The Health Care Financing Administration (HCFA) is in the process of finalizing its proposed new practice expense relative value units (RVUs) for the practice expense component of the resource based relative value scale (RBRVS). The RBRVS is used by Medicare and many other private insurers to determine physician reimbursement. The proposed new values are currently scheduled to be published in the Federal Register on May 1, 1998. Following a 90- day comment period, HCFA will finalize the new RVUs, which will go into effect on January 1, 1999.
Last year, HCFA had proposed practice expense RVUs that would have reduced total neurosurgical income by 25-30 percent. This situation brought much of organized medicine together to seek federal legislation aimed at preventing the implementation of this plan. Neurosurgery was at the forefront of this successful legislative campaign, which resulted in the passage of a new law that delayed the implementation of the new payment system and mandated HCFA to take an entirely new approach to devising the new payment system. The AANS and CNS continue to be concerned that HCFA will not make significant changes to last year’s proposal, although with continued oversight by Congress and the General Accounting Office, we remain hopeful that HCFA will publish new practice expense values that reflect neurosurgeons’ actual practice costs.
The purpose of this article is to bring AANS and CNS members up-to-date on some of the recent activities related to this project.
Balanced Budget Act of 1997
Last August, Congress passed the Balanced Budget Act (BBA) of 1997, which was subsequently signed into law by President Clinton. The AANS and CNS, in conjunction with the Practice Expense Coalition, the AMA and the American College of Surgeons, were successful in getting extensive practice expense provisions included in the BBA. The BBA, among other things, requires the following:
- A one-year delay in the implementation date of new practice expense RVUs from January 1998 to January 1999;
- A four year phase-in of the new values from 1999-2002;
- A General Accounting Office (GAO) review and evaluation of HCFA’s proposed methodology, including an evaluation of the adequacy of the data and the potential impact of the proposal on Medicare beneficiary’s access to services; and
- Detailed requirements for HCFA in developing new practice expense RVUs, including a directive to use generally accepted cost accounting principles and data based on actual physician practice expenses. HCFA is also required to work closely with physicians in developing the new values.
HCFA’s Activities Since the Enactment of the BBA
Since last August, HCFA has convened a series of meetings with the physician community – the October “validation” panel meeting, the November “indirect expense” conference, and December’s “cross-specialty” panel meeting. HCFA also published a Notice of Intent to Regulate in the Federal Register, seeking suggestions from medical groups as to how the agency should proceed in developing the new values. Finally, HCFA has held private meetings with a number of interested parties.
Representatives from the AANS and CNS participated at each of these meetings, and we submitted comments in response to the Federal Register notice. Based on this experience, however, it is clear that HCFA is not meeting the directives of the BBA. In general, no new data on actual physician practice expenses were collected, and HCFA continues to resist making any changes to last year’s proposal. For example, at both the October and December meetings, we offered detailed data refuting HCFA’s numbers. At each of these sessions, however, neurosurgery was “outnumbered,” and when put to a vote, our data were essentially rejected.
HCFA is currently in the process of finalizing the new proposed values. In its recent Report to Congress, HCFA outlined several “options” under consideration for the May rule. Although the report lacked sufficient detail, it appears that HCFA will use last year’s methodology and data, making only minor changes.
The GAO Report
As required by Congress, the General Accounting Office (GAO) conducted a thorough review of HCFA’s original proposal. Issued on Friday, February 27, 1998, the GAO report is titled: “HCFA Can Improve Methods for Revising Physician Expense Payments.” Even though HCFA has made considerable progress developing the new practice expense RVUs, the GAO notes that “much remains to be done before the new fee schedule payments are implemented in 1999.” The report identifies several key problem areas that must be addressed before a final system is in place. These include:
- HCFA’s failure to validate the data produced by the clinical practice expert panels. In 1996, HCFA convened a number of expert panels to collect information on direct costs. While the GAO concluded that the process itself for collecting this information was acceptable, it recommended that these data be validated using surveys of actual physician practices – something HCFA has not done.
- HCFA’s use of statistical techniques to manipulate the direct cost data. These statistical manipulations were primarily responsible for the large cuts in payments for many neurosurgical procedures. For instance, the practice expense reimbursement for CPT code 63047, lumbar spinal decompression, would have been reduced by 65 percent under the original proposal. The GAO raises serious questions about the use of these statistical manipulations, recommending that they be substantially revised.
- HCFA’s failure to use specialty specific costs to formulate “indirect” practice expenses. HCFA proposes to divide physician practice expenses into direct and indirect costs. Because HCFA abandoned its survey of physician practices, it has no data on indirect expenses. It therefore had to use estimates rather than actual data. Moreover, HCFA decided to allocate expense data based on a single direct/ indirect cost ratio of 55/45 percent for all specialties (neurosurgery’s ratio is 35/65 percent). The GAO report points out that the use of specialty specific indirect expense ratios would be more consistent with the law, which requires HCFA to use actual practice expense data.
- HCFA’s disallowance of certain costs. HCFA has disallowed nearly all the costs physicians incur when they bring their own staff to the hospital to assist in the care of patients, arguing that these costs are already included in the hospital payment rates. However, several specialties, including neurosurgery, regularly use their own staff to perform these functions and are not reimbursed by the hospitals for these services. The GAO acknowledged that there may have been a shift in hospital and physician practices that Medicare has not recognized in its reimbursement methods. If hospitals are no longer providing the same level of staff support and physicians are supplementing this with their own personnel, these costs need to be recognized in the physician fee schedule.
