April 1997 Bulletin

Time to say 'enough is enough'

My first Across the President's Desk column will focus on the serious impact the proposed modifications and reductions in Medicare reimbursement may have on orthopaedic care. These potential reductions threaten quality and access to medical care for our senior citizens. In addition, some of the current managed care contracts in Southern California are jumping on the bandwagon by discounting the current Medicare reimbursement rates for orthopaedic procedures by 10 to 15 percent in anticipation of payment changes coming in 1998.

The emphasis on these reimbursement issues should not be misinterpreted to mean the Academy has moved away from our core value of meeting the educational needs of our members and the patients we serve. However, I think it is the Academy's responsibility to vigorously oppose any governmental action which may threaten our ability to provide the highest value-added care for our patients.

When any payer expects the same level of care and then cuts reimbursement so low we cannot do it, we must be heard. The time has come to say, "enough is enough," not only for our patients but for ourselves. Your voices will be heard clearly and thoughtfully at the Health Care Financing Administration (HCFA) and in Congress as we speak for fair and reasonable reimbursement under Medicare.

The latest proposal by HCFA is to institute resource-based payments for practice expenses which could reduce payments for orthopaedic services by 9 to 16 percent. Before the resource-based relative value scale (RBRVS) was established, Congress told HCFA to make sure Medicare payments reflected the actual resources used to provide medical services - thus, the term resource-based. Medicare payment rates were supposed to cover three factors which make up the cost of medical services: your work as a physician; your practice expenses, covering your staff, equipment, office and other overhead; and your medical malpractice insurance costs. Physician work and practice expenses together make up 95 percent of your payment, with the remainder going to medical malpractice costs.

When the RBRVS started in 1992, HCFA only had time to do a study of the resources used to provide physician work. It contracted with William Hsiao, PhD, and the Harvard School of Public Health to do what became a very controversial study. The results have been contested ever since by the Academy and other specialty societies. Studies of actual practice costs and malpractice insurance payments were put on hold until some future unspecified date.

More cuts ahead

Thus, when the RBRVS started, the only portion of it that was actually based on a study of resources was the physician work portion. Payments for the practice expense and malpractice insurance cost portions were based on a formula using the old Medicare (pre-1992) payment system. We experienced dramatic cuts in our Medicare payments due to the implementation of the RBRVS, along with limits on balanced billing. We face a more serious reduction as HCFA gets ready to modify the Medicare system again.

Two years ago, Congress told HCFA to establish "resource-based" payments for the practice expense part of the RBRVS. From the start, HCFA had tremendous difficulties with developing a credible study. There were problems just determining how to do it and how to involve the right mix of physicians and practice managers. There was continual trouble meeting deadlines under a timetable which increasingly seemed unrealistic. The Academy and other specialty societies tried to get Congress to allow a one-year delay in collecting data for the new payment system. This would allow HCFA and all of us more time to do an appropriate study. The AMA also supported this position, but Congress did not act.

A few months ago, the study collapsed. The survey of practice costs, involving more than 5,000 practices, failed because of the difficulties that the practices were having filling out the survey. The research team hired by HCFA to do the study was released and further work on the survey was canceled.

Now HCFA is planning to establish practice cost payments using much less reliable data through an approach which, by its own admission, the agency has not fully worked out. There are several alternatives being considered. (See table at end of column.) Under each of these alternative approaches, payments for orthopaedic services may decrease by 9 to 16 percent. Several other specialties may experience even greater cuts. For example, payment for cardiac surgery may decrease by as much as 44 percent while payments for thoracic surgery may decrease by up to 40 percent. Neurosurgery payments may see a 30 percent cut. On the other side, payments to chiropractors may increase 27 to 54 percent while payments for podiatric services may increase by 23 to 41 percent. Internal medicine, which expected large gains, may only get a 1 to 4 percent increase. Family practice projections do better with a possible 9 to 19 percent increase.

The Academy has taken the position HCFA should have a new study designed and implemented to generate accurate practice cost data from actual physician practices as Congress originally intended. Moreover, Congress should delay its January 1998 deadline for the new payment system to allow for an appropriate study to be completed. The Academy is approaching this issue through a variety of activities divided into two phases.

