HCFA Publishes Proposed Practice Expenses Regulation

Note: At press time, Congress was considering legislation to delay the implementation of the new resource-based practice expense system. The following article outlines HCFA’s current proposal, which still may eventually be implemented in one form or another. On June 18, 1997, the Health Care Financing Administration (HCFA) published in the Federal Register, the notice of proposed rulemaking (NPRM) outlining the details of their proposed resource-based practice expense system. Neurosurgeons face a 13-21% reduction in total income if HCFA implements this new system on January 1, 1998. This does not include the proposed change to a single conversion factor or budget neutrality adjustments, which produce an additional 12% reduction. [See Table 1 for some examples of common neurosurgical procedures]

The current proposed rule largely reflects the assumptions contained in HCFA’s January 22, 1997 proposal, that is, HCFA’s methodology assumes that when the surgeon is in the hospital doing surgery, he or she is not incurring any overhead expenses. (See AANS Bulletin, Spring 1997 for comprehensive discussion) Given this assumption, it is easy to see why specialties like neurosurgery face such steep reductions in their Medicare fees.

Under the new proposal, the “winners” include: podiatry +24%, dermatology +18%, optometry +15%, rheumatology +15%, chiropractic +14%, and family practice +12%. In addition to neurosurgery, the “losers” include: cardiac surgery -32%, thoracic surgery -28%, gastroenterology -20%, cardiology -20%, and orthopedic surgery -11%. The most vocal proponents of this new system, the general internists, only receive a 3% increase.

The AANS and CNS are currently analyzing the proposal and will submit comments if it becomes necessary. The data from organized neurosurgery’s own practice expense study exposes significant errors in HCFA’s methodology, and should provide us with the necessary ammunition with which to counteract HCFA’s approach.

Global Surgery Fees Increased

In the same NPRM, HCFA announced its proposal to increase the work relative value units (RVUs) for global surgical services to account for increases in the evaluation and management component of those services. Over the past year, the AANS and CNS, along with the other surgical specialties, have fought aggressively for this increase. During the 5-year review of values, HCFA substantially increased the work RVUs for all E/M codes, but did not give a corresponding increase to the E/M component of the global surgical codes. We have argued that this policy was arbitrary and unfair. In response to this pressure, HCFA has agreed to increase the work RVUs of all surgical codes with a 90-day global period by 12%. This should help to slightly mitigate any changes to the practice expense component.

If you would like more information or a copy of the proposed rule, please call Katie Orrico in the Washington Office at (202) 628-2072.

U.S. Congress Nears Completion on Medicare Budget Reconciliation Legislation

The House and Senate are completing action on Medicare budget reconciliation legislation. Included in these bills are several provisions affecting neurosurgery. The final bill will likely include the following provisions:

• Resource Based Practice Expenses: A one year delay of implementation of new practice expense RVUs, a 3 or 4 year transition of the new values beginning 1999, and detailed requirements for developing the new values, including language requiring HCFA’s methodology to be based on generally accepted accounting principles and to use data on actual physician practice costs.
• Single Medicare Conversion Factor/Elimination of Medicare Volume Performance Standard: The current 3 Medicare conversion factors would be eliminated and replaced with a single conversion factor of $37.13. The current conversion factors are: surgery $40.96, primary care $35.77, other services $33.85. The Medicare Volume Performance Standard system would be replaced with a sustainable growth rate system based on real Gross Domestic Product. The annual update increased would be capped at 3% and any decreases would be capped at 7%.
• Medicare Choice Program: The bill would give Medicare beneficiaries a choice of plans including: fee-for-service, PPOs, point-of-service, PSOs, HMOs, and Medical Savings Accounts (MSA). The MSA program would be a demonstration project limited to a fixed number of Medicare beneficiaries.
• Graduate Medical Education: The number of residents in training would be capped at existing levels and the Secretary of the Department of Health and Human Services would be required to establish rules for approving new residency programs.

It is expected that the total Medicare savings from physicians will be in the range of $8-10 billion out of $115 billion in total Medicare savings. The additional savings will be achieved by cuts to hospitals, HMOs, home health agencies, and others.