1. RBRVSRBRVS Resource Based Relative Value Scales

2. Definition of RBRVS Financing mechanism reimbursing providers on a classification system which measures training & skill required to perform a given health service

3. RBRVSRBRVS Used to correct Medicare’s tendency to: –Overcompensate for services (e.g. surgery, diagnostic tests) –Underpay for primary care services

4. Three Factors Which Combined to Force RBRVS Dissatisfaction with original payment system Escalation of Part B costs Promise of credible basis for new payment system

5. Problems with Previous System Customary, prevailing, reasonable system (CPR) Some intermediaries had one prevailing charge Others had charges based on medical specialty Wide variations between physician specialties & geographic regions

6. TEFRA 1983: Precursor to RBRVS Use of a Prospective Payment System (PPS) to pay for hospital care for Medicare patients –Standardized payment for each hospital admission –Variation according to geographic differences in wage rates –Variation according to whether hospital is urban or rural –“Outlier” cases requiring longer LOS permits higher rate of payment

7. TEFRA 1983: Precursor To RBRVS Admissions are categorized according to 492 DRGs –Payment based on national average cost for patients with that diagnosis Success of DRGs focused attention to physician reimbursement

8. RBRVS Study: Phase 1 RBRVS Study: Phase 1 Hsiao & Braun conducted a 1985-1988 study to develop RBRVS for 12 medical specialties - Anesthesiology- Family Practice - General Surgery- Internal Medicine - OB/GYN- Ophthalmology - Orthopedic Surgery- Otolaryngology - Pathology- Radiology - Urology - Thoracic/ Cardiovascular Surgery

9. RBRVS Study: Phase 1 Six additional specialties were funded independently & included in the study - Allergy & immunology - Dermatology - Oral & maxillofacial surgery - Pediatrics - Psychiatry - Rheumatology

10. RBRVS Study: Phase 2 Added 15 specialties in 1990 - Cardiology- Emergency Medicine - Gastroenterology- Hematology - Infectious Disease- Nephrology - Neurology- Neurosurgery - Nuclear Medicine- Oncology - Osteopathic Medicine- Radiation Oncology - Plastic Surgery- Physical Medicine & - Pulmonary Medicine Rehabilitation

11. RBRVS Method 1Total work units for a practice calculated by weighting RBRVS value for each procedure by its function 2Total practice expenses then divided by total work units to arrive at a cost conversion factor (CCF)

12. RBRVS Method 3CCF then applied to specific RBRVS for an individual service & this yields estimate of the relative costs of providing that service in a specific market 4This estimate applies to physician services to which direct costs cannot be assigned –i.e. visits, consultation, surgical procedures

13. RBRVS Method Method of calculating CCF __Total Annual Practice Expense__ Total Annual Relative Value Units –First step in costing is to compile relative values for all prominent procedures performed over a 12 month period

14. RBRVS Method Method of calculating CCF (cont.) –Second step is to total all expenses Includes physician & staff income, benefits, practice expenses, malpractice insurance costs Excludes any expenses which can be direct-costed –This is a quick way to determine relative costs by CPT code or for set of codes i.e. those to be included in a cap rate

15. Legislation Creating Medicare RBRVS Payment System OBRA 89: Physician Payment Reform Provisions –Congress enacted new Medicare physician payment system –RBRVS narrowed specialty & geographic differences –Retained some balance billing limits for patients –Established mechanism of monitoring expenditure increases for the government

16. Key Features of New System Five year transition, commencing January 1, 1992 Adjust each component of RBRVS for geographic differences Eliminate specialty differentials –Medicare payments now the same for all physicians providing the same services in a locality Calculate budget neutral CCF

17. Key Features of New System Establish process for annually updating CCF Limit balance billing Establish Medicare Volume Performance Standard –Assist Congress in understanding increased acuity of Medicare services

18. Four Step Transition to New System Adjust CPR rates & eliminate specialty differentials Historical payment basis decreased by 5.5% –Later increased by 1.9% –Applied to RBRVS schedule

19. Four Step Transition to New System Implement new payment schedule –If adjusted historical payment basis changed by more or less than 15%, payment was adjusted accordingly for that year

20. Four Step Transition to New System Standardize payment schedules among intermediaries –Currently 28 carriers administer claims for 211 Medicare localities –After 1992, carriers no longer had latitude in establishing their own policies governing payments

21. Scope of RBRVS System Today Most physician services now included in RBRVS payment system Exceptions: –Medicare patients enrolled in Medicare HMO –Some physician services provided in hospitals, SNFs, outpatient rehabilitation facilities, & some services of teaching physicians

22. Four Major Components of RBRVS Payment System Relative Value Scale Cost Conversion Factor Geographic Adjustments Limits on Balance Billing –Virtually eliminated –Balance Billing = billing patient for amount Medicare does not pay

23. Six Parts of Each RBRVS Assigned to a CPT Code Physician Work Required Practice Costs Professional Liability Insurance Work GPCI Practice Cost GPCI Professional Liability Insurance GPCI

24. Physician Work Component Time required to perform service Technical skill & physical effort Mental effort & judgment Psychological stress associated with physician’s concern regarding iatrogenic risk to patient –Adverse effects induced by physician during care of patient

25. Physician Work Component Total work performed includes: –Intraservice Work Actually providing service or performing procedure i.e. office visit, hospital visit, surgical procedure –Pre-Service Work Preparing for a procedure –Post-Service Work Writing records