Phase one

Your Board of Directors approved $235,000 at their February 1997 meeting for the following activities:

Legislative activities. The Practice Expense Coalition, an organization of 25 medical associations which is co-chaired by the Academy, has contracted with a lobbying firm to work full-time on the practice expense issue for the next six to nine months. The objective is to try to persuade Congressional members that the current HCFA practice cost study should be stopped because it does not involve the kind of in-depth research that Congress intended.

Legal activities. The Practice Expense Coalition has asked legal counsel to conduct an analysis of litigation possibilities. This analysis will include an assessment of relevant case history to determine if there is legal precedence to pursue a temporary restraining order because of HCFA's failure to conduct its practice expense study as Congress originally intended.

Direct mailing to Academy fellowship. The Academy has budgeted funds to send up to three separate mailings to fellows, alerting them of the impact of this issue on the practice of orthopaedic surgery and giving updates on the Academy's activities.

Data collection and analysis. The Academy will access a Medicare Part B database to assess the estimated impact of the new practice expense payment system on orthopaedics and other specialties. This data collection effort would also be used to determine if there are any less onerous, alternative ways to HCFA's likely redistribution practice expense dollars. The results of this data collection and analysis project will be used in our legislative efforts with Congress and communications to the fellowship.

Analysis of proposed rule. HCFA has stated that it will publish its proposed new practice expense relative values on or around May 1, 1997. There will be a 60-day public comment period following publication. The Academy will analyze the methodology used to develop the practice expense relative values in order to prepare comments to HCFA.

External public relations campaign. The Practice Expense Coalition members may direct their communications/public relations departments to coordinate a public relations campaign in an effort to communicate this issue to the general public. The campaign would emphasize access for Medicare beneficiaries and quality of care issues.

Phase Two

If the strategies outlined above are not successful and new practice expense payments are implemented in 1998, HCFA will conduct a refinement process. During this process, specialty societies and all other interested parties will be invited to submit data on physician practice expenses to refute the new practice expense relative values. If HCFA is convinced that corrections in practice expense relative values are warranted, these changes would occur in 1999.

Even if the new practice expense payments are not implemented in 1998, HCFA may still be required to develop and implement a new payment system for practice expenses at some point in the near future. Under any scenario, it is important for the Academy to gather accurate practice expense data for orthopaedic procedures in order to determine the validity of HCFA's data. We soon will have some data as a result of the previous Board of Directors action. In December 1996, your Board of Directors approved $80,000 for a detailed time-motion study that will determine the actual physician practice costs associated with a select group of orthopaedic procedures. This data should prove to be beneficial.

The real issue in this cost cutting is the solvency of Medicare and the future financing of health care in this country. We need to continue to be part of a more realistic solution that empowers patients, gives access, maintains quality and allows portability. Medicare, as it exists, is in serious trouble and our politicians are avoiding working on realistic solutions. We will continue to be buffeted until true restructuring is seriously undertaken. In the meantime you and your patients will be represented in these debates by the Academy. We will be requesting your involvement as this debate unfolds. Do not underestimate the potential significance of what is happening in Congress.

I'd like to end this column by saying that I assume the presidency of the Academy with both humility and confidence. Humility because of the strong leadership I am following and knowing many others could serve in this position very well. Confidence because of the outstanding professional staff, Board of Directors and a talented and dedicated membership available and willing to help. In addition, the past two years have provided me with a steep learning curve. Two past presidents, Dr. DeHaven and Dr. Strickland, will remain on the Board this year bringing their experience to our deliberations. Dr. Heckman and Dr. D'Ambrosia, following in the presidential line, will continue the tradition of strong teamwork.

As we did at the Annual Meeting, I want to pay tribute on all our behalf to Ken and Jean DeHaven. They were outstanding leaders this past year with real sensitivity and courage. It has been a pleasure to work with and follow Ken into this position. Ken and Jean, a job well done.

Douglas W. Jackson, MD
President

Special acknowledgment to Robert C. Fine, JD, for assistance in preparing this column.

HCFA proposed resource-based practice expense relative value units - option two

Numbers in parenthesis indicate reductions in total RVUs