The gradual reduction in physician reimbursement over the past decade has focused greater attention upon the methods for determining physician work. Since the beginning of the Medicare program in 1965, the physician payment schedule was based upon usual, customary, and reasonable charges that reflected an aggregation of actual physician fees. After successful cost-containment efforts using a prospective pricing system for hospital reimbursement in 1983 allowed reduction of Medicare expenditures by more than half during the 1980s, the Health Care Finance Administration (HCFA) sought an alternative method for physician reimbursement as well.
RBRVS System
Although defining the prevailing charge as a lower percentile initially reduced costs, HCFA subsequently introduced a price-freeze on physician services with efforts to reduce payments on “over-priced” surgical services. With judicial support of congressional legislation to limit physicians’ fees, HCFA sponsored development of a relative value system. This concept had already been implemented by the California Medical Association in 1956, but it was based on a median of charges reported by California Blue Shield.
Antitrust concerns raised by the Federal Trade Commission regarding common use of this data to develop physician fee schedules led to discontinuation of database updates. Rather than using a charge-based system, attention was directed toward development of a resource-based relative value system (RBRVS) that reflected the costs involved in providing services
The development of this system by the Harvard University School of Public Health, which was mandated by the Consolidated Omnibus Budget Reconciliation Act of 1986, led to the basis for the current Medicare Fee Schedule (MFS). Under the direction of Drs. Hsiao and Braun, an initial RBRVS system for 12 physician specialties was expanded to 33 specialties over several phases.
The final determination of the MFS was based on measurements of physician work, professional liability costs, and practice expense multiplied by a conversion factor that was adjusted for geographic variations. The five-year transition to the RBRVS began in 1992. Codes that were not studied were assigned relative value units (RVU) by regional carrier medical directors, and the final comprehensive list was published in the Federal Register in November 1992.
Role of the RUC
In order to maintain this system as current procedural terminology (CPT) evolved, the AMA/Specialty Relative Value Update Committee (RUC) was created in 1991 to work with HCFA in recommending additions/changes to the estimates of physician work. Specialty society representatives are responsible for gathering physician survey data to determine the time, complexity, and intensity of providing physician services so that a scaled work value can be determined.
Every five years, HCFA has been mandated to re-examine the work values and allow for changes based on new data. We are currently preparing for the second five-year review. However, the Balanced Budget Act requires maintenance of budget neutrality, which results in reductions in reimbursement for some services with each addition of new services or upward revision in work estimates for existing services.
Evaluating the methodology for estimating physician work is imperative in understanding the basis for the MFS as well as the fee schedule of many third party payers. After a CPT code is assigned for a physician service, the specialty society is charged with soliciting survey data from practicing physicians.
The RUC has developed a survey instrument that asks the physician to compare the surveyed service with other reference services to obtain a relative estimate of comparable work. The driving factor in estimating physician work is the time spent by the physician with the patient. A vignette is provided which summarizes the components of work included in a particular CPT code.
Surgical services have been divideed into preoperative, operative, and postoperative components. The pre-service (preoperative) time includes the evaluation and management service for obtaining the history, physical, and operative consent as well as the preparatory work of pre-admission testing. The intra-service time describes the actual surgical time. Finally, the post-service time includes speaking with the family and other physicians, postoperative hospital visits, and office visits within the global period (0, 10, or 90 days) for that particular procedure.
The survey respondent is asked to provide time estimates for the surgical procedure whereas estimates of pre- and post-service times are obtained by using the number and level of evaluation and management services provided in the hospital and office within the global period. In addition, the physician is asked to compare the complexity and intensity of various components of the surgical service in comparison to the reference code chosen. A formula combines physician time and intensity to calculate physician work, thereby forming the basis for the RVU recommended for a particular CPT code.
Subsequently, HCFA determines whether to accept the value recommended by the RUC. A mechanism exists for resolution of differences in work estimates between the RUC and HCFA.
Obviously, the system is dependent on several factors, including accurate estimates of physician time for the average patient undergoing the particular surgical procedure as well as sufficient survey responses to ensure accurate median time estimates. Since the RUC is composed of multiple surgical and medical specialists as well as other representatives, presentations by a specialty society are very carefully examined for accuracy, data quality, and relativity to other physician services both within and between specialties. The quality of the information is exceedingly important in obtaining a consensus support by the RUC for the requested valuation recommended by the specialty society.
Complicated Process
In summary, the determination of physician work is a complicated and very political process, which affects not only the providers of that service but also all physicians in general. Timely and accurate completion of RUC surveys is critical for your specialty society representatives in their presentation to the RUC members.
Time estimates of the “smoothest” case or most complicated, unusual case affect the reliability of the data gathered. Misunderstandings of the actual work being valued have also led to data variations, which become difficult to explain.
I hope that this summary of the history and methodology of measuring physician work will foster cooperation among our colleagues when asked to complete surveys. The data is invaluable in the RUC process and is the basis for the fee schedules by which physicians are reimbursed.
Gregory J. Przybylski, MD, is on staff at Northwestern Medical Faculty Foundation in Chicago and a faculty member for the AANS-sponsored coding and reimbursement courses.