AAOS Bulletin - October, 2005

AAOS addresses medical liability reform, payment issues

Washington Report

The following summary is taken from the report of the AAOS Washington, D.C., office to the American Association of Orthopaedic Surgeons’ Board of Directors, Sept. 23, 2005.

AAOS and the Alliance of Specialty Medicine (Alliance) continue to work with House and Senate leaders on developing comprehensive medical liability reform legislation.

Although Senate Majority Leader Bill Frist has signaled that he would like to have a vote on medical liability reform in the fall, he has not yet clarified a plan or strategy, so voting may occur in 2006.

Since Congress returned from its August break, attention has shifted to providing relief to hurricane-stricken states; the Senate is also focused on the hearings for Supreme Court nominees.

The Fair and Reliable Medical Justice Act, introduced by Sen. Mike Enzi (R-Wyo.) and Max Baucus (D-Mont.), would fund up to 10 state demonstration projects for the establishment and evaluation of pilot projects to test alternatives to tort litigation. The bill encourages the establishment of systems of early disclosure and compensation, administrative determination of compensation and special health care courts.

The Healthy American Act of 2005 (S. 4) focuses on medical liability reform as a top priority among a number of measures, including electronic medical records, combating fraud and abuse in Medicare and Medicaid, increasing access for the uninsured, long-term care insurance, health savings accounts, flexible spending accounts, state high-risk pools and community health centers.

The House passed the Help Efficient, Accessible, Low-cost Timely Healthcare (HEALTH) Act of 2005 (H.R. 5), which allows unlimited awards of economic damages with a reasonable $250,000 cap on noneconomic damages; establishes a statute of limitations for filing a lawsuit to ensure speedy resolution of claims; ensures the bulk of any award goes to the patient, not attorneys; and protects the rights of states to set their own caps.

The 2005 grassroots campaign activities of Doctors for Medical Liability Reform (DMLR) will begin in October, with a press conference early in the month. DMLR will initially focus on efforts in the states of Maryland and Washington. Additional states will be added, gearing up for DMLR activities in the 2006 election year.

Medicare Pay-for-Performance

The recently introduced Medicare Value Purchasing Act of 2005 would establish value-based purchasing requirements for Medicare payments to physicians and other health care providers, commonly referred to as pay-for-performance. The legislation also addresses quality measures for hospitals, home healthcare, nursing homes, dialysis centers and Medicare Advantage plans.

Specifically, the legislation requires the Secretary of Health and Human Services (HHS) to establish a private, nonprofit entity to make recommendations on the development, implementation and updating of a quality measurement system. Physicians, starting in 2008, would receive higher value-based payments for exceeding quality standards or demonstrating improvement from one year to the next. Starting in 2007, physicians must collect, analyze and report required data; a noncompliant physician would receive a 2 percent reduction in reimbursement. The legislation also creates a system for measuring resource utilization and requires HHS to report usage information to physicians. Public reporting of information in a “clear and understandable form” will begin in 2008.

AAOS and the Alliance have developed principles that should be included in any legislation that links physician reimbursement to the reporting of quality measures. The principles call for performance measures that are developed collaboratively across physician specialties, based on sound scientific evidence, pilot-tested and voluntary. They also call for a quality measurement system based on rewards, not penalties.

The AAOS is concerned that the system for physicians is designed as budget neutral, with no additional funds for the higher value-based payments. With physicians already facing a 4.5 percent reduction in Medicare reimbursement in 2006, and an average 5 percent cut annually in subsequent years, the pool of dollars to sustain such a program is a concern.

In the House, Rep. Nancy Johnson’s Medicare Value-based Purchasing for Physicians’ Service Act of 2005 would replace the volume-controlled Sustainable Growth Rate (SGR) formula with annual payment updates based on the Medicare Economic Index, by linking payment to the rate of inflation for providing medical services to beneficiaries.

AAOS and the Alliance are concerned about the framework and timeline for a shift to a system of value-based purchasing. The two groups have expressed these concerns and continue to work with Chairman Johnson and others. The principles that AAOS believes must guide negotiations with policymakers state that measures must be developed by the physician specialty societies with expertise, pilot-tested, phased in over time and risk-adjusted for patient demographics, severity of illness and co-morbidities. Any changes to the Medicare payment structure that is based on value-based purchasing must also address the flaws in the physician payment formula. Reporting measures should promote learning and improve quality and patient safety and must remain confidential and not subject to legal or other proceedings.