26. Practice Costs Component Practice expenses average 41% of total practice revenues

27. Professional Liability Insurance Component PLI averages 4.8% of practice revenues

28. Geographic Variations Calculate using Geographic Practice Cost Indices (GPCIs) –Work GPCI Geographic differences in earning of all professional workers –Practice Costs GPCI Differences in rents & employee wages –PLI GPCI Geographic differences in premiums for mature claims made policy providing $1M or $3M limits

29. Surgery Iteration Government further specified work RVUs for surgeons Physician work RVUs based on the following activities: –Pre-op visits –Hospital admission workup –Primary operation –Immediate post-op care i.e. notes, family talk, meetings with other physicians

30. Surgery Iteration Physician work RVUs based on the following activities: (cont.) –Writing orders –Evaluating patient in recovery room –Post-op follow up on day of surgery –Post-op hospital & office visits

31. Surgery Iteration Many surgical reimbursements are handled as Global Package –Limits number of post-op services eligible for separate billings i.e. dressing changes, incision care, removal of op packs/sutures/cast/lines/catheters/IV lines/tracheostomy tubing, pain management

32. Surgery Iteration Payment to assistant surgeons –Lower of actual charge or 16% of global payment amount

33. Formula For Calculating Medicare Payments Payments are a function of three key factors: –RBRVS –GPCIs –Cost Conversion Factor

34. Formula For Calculating Medicare Payments Translates into six component parts: –Physician Work RVUs –Physician Work GPCI –Practice Cost RVUs –Practice Costs GPCI –PLI RVUs –PLI GPCI

35. CPT Code Explanations 99211 –Office or other outpatient visit –Established patient –May not require the presence of a physician –Presenting problem(s) are minimal –5 minutes are spent performing or supervising these services

36. CPT Code Explanations 99212 –Office or other outpatient visit –Established patient –Requires at least 2 of these components: Problem-focused history Problem-focused examination Straightforward medical decision making

37. CPT Code Explanations 99212 (cont.) –Counseling and/or coordination of care with other providers/agencies are provided Based on nature of problem(s) & patient’s/family’s needs –Presenting problem(s) are self limited or minor –Physicians spend 10 minutes face-to- face with patient/family

38. CPT Code Explanations 99213 –Office or other outpatient visit –Established patient –Requires at least 2 of these components: Expanded problem-focused history Expanded problem-focused examination Medical decision making of low complexity

39. CPT Code Explanations 99213 (cont.) –Counseling and/or coordination of care with other providers/agencies are provided Based on nature of problem(s) & patient’s/family’s needs –Presenting problem(s) are low to moderate severity –Physicians spend 15 minutes face-to- face with patient/family

40. CPT Code Explanations 99245 –Office consultation –New or established patient –Requires at least 2 of these components: Comprehensive history Comprehensive examination Medical decision making of high complexity

41. CPT Code Explanations 99245 (cont.) –Counseling and/or coordination of care with other providers/agencies are provided Based on nature of problem(s) & patient’s/family’s needs –Presenting problem(s) are moderate to high severity –Physicians spend 80 minutes face-to- face with patient/family

42. Calculating RBRVS Central Florida GPCIs (1998) _Work_Practice Costs__PLI__ 0.976 0.946 1.372

43. Developing An Organization’s Cost Conversion Factor: Example #1

44. Developing An Organization’s Cost Conversion Factor: Example #2

45. Adapting RBRVS to Central Florida Market: Example #1

47. Adapting RBRVS to Central Florida Market: Example #2

49. Case #1 5,000 Patients are Expected to Generate an Estimated 3,000 Visits

51. Facts of note: –Group in Example #2 is $7,130 (13%) more expensive –MCO wishes to contract with Clinic #1 –Clinic #1 would prefer to channel as many patients as possible to CPT #s 99211, 99217, & 99221

52. Case #2: Central FL GPCIs Included 5,000 Patients are Expected to Generate an Estimated 2,730 Visits

54. Facts of note: –Group in Example #2 is $5,189 (13%) more expensive –MCO wishes to contract with Clinic #1 –Clinic #1 would prefer to channel as many patients as possible to CPT # 99211

55. Incentives for Physicians to Participate Full payment schedule of non- participating physicians set at 95% of full payment schedule for participating physicians Directory of participating physicians sent to seniors

56. Incentives for Physicians to Participate Participating physicians provided with toll-free transmission lines if they transmit a percentage of claims electronically Participating physicians assisted by Medicare intermediaries with simplified billing procedures for Medigap coverage

57. Forces Driving Private Third Party Payers to Implement RBRVS Encourages use of primary care services Keeps up with practices being selected by self-insured employers Keeps up with cost savings realized by competitors using RBRVS

58. Forces Driving Private Third Party Payers to Implement RBRVS Prevent doctors from raising fees to insurers & cost shifting fee cuts from Medicare to private insurance Desire to reduce services payments perceived as overpriced

59. Other RBRVS Examples Costs Estimated Under RBRVS vs. Comparative Expectation of Reimbursements Based Upon a Consistent Rate of Contractual Allowance

60. Example: OUCH Cost Conversion Factor for Outpatient Counseling Services

61. Example: OUCH RBRVS Values with GPCIs

64. Example: OUCH Estimate of Charge & Cash Receipts Per Month

65. Example: RIP Cost Conversion Factor for Outpatient Counseling Services

66. Example: RIP RBRVS Values with GPCIs

69. Example: RIP Estimate of Charge & Cash Receipts Per Month