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Fallout from New Medicare Policy on Consultation Codes Continues
Private Insurers Are Undecided About Change

Although the financial consequences for neurologists are unknown, the Centers for Medicare & Medicaid Services (CMS) decision to eliminate consultation codes is sure to cause them headaches in the new year.

As of Jan. 1, physicians treating Medicare patients must replace consultation codes with codes for new or established office visits, initial hospital visits, or initial nursing facility visits.

The change caught physicians off-guard when the CMS first proposed it in July. Despite opposition from the AAN and many other medical associations, the CMS finalized its plan to stop paying for consultation codes when it published the 2010 physician fee schedule in late October.

At press time, private payers were still scratching their heads over the issue. Representatives of WellPoint, Cigna, Aetna, UnitedHealthcare, and some large regional health plans all told Neurology Today that they were studying the CMS decision and had not decided whether to follow its lead.

Even if private payers do decide to replace consultation codes, their contracts with physicians may prevent that move from being implemented until contracts are renewed.

“It is going to be complicated,” said AAN Associate Director of Medical Economics Amanda Becker.


The CMS attributed its decision to years of confusion over consultation codes, stemming in part from disparities between the CMS rules and the American Medical Association (AMA) Current Procedural Terminology manual.

The agency maintains that eliminating payment for consultation codes will be budget-neutral, that is, that it does not expect it to either increase or decrease its payout to physicians. But the change will redistribute the CMS payments to physicians.

Pay rates for new and established office visits will increase by about 6 percent and for initial hospital and facility visits by less than 1 percent. To some degree, those increases will offset the fact that CMS paid more for consultations than other evaluation-and-management (E&M) services. The most likely effect of those increases, however, is a boost in income for primary care practitioners at the expense of some specialists.

In a Nov. 9, 2009, study in Archives of Internal Medicine, Joel I. Shalowitz, MD, MBA, a researcher at the Kellogg School of Management at Northwestern University, found evidence to support the CMS perspective. He reviewed 500 consecutive written requests for ambulatory consultations by 20 primary care physicians in suburban Chicago between June 2008 and July 2009. The overall coding error rate was 32.4 percent.

Dr. Shalowitz reported that when the requesting physician ordered a consultation, the error rate was 5.5 percent. When the primary care physician made a referral for a patient with a known diagnosis, the specialist would use a new patient visit code instead of a consultation code; on those claims, Dr. Shalowitz found an error rate of 78 percent.

Changing ambulatory consultation codes to new patient visit codes would save Medicare more than $500 million a year. While that is a tiny fraction of Medicare's $59 billion annual tab, Dr. Shalowitz said higher pay rates for consultations devalues primary care.

“At a time when we want to encourage new physicians to consider primary care and support current practitioners, this differential sends a dissonant message,” he wrote. “Furthermore, as patients are increasingly responsible for out-of-pocket payments, it is difficult to explain to them why consultant physicians are paid so much more than their primary care physicians for the same or less time spent with them.”

The financial implications of the CMS changes will vary among neurology practices, based in part on their historical coding habits.

“I would urge neurology practices to ‘run the numbers,’ taking into account the increased payments expected for the other E&M codes and the increase in the practice expense payment factor,” said Tennessee neurologist Laura B. Powers, MD, referring to a 1 percent increase in practice expense pay in 2010.

Dr. Powers, a member of the AAN Board of Directors, worries that the CMS action may backfire. “In the past, physicians who rely heavily on E&M have increased non-E&M services and reduced hospital E&M services to increase reimbursement,” Dr. Powers said. She noted that the overutilization of non-E&M services triggers the annual proposal for across-the-board pay cuts through the Sustainable Growth Rate formula.

“Eliminating the consultation codes will likely have the same effect for consultative specialties such as neurology, endocrinology and rheumatology, and then further worsen the situation we believe is already one of the worst problems within the US healthcare system,” she said.


Aside from the financial implications of the elimination of consultation codes, physicians can expect some challenges in using the replacement codes.

Neil A. Busis, MD, chair of the AAN Medical Economics and Management Committee, doubts the CMS assertion that the policy change will make documentation easier. For example, a physician must determine a patient's history with the practice before knowing how to code for an office visit.

“You have to be able to say that no one in your practice has seen that patient for the last three years,” he said. “Otherwise, it is an established patient visit.”

Dr. Busis also foresees confusion related to concurrent care by two physicians for inpatients. The CMS said it will create a modifier that the admitting physician will use to identify himself or herself as the physician of record. However, if the admitting physician fails to use the modifier appropriately, consulting physicians may have trouble getting paid.


DR. LAURA B. POWERS: “I would urge neurology practices to ‘run the numbers,’ taking into account the increased payments expected for the other E&M codes and the increase in the practice expense payment factor.”


Becker and representatives from other medical groups met with the CMS after the final rule was issued to seek guidance on how physicians should implement the change.

“We felt disappointed that CMS does not seem to understand how many questions and concerns our members have about this change,” she said.

Thus, she is not optimistic that efforts to change the CMS view on the policy will gain traction. The AMA is supporting a resolution introduced by the Infectious Disease Society of America that encourages the CMS to work with the AMA and other physician groups to address concerns with consultation codes, rather than scrap them entirely.

Separately, the AAN and a few other medical groups are planning to ask Congress to postpone adoption of the change for a year to give physicians time to prepare.

“If the CMS comes up with a major change in coding, billing and reimbursement, they need a long time for education before they promulgate the change,” Dr. Busis said.

Will Congress make time for this issue? “I have no idea, but I feel strongly that we should try,” he said.

Meanwhile, the Academy is committed to preparing its members for the transition to the new policy. Information about the policy change is available for free through the AAN at