The timeline for moving on either the Senate or House bill is unclear. The measure may be added to the budget reconciliation package planned for the fall. Repealing the SGR formula is expected to cost an estimated $183 billion over the next decade.

Medicare Payment Formula

Based on the current payment formula, CMS expects that in 2006 physicians will experience a negative 4.3 percent update, which would drop the current conversion factor of $37.8975 to $36.2679. With other proposed changes, payments for orthopaedic surgery could see an additional average reduction of approximately 0.1 percent.

Most troubling for the orthopaedic community are the proposed changes to the methodology used in the calculation of practice expenses. CMS is recommending the use of “bottom-up” accounting, in which direct costs would be determined by summing up the costs of the resources (clinical staff, equipment, supplies, etc.) that are typically required to provide this service. This calculation was rejected by the surgical specialties in the 1990s in favor of a “top-down” approach, which allocates aggregate specialty practice costs to specific procedures. Indirect expenses would still be calculated using the “top-down” methodology.

For orthopaedic surgery, this would result in a reimbursement decline of 0.4 percent in 2006, 0.07 percent in 2007, 1.1 percent in 2008, and 1.5 percent in 2009.

The AAOS is disappointed that CMS is proposing a return to a formula that was rejected by the surgical community several years ago. In its comments to the agency, the AAOS will raise its concerns about this practice expense proposal and may seek Congressional relief to postpone the reimbursement cuts due to this change in formula.

The proposed rule also would eliminate the separate Healthcare Common Procedure Coding System codes for casting supplies (Q4001 through Q4051), and include these supplies in the Practice Expense database.

As part of the proposed rule, CMS is planning to exclude data for any specialty that performs less than 5 percent of a particular service or procedure from the professional liability Relative Value Unit (RVU) calculation for that service or procedure. Additionally, CMS is proposing to eliminate evaluation and management (E&M) services because these are performed by all physician specialties, indicating that this change would have no or minimal impact on the majority of codes.

AAOS will examine the impact of these proposed changes on orthopaedics, as well as continue to scrutinize the methodology and data used in calculating the professional liability RVUs to reflect the real costs of professional liability insurance rates.

Emergency room call

On-call issues were a major focus of the second meeting of the Emergency Medical Treatment and Labor Act (EMTALA) Technical Advisory Group (TAG). The TAG has been tasked with seeking advice from the public and considering and recommending changes on the implementation of EMTALA. James V. Nepola, MD, an orthopaedic trauma surgeon from the University of Iowa, is one of the 19 appointees to the TAG.

The TAG defeated a proposal to recommend that physicians be required to serve on-call as a condition of participation in Medicare. The extent to which on-call shortages in community hospitals are affecting transfers to Level 1 and Level 2 trauma centers was also examined. AAOS and the Orthopaedic Trauma Association are working together to provide information to the TAG, both on the issue of transfers, as well as the concerns raised by on-call orthopaedic surgeons in community hospitals. The TAG heard testimony from AAOS members Jason W. Nascone, MD, and John V. Hill, MD.

    AAOS, CPCI establish imaging hotline

    The Coalition for Patient Centered Imaging (CPCI), of which AAOS is a member, has established a toll-free hotline for use by orthopaedic surgeons and other specialists concerned about efforts to restrict the provision of in-office diagnostic imaging. AAOS and CPCI believe that office-based imaging is good patient care and must be protected.

    To access this CPCI hotline, dial (800) 210-7193. At the prompt, enter your five-digit zip code to be connected to your congressional representative’s office, where you can speak to a health legislative staffer or leave a message. Two points you may wish to consider making include:

    • Office-based imaging is good patient care and helps patients through more efficient and non-invasive diagnosis and detection of disease, as well as more effective monitoring of post-treatment outcomes.

    • Congress should oppose any legislative efforts that would limit your ability to diagnose and treat Medicare patients using office-based medical imaging.

If you have any questions or concerns, please contact the AAOS Washington Office toll free at (877) 389-AAOS.

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