Although many assume that reimbursement for a procedure code represents payment for physician work, this is only one variable in the complicated formula determining the allowable payment. Given the frequent adaptation by third-party payers of the Resource-Based Relative Value System (RBRVS) of the Health Care Finance Administration (HCFA), changes in the calculation of total relative value units will have broad affects on non-Medicare reimbursement as well.
In response to a Congressional mandate, HCFA is in the process of “refining” the practice-expense calculations so that these are also “resource-based” values. Given the potential for significant changes in this component of the total relative value, it is timely to discuss the evolution of this process and the current efforts of the Coding and Reimbursement Committee (CRC) to maintain an equitable transition.
With the creation of RBRVS by Professors Hsiao and Braun, HCFA adopted a formula for calculating the total relative value (RVU) of a procedure code based on three components and a correction factor. First, the physician work component (RVw) reflects the time, effort and complexity of the physician activities before, during and after a surgical procedure is performed within the designated global period.
The second component involves an estimation of the expense to the practice (RVpe) in performing the required services. Finally, the third component reflects the malpractice cost (RVm). These components are further adjusted by geographical correction factors.
Although the relative proportion of these three components varies among procedures, a typical breakdown of total RVU is 50 percent RVw, 45 percent RVpe, and 5 percent RVm. Consequently, changes in the practice expense calculation can have a significant impact upon the total RVU.
Advisor Group Created
The original allocation of resource-based practice expense was derived from a HCFA-contracted study by Abt Associates. The study used two groups of experts to develop a database of cost estimates. The Clinical Practice Expert Panels (CPEPs) were comprised of physicians and administrators nominated by specialty societies to estimate direct costs.
In contrast, the Clinical Practice Expert Panel Technical Expert Group consisted of representatives from organized medicine who were charged with monitoring data collection to ensure reliability. The transition to a resource-based calculation began in 1999.
Because of concerns about the validity of the CPEP process, the Relative-value Update Committee (RUC) of the American Medical Association created an advisor group called the Practice Expense Advisory Committee (PEAC). A basic set of ground rules were developed to examine direct expense inputs (clinical labor, office supplies and equipment) on an individual code basis. Although standard postoperative surgical supply packages were developed by the PEAC, the CRC presented separate supply packages for neurosurgical procedure codes that were accepted by the PEAC as well.
A significant achievement was agreement to clinical labor times for evaluation and management (E&M) services. This facilitated development of staff time for the E&M components of surgical procedure codes with global periods. The committee accepted the recommendation to use the RUC database of postoperative visit frequency and service level to calculate postservice clinical staff time.
Another significant achievement was the development of a “standard package” for preservice clinical staff time for 90-day global procedures by a PEAC workgroup. Currently, the preservice clinical staff time for neurosurgical procedure codes can vary from none for emergency procedures to more than two hours for spinal procedures.
Although a “standard package” for preservice clinical staff time of one hour was developed, opportunity to provide data showing different times and staff blends was given. The CRC recommended longer preservice time and a different clinical staff blend to the PEAC in March based upon preliminary survey data. However, the PEAC showed significant discomfort with adopting times that deviated from the standard package. Consequently, the prior Preservice Workgroup was reconvened to develop criteria for deviating from the standard package.
Effect on Reimbursement
Although implementation of the standard preservice clinical staff time for all 90-day global codes has been postponed for one year, this process soon may have a significant impact on reimbursement for all procedure codes. The CRC will continue to accumulate survey data to determine if the standard preservice time and clinical staff blend is truly representative of neurosurgery. With input to and guidance from the Preservice Workgroup of the PEAC, the CRC will make every effort to ensure an equitable distribution of practice expense dollars among procedure codes.
Gregory J. Przybylski, MD, is associate professor of neurological surgery at Northwestern Memorial Faculty Foundation of Northwestern University in Chicago and a faculty member for the AANS-sponsored coding and reimbursement courses.