The GAO report also cautions that the magnitude of the changes proposed last June were “significant and could affect physician decisions regarding care of Medicare beneficiaries.” The GAO therefore suggests that there be ongoing review of beneficiary access to care once the new system is in place, with a special focus on access to those services that see the biggest payment reductions.
Congressional Hearings
Congress continues to be sensitive to this issue and recently two committees held public hearings on the status of this project. On March 3, 1998, the House Ways and Means Health Subcommittee convened a hearing to review the GAO report. The GAO, Practice Expense Coalition, AMA, American Society of Internal Medicine (ASIM) and American Academy of Family Physicians (AAFP) testified at the hearing.
Committee members raised several concerns about HCFA’s proposal and expressed their support for GAO continuing its oversight of the project. Representatives Jim McCrery (R-LA), John Cooksey (R-LA) and Nancy Johnson (R-CT) were particularly critical of HCFA. Rep. Johnson noted that the lack of supporting data was “very serious” and “disturbing,” adding: “I think the weaknesses in HCFA’s work…are substantial.”
Senator Arlen Specter (R-PA), Chairman of the Senate Labor and Health and Human Services Appropriations Subcommittee, invited Arthur Day, MD, AANS Board Member and Chairman of the Joint Washington Committee, to testify at a March 10, 1998, hearing. Dr. Day spoke on behalf of the AANS, CNS and the Practice Expense Coalition. Also appearing before the subcommittee were representatives of HCFA, Society of Thoracic Surgeons, ASIM and AAFP.
In our testimony, we outlined the numerous problems with HCFA’s data and methodology and stressed that without substantial correction, HCFA’s current effort to develop new practice expense relative values will cause access to care problems. We also requested additional funding for HCFA to collect actual physician practice cost data. Senator Specter expressed serious concerns about the direction of HCFA’s work and indicated his willingness to provide the additional resources necessary to get accurate data. At the conclusion of the hearing, Senator Specter requested that the HCFA Administrator, Nancy-Ann Min DeParle, meet with Dr. Day to further discuss ways in which HCFA can improve its methodology and data.
AANS/CNS Strategy for 1998
The AANS and CNS have a comprehensive strategy in place for 1998. Once again, our efforts will focus on each branch of government – Congress, Executive and Judiciary. Specifically we will engage in the following activities:
- The Congress. Given this year’s short legislative session (at press time less than 60 legislative days remained), Congress will have limited opportunity to review HCFA’s proposal or, if necessary, to intervene on the final proposal before it is implemented on January 1, 1999. Nevertheless, there are a number of things we can do to keep Congress involved and informed about this issue. These include:
- Meeting with key Members of Congress and their staff,
- Urging Members to write to HCFA expressing their concern about the proposal
- Urging Congress to convene additional oversight hearings; and
- Conducting a grassroots letter writing campaign.
The AANS and CNS will facilitate these activities through our participation in the Practice Expense Coalition, which has retained several ex-Members of Congress as outside consultants. We will also utilize our Key Person Program, if necessary. Despite the fact that HCFA has not made many changes to its original proposal, it is clear that significant ongoing Congressional pressure will help temper the magnitude of the reductions.
- The Executive. This is where most of the action will be this year. A variety of activities are planned to influence HCFA’s final proposal. These include:
- Collecting additional practice expense data. The AANS and CNS are in the process of conducting a survey of 300 private neurosurgical practices, and all academic practices, to collect detailed practice expense data. The purpose of this survey is twofold: (1) to influence HCFA and (2) to develop practice expense benchmarks for AANS and CNS members to use in evaluating their own practice expenses. It is critical for each neurosurgeon receiving this survey to complete and return it promptly. Without adequate data, we will not be able to convince HCFA to make changes in its proposal.
- Developing an alternative methodology for devising practice expense RVUs. The Practice Expense Coalition has hired Coopers and Lybrand, a well known national accounting firm with extensive health care experience, to develop an alternative methodology.
- Conduct a grassroots writing campaign, whereby individual neurosurgeons submit individual comments to HCFA in response to the May proposal.
- Judiciary. The AANS and CNS will review avenues for potential litigation. The Practice Expense Coalition has retained two law firms to develop a detailed litigation strategy, should we decide to sue HCFA.
Final Thoughts
Even though it appears that HCFA is merely recycling last year’s proposal, there are signs that we are making progress. HCFA’s administrator has questioned the need to make these drastic changes. HCFA is testing the alternative methodologies we have suggested. Congress remains committed to achieving a reasonable solution. While neurosurgeons will likely see some fee reductions, we are hopeful that we will not be facing the magnitude of cuts proposed last year.
The AANS and CNS leadership will continue to keep our members informed about this issue as HCFA moves forward. Last year’s legislative victory was achieved because most of you took the time to make a phone call, write a letter or send an e-mail to your Member of Congress. Our work is not done, and each and every neurosurgeon needs to participate, when called upon, or we will not be successful.
For more information, please contact Katie Orrico in the Washington Office at (202) 628-2072 or e-mail at [email protected].