of CMS and H. Forman, MD

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Courtesy of CMS and H. Forman, MD

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What can we do…

Well, all politics is local . . .

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July 6, 2006

h

AK

NJ

RI (BC/BS of AR)

NM

WA

OR

ID

MT

WY

ND

SD

CO

UT

NV

CA

AZ

NM

TX

OK

HI

NE

KS MO

IA

MN

WI

IL

MI

IN OH

KY

TN

NC

MS

GA

FL

Palmetto Gov. Ben.

WV

PA

MD DC

NY

ME

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MA

LA

VT

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AK

NH

Noridian

Noridian

BC/BS of MT Noridian

CIGNA Noridian

Noridian

National Heritage Insurance Company

Noridian Noridian Noridian

BC/BS of KS

BC/BS of KS

Noridian

BC/BS of AR

Trailblazer

BC/BS of AR

WPS

WPS

WPS

Noridian

BC/ BS of KS

Noridian

Noridian

WPS Admina- Star

Palmetto Gov. Ben. Admin.

HGSA of PA

Empire

Cahaba Gov. Ben. Admin

First Coast Service Options

Cahaba Gov. Ben. Admin

Admin. SC

CIGNA CIGNA

AdminaStar

Trailblazer Trailblazer

Group Health

BC/BS of Western NY

Empire

Trailblazer

BC/BS of AL (Cahaba Gov. Ben. Admin) AL

National Heritage

First Coast Service Options

National Heritage Insurance Company In

BC/BS of AR

BC/BS of AR

BC/BS of AR

Local Medicare Carriers

VA

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MAC

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All politics is local…..

>90 % Of Coverage And Payment Decisions Occur At The Local Level

Each MAC is required by CMS to have a physician Contractor Medical Director (CMD), who must follow the Coverage Issues Manual, Program Memoranda and other transmittals from CMS defining the CMS national policy for Medicare reimbursement

ACR involvement helps prevent the spread of reimbursement policy damaging to radiology between contractors

CMS gives authority to the local contractors to determine under what conditions a service is considered medically necessary and claims may be denied if not appropriate.

In most states the CMD has the ultimate authority to determine medical necessity

Adapted from John Patti, MD

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CMS

MAC (MD)

Radiologist

State

CAC Rep

CPT

RUC

ACR

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Local Coverage Determination

LCDs are produced by CMDs to inform providers of the local Medicare reimbursement rules and the medically necessary reasons for an examination or procedure

LCDs are created for certain CPT codes or a group of CPT codes (with associated ICD-9 codes and established diagnoses) required when submitting a Medicare claim

Procedure Description, Reasons For Denial, and Coding Guidelines are omitted from LCDs and published in separate supporting articles by the Contractor

New LCDs and supporting articles must be posted for public comment prior to integration; this period is 45 days

Traditionally contractors have been receptive to comment on both the LCDs and supporting articles

Adapted from of John Patti, MD

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Lines of communication

Courtesy of Bibb Allen, MD

Managed Care Committee / Network

3rd Party Payer

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Carrier Advisory Committee Network

Diagnostic Radiology, Radiation Oncology, Nuclear Medicine, SIR CAC, RBMA CAC Network

Link between Medicare Carrier and general membership by ensuring that local policies appropriately represent practice of radiology

CPT III Codes specifically **

Staff assist CAC representative in evaluating Local Coverage Determinations (LCDs)

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Why all the doom and gloom?

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1. DRA

2. Contiguous Body Part Imaging

3. 5 Year Review

4. The calm _____________ the storm…..

The Perfect Storm

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TC capped at the lesser of the Medicare physician fee schedule payment rate or the Ambulatory Payment Category (APC) rate under the hospital outpatient prospective payment system (“HOPPS”).

Includes X-ray, ultrasound (including echocardiography), nuclear medicine (including PET), MRI, CT, and fluoroscopy,

Excludes diagnostic and screening mammography

Professional Component is not affected

Congressional Budget Office (CBO): $2.8B savings over the next 5 years

ACR staff: $1.2 B savings in first year alone

CBO new score at $13B over 10 years

Deficit Reduction Act of 2005: Section 5102(b) limits TC payment for imaging in physician offices

or imaging centers on/after January 1, 2007.

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Deficit Reduction ActThe imaging provisions are a public policy disaster

FALSE: Wide variance of payment between hospital outpatient based imaging services and imaging provided in physicians offices/imaging centers

TRUTH: Study done by The Moran Company shows a variance across all imaging modalities of 3%

Provisions written without input from the imaging community, without Congressional hearing, without accountability to its authors

No one takes responsibility for authorship

Eliminates RBRVS and takes lower of payment between the MPFS and HOPPS

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DRA Impact

Financial Impact Breakdown By Procedure

Percent Reduction Lost Imaging Revenue

MRI 35 % 490 M

US 30% 300 M

Nuc Med 16% 136 M

CT 9% 69 M

MRA 25% 24 M

CTA 37% 10 M

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DRA Impact

Biggest Hits by Lost Revenue

MRI Brain $162 M

MRI Spine $90 M

Myocardial Perfusion SPECT $132 M

Carotid Artery Duplex $87 M

Echocardiography Color Doppler $83 M

PET and PET/CT ??

