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Date: Friday, Oct. 30, 1998 FOR IMMEDIATE RELEASE Contact: HCFA Press Office (202) 690-6145
The 1999 Medicare physician fee schedule for the first time will begin to relate payment for physician practice expenses to the actual resources used to provide medical services rather than physicians� historical charges. Breaking the link between Medicare practice-expense payments and historical physician charges will create a fairer payment system, HCFA Administrator Nancy-Ann DeParle said.
ABy making sure that Medicare pays physicians fairly, we help ensure that Medicare beneficiaries will continue to have broad access to the physicians they need to stay healthy and productive," DeParle said.
Under the new system, physicians who provide services primarily in office settings, such as family practice and internal medicine specialists, will generally receive increased payments, while physicians who provide services primarily in hospital settings, such as cardiac surgeons and neurosurgeons, will generally receive decreased payments.
HCFA, the agency that runs Medicare, put the 1999 physician fee schedule on display today at the Federal Register, and the final rule is scheduled for publication in the Nov. 2 Federal Register. The fee schedule specifies the payments to physicians for more than 7,000 services and procedures, ranging from routine office visits to cardiac bypass surgery. In 1999, Medicare will spend about $35 billion on physician services.
Studies have shown that the old charge-based system did not fairly compensate physicians for practice expenses. For example, under the old system, coronary bypass surgery would receive practice-expense payments more than 100 times greater than those for an office visit, although costs for bypass surgery are only about 40 times higher.
Practice expenses are composed of direct and indirect expenses. Direct expenses include non- physician labor, medical equipment and medical supplies needed for each procedure. Indirect expenses such as the cost of general office supplies and utilities cannot be tied to individual procedures, so HCFA used accepted accounting techniques to allocate expenses to each medical procedure. Working with virtually all major medical specialty societies, HCFA convened expert panels and conducted extensive research to estimate the direct expenses for different medical procedures and services. HCFA also used information gathered by the American Medical Association�s Socioeconomic Monitoring Survey.
Before implementation of the fee schedule in 1992, Medicare based payments on each physician�s charges. The fee schedule system was created to relate payments to the resources physicians use to provide a service rather than what physicians charge for a service.
For two of three categories of resources -- physician work and practice expenses -- each medical procedure is now measured relative to all other procedures according to the amount of resources used. The third element -- malpractice expenses -- will be resource-based starting in 2000. Until now, practice expenses under the fee schedule were based on physicians� historical charges.
The fee schedule allowance for a procedure equals the sum of the three rankings, expressed as relative value units (RVUs), adjusted for payment locality cost differences, and multiplied by a conversion factor that translates RVUs into dollars.
The relative values for physician work -- the physician�s own time and effort and the intensity of a procedure -- have been established since the inception of the Medicare fee schedule. In 1994, Congress instructed HCFA to design a similar resource-based relative value system for physician- practice expenses.
The law required the new payment system to be budget neutral, meaning total physician payments cannot exceed what they would have been without the changes.
HCFA published a proposed rule in June 1997 to revise the practice-expense component of the Medicare physician fee schedule, which was originally to take effect Jan. 1, 1998. However, in the Balanced Budget Act of 1997, Congress made several changes in practice-expense payments, including creating a four-year transition and delaying its start for one year until Jan. 1, 1999. Using the new instructions from Congress, HCFA issued a new proposed rule on June 5, 1998, with a 90- day comment period. After reviewing comments from interested parties, HCFA issued the final rule.