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A Primer to Payment for Neurology Services and Procedures in 2007

WHAT IS THE RESOURCE-BASED RELATIVE VALUE SCALE?

All CPT (Current Procedural Terminology) codes that describe physician services and procedures covered by Medicare are assigned relative value units (RVUs). These units reflect the different amounts of physician work and practice expenses for individual services or procedures. Each type of RVU is calculated using a specific formula. The Medicare reimbursement for a CPT code is determined by multiplying the RVU for that code with a dollar value conversion factor that is the same for all CPT codes: For example, total RVU x 2007 conversion factor ($37.8975) = Medicare payment.

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Dr. Neil A. Busis

HOW ARE RVUS DETERMINED?

Three components make up the total RVU for a service or procedure – physician work, practice expense, and professional liability insurance. On average, work RVUs comprise 52 percent of a service, practice expense RVUs are 44 percent, and professional liability insurance RVUs are 4 percent.

HOW ARE RVUS UPDATED?

The CPT Editorial Panel sends new or revised codes to a committee, the Relative Value Scale Update Committee. The committee assigns an RVU for physician work and provides direct “inputs” – data on time for clinical labor and costs of supplies and equipment — for practice expense RVUs. The committee forwards its RVU recommendations to the Centers for Medicare & Medicaid Services (CMS), the agency that administers Medicare. Existing codes may be reviewed through the Resource-Based Relative Value Scale Five-Year Review Process.

HOW WILL PAYMENT FOR MY SERVICES CHANGE IN 2007?

Overall, Medicare payments to neurologists will increase by 1 percent. Increases to evaluation and management (E/M) services have been counterbalanced by cuts to some imaging services, as mandated by the Deficit Reduction Act, and a 10 percent work reduction on all codes (the “budget neutrality work adjuster”). Congress averted a 5 percent cut to all physician payments, leaving the 2007 conversion factor at the 2006 level.

WHY IS THE MEDICARE PAYMENT FOR THE SAME SERVICE HIGHER IN CHICAGO THAN IN NORTH DAKOTA?

The Medicare fee schedule accounts for differences in costs, according to geographic practice cost indexes (GPCIs), which adjust payment rates to account for regional differences in the price of inputs used in furnishing physician services. GPCIs are applied to each component of a service: physician work, practice expense, and professional liability insurance. The formula for total RVUs for a service or procedure is: (work RVU x budget neutrality work adjuster x work GPCI) + (practice expense RVU x practice expense GPCI) + (professional liability insurance RVU x practice expense GPCI) = total RVU.

WHY ARE PAYMENTS FOR E/M SERVICES DIFFERENT IN 2007?

Physician work RVUs for E/M services significantly increased in 2007 as a result of the recently completed five-year review process. Codes commonly billed by neurologists fared well. Level 3 and Level 4 office visits for an established patient went up 37 percent and 29 percent. Level 4 office consults and level 4 initial inpatient consults went up 17 percent and 25 percent. Approximately 62 percent of Medicare charges by neurologists are for E/M services.

WHILE IT'S NICE TO SEE INCREASES TO E/M CODES, WHY HAVE PAYMENTS FOR SOME OF MY PROCEDURES GONE DOWN?

For budget neutrality, CMS applied a 10 percent reduction to the work values of all codes on the Medicare fee schedule in 2007. Changes are required to be budget neutral to Medicare to ensure that federal funding isn't increased over what would have been spent under current law requirements.

WHAT ROLE DID THE AAN PLAY IN THESE CHANGES?

The AAN played a lead role in the five-year review process, actively surveying members and working with other medical specialty societies to develop joint recommendations for increased E/M work RVUs. Members of the Medical Economics and Management Committee (MEM) and AAN leadership met with CMS leadership in December 2005 to highlight reimbursement issues for neurologists and cognitive (E/M) services. AAN organized a multispecialty meeting in October 2006 to urge CMS not to apply the budget neutrality adjustment to the work RVUs.

HOW DO THESE CHANGES TO MEDICARE AFFECT WHAT I'LL SEE FROM OTHER PAYERS?

Many private insurance plans adopt some form of the Medicare physician fee schedule, but may pay at a different rate.