October 1997 Bulletin

Orthopaedists face two payment cuts

Hit by practice expense cap, single conversion factor

In 1998, many orthopaedic surgeons will see their Medicare reimbursement decrease by about 10 percent from 1997. While significant, these cuts are not as drastic as those originally proposed earlier this year.

The original proposal, published in June by the Health Care Financing Administration (HCFA), would have cut Medicare reimbursement for some of the most common orthopaedic procedures, such as total hip replacement, by approximately 30 percent. Other specialties, such as cardiovascular and thoracic surgery, fared even worse.

This summer, Congress passed legislation delaying implementation of HCFA's proposal by one year, until 1999. However, the legislation (included as part of the Balanced Budget Act) established a special rule for 1998 that shifts $390 million from hospital-based procedures to office-based procedures. Under this rule, all procedures will have a practice expense component that is no more than 110 percent greater of the physician work component under Medicare's resource-based relative value scale. In addition, a single conversion factor of $37.13 will be effective in 1998. Currently, there are three conversion factors: surgery ($40.96), primary care ($35.77) and other medical services ($33.85).

The table below indicates the impact of the various proposals on the 50 most commonly performed orthopaedic procedures. The first column of data shows the estimated impact on total Medicare payments that would have taken place if HCFA's proposal had been implemented. There are separate estimates for in-office and out-of-office services because HCFA proposed separate payment rates for different sites of service. The second column shows the estimated impact on total payments of the 110 percent practice expense cap. The third column indicates the estimated impact on total payments of the new single conversion factor. The fourth column shows the estimated impact on total Medicare payments of the two changes that will take place in 1998: the 110 percent practice expense cap and the single conversion factor. Note: CF denotes Classification Factor.

On the home page

A complete list of the impact of the various proposals on the 100 most commonly performed orthopaedic procedures will be with this story on the Academy's home page www.aaos.org. The October Bulletin will be in the "Library" section. You also can receive the full table by faxing a request to the Bulletin editor (847) 823-8026. The history of the Medicare resource-based payment system for practice expenses is presented in a Health Policy Update in the "Federal Health Policy" section on the home page.


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