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Multiple Procedure Discount For Contiguous Body Parts

CMS Regulation

Continues the reduction for the second and subsequent examinations at 25% in 2007

At the urging of ACR, CMS did not increase the reduction to 50%– Any savings from multiple examinations goes back to the federal fund

– Application of the reductions to the HOPPS rate would result in 75% reductions for the second procedure in some cases

CMS will apply the 25% reduction to the MFS payment rate and if that payment is higher than the HOPPS payment, the HOPPS payment is paid

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The Third 5 Year ReviewBudget Neutrality

Section 1848 (c) (2) (B) (ii) (II) of the Social Security Act requires that adjustments in RVUs may not cause total Medicare Physician Fee Schedule payments to differ by more than $20 million

When this tolerance is exceeded CMS must make a budget neutral adjustment

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The Third 5 Year ReviewMandated process for Medicare to review overvalued and undervalued CPT codes (Via evaluation of RVU’s).

Over 160 high utilization codes were reviewed, 40 pertaining to radiology

Major change was 20% increase in E/M value, resulting in greater than $4 billion budget neutral effect

Incidentally, Anesthesia work value inc. 32% - this is reflected in the Budget Neutrality Adjustment in 2008 Final Rule

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The Third 5 Year Review

Budget Neutrality Adjustment For Physician Work RVUS

Vigorously opposed by the ACR

Vigorously opposed by the RUC and almost all medical specialties

Reasons For ACR OppositionMajor impact on hospital based physicians

This is a historical precedent for changing the CF

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The Third 5 Year ReviewEnter the Budget Neutrality Adjustment…

Professional Component (PC) Payment

(RVUxGPCI) +(RVUxGPCI) + (RVU+GPCI) * CF

(RVUxGPCIx.8816) +(RVUxGPCI) + (RVU+GPCI) * CF

CMS has finalized its 32% increase for anesthesiology physician work values as part of the third 5 year review. 

The physician work adjustor will cause the 10.1% cut in physician work values for 2007 (with a work adjustor of .89896) to be increased to a 11.94% cut (changing the work adjustor to .8816) to all physician work values in the physician fee schedule for 2008.

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Conversion FactorCalculated each year based on a statutory formula that centers around the

Sustainable Growth Rate - a.k.a. SGR

SGR components

Medical economic index - a.k.a. MEI

Volume of services in prior years

Target volume of services based on the Medicare population

Gross domestic product

SGR now demanding decreases in the conversion to achieve the target ratesFive years of fixes leaves a large amount to repay to the systemWe are at the cliff and if the SGR formula is not changed double digit reductions in the CF will occur

Decreases 10.1% for 2008 to $34.0682

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ACR Policy PrioritiesCo-founder of Access to Medical Imaging Coalition (AMIC), ACR will urge AMIC to support Accreditation as a means to address rapid growth in utilization http://www.imagingaccess.org/

ACR will support participation in Accreditation programs BY ANY PHYSICIAN SPECIALTY who commits to quality and appropriate use of imaging studies and further, the ACR will support Medicare development of Accreditation requirements/Appropriateness criteria based on private sector/physician specialty societies programs

AMA and medical community pushing for comprehensive legislation to fix or replace the SGR focusing on those changes not adversely affecting radiology

Because the increase in imaging utilization by ~14% is seen as a driver of SGR spending, radiology remains in the crosshairs

Extensive congressional lobbying with bipartisan co-sponsors re: DRA moratorium bills filed in 2006 and 2007

Advocacy to CMS on contiguous imaging reduction – prevented a 50% cut for 2007, continue to defend TC from attack

Advocacy to CMS on need for valid survey data on equipment utilization rate – CMS proposed to hold rate steady for 2008

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Final Rule for 2008 Conversion Factor for HOPPS payments will increase by 3.3%

CMS is proposing not to pay separately for the hospital TC of codes that they describe as dependent items and services

All imaging guidance, supervision, and interpretation (S&I) codes would be bundled into the procedure codes and, also Intraoperative services such as ultrasound would be bundled into the procedure code

Image processing services – 3-D post processing would not be paid separately

Contrast material and radiopharmaceutical cost will not be paid separately

Conversion Factor for MPFS payments will decrease by 10.1%

Anti-Markup Language – if you bill Medicare $50, they will ONLY pay you $50….

Under Arrangements – no joint venture participation by hospitals and referring MD’s

ACR lobbied heavily for the Radiology Practice Expense / Hour increase to $204.86

HO

PP

SM

PF

S

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MPFS Final Rule for 2008Practice Expense Methodology

Practice expense per hour (PE/hr) is amount it costs radiology practices in indirect/overhead to run an office or imaging center per hour.

One of only a few specialties to conduct an alternate survey to re-calculate PE/hr – original CMS Socioeconomic Monitoring Survey assigned $54/hr to radiology

ACR survey to replace SMS survey was miscalculated by CMS contractor (Lewin) at $174 PE/hr

ACR vigorously challenged Lewin – CMS agreed

In 2008 CMS will correct the radiology PE/hr to $204– $100m shift to radiology

Will partially balance the DRA effects and CF changes

Courtesy of Pam Kassing

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Future• Equipment Utilization

• Interest rate for equipment debt

• Practice Expense

• CF

• P4P

• Radiology Utilization Management Companies– “Steerage”, Pre-Auth.

• Assume no DRA moratorium

• Comparative Effectiveness

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Future• Leasing Arrangements

• Resolve Reimbursement Issues for use of RA’s

• More self-referral regulations and Stark III

• Fixing the SGR formula and how the conversion factor is calculated

• Continue to work with private payers to address similar issues

Courtesy of Pam Kassing

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Special Thanks and Attributes to…

John Patti, MDBibb Allen, MDHoward Forman, MDPam KassingMaurine Spillman-DennisDiane HayekAnita PenningtonKathryn KeysorHelen OlkabaEvelyn GIlbert

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Thank You !

Thoughts, Questions, Concerns. . .

[email protected]