Fee for Service: Payment Fundamentals, Trends, and Troubles

When we develop codes that have new RVUs, it suddenly devalues every other RVU in the system. When we valued fetal MRI for 3 RVUs, new RVUs weren’t created de novo; via the conversion factor, every other RVU is worth slightly less because the pool of money is fixed.

Kurt Schoppe, MD
ACR RUC Advisor
October 31, 2018

Kurt Schoppe, MD, talks about reimbursement the way others dissect a novel or an episode of a favorite TV show: players, motives, plot points, unintended consequences.  The ACR advisor to AMA’s RVU Update Committee (RUC) held attendees rapt at Strategic Radiology’s Executive Education event in Fort Worth in September as he delivered the first of three short talks that linked payment policy with relationship building and strategies to deal with the reimbursement uncertainty ahead.

Schoppe is a body radiologist with member practice Radiology Associates of North Texas (RADNTX) and began with the fundamentals of payment policy for a reason: “If you don’t understand the fundamentals, it is really hard to make good decisions about them.”

His first task was to deconstruct a basic building block of fee-for-service (FFS) reimbursement, the relative value unit (RVU), composed of work, technical, and professional liability components. In order to convert an RVU to reimbursement, the total RVUs for a code is multiplied by the conversion factor, which for 2018 is $35.99.

All things considered, Schoppe took a neutral position on the actual number. “We were promised a .5% adjustment and what we got was less than .1%,” he said, explaining that the difference between the .5% pledged and the actual number can be explained by budget neutrality and Medicare claw-backs for anticipated savings that never materialized. For 2019, the proposed conversion factor is $36.05, which represents between a .02%, and.03% adjustment.

When the conversion factor is viewed in inflation-adjusted dollars, radiologists can begin to understand why they are working harder to keep from losing ground. The conversion factor in 1998 was $36.68, technically more in nominal dollars than in 2018. In inflation-adjusted dollars, $36.68 translates to $55.87…almost a 50% cut. “Medicare sees a lot of people making a fair amount of money in health care, so their interpretation is that there are more efficiency gains to be had,” Schoppe forewarned.

Medical Fight Club

Schoppe’s role as RUC advisor is to manage the process of making value recommendations on the number of RVUs to be assigned to a particular CPT code. With multiple specialties at the table, he characterized it as a medical fight club whose contentiousness derives from Medicare’s budget neutrality constraint.

“When we develop codes that have new RVUs, it suddenly devalues every other RVU in the system,” he said. “When we valued fetal MRI for 3 RVUs, new RVUs weren’t created de novo; via the conversion factor, every other RVU is worth slightly less because the pool of money is fixed.”

When new codes come in from the AMA’s CPT Editorial Panel, radiology indicates whether it will participate. A yes triggers a survey sent to member radiologists, asking them how long they spend on the specified task and how it compares to other activities.

The surveys are critical in addressing the two ingredients that go into the valuation process: time and intensity. With time relatively easy to assess, intensity is the main reason that the ACR needs radiologist input.

“This is the resource-based relative value scale,” Schoppe emphasized. “[Each code] also is compared with every other specialty. I am obligated to find non-radiology codes that justify radiology codes—whether urologic, podiatric, gynecologic—that take similar efforts and similar times, and ideally those end up with similar RVUs.” (No amount of intensity will elevate the value of a code with low time values, he noted.)

Among recent successful valuations, Schoppe counts the revaluation of the mammography G codes bundled with CAD (77065, 77066, 77067), CT neck w/o contrast (from 1.45 to 1.62 RVUs), and CT chest (from 1.02 to 1.16 RVUs). Both abdominal MRI and pelvic MRI without contrast codes and with contrast codes maintained their value, which Schoppe also counted as a win, although the with-and-without codes both decreased from 2.26 to 2.2 RVUs. “Not bad, but it is really hard for me to sit there and tell you we did well when a code goes down,” Schoppe said.

Schoppe is less sanguine about codes up for revaluation in 2019. They include MRI breast w/CAD, FNA biopsy w/imaging, MR and US elastography, US scrotum, US extremity, CT biopsy and many X-rays.

E&M Codes—an Ill Omen

Individual code victories and losses aside, the changing mechanics of the policy process bear close attention as practice decisions will be impacted down to the operational level, Schoppe advised. To date, the AMA and its RUC process has acted as a buffer to inconsistent and unfounded reimbursement cuts, but CMS’s decision in the proposed 2019 MPFS rule to collapse five categories of evaluation and management (E&M) codes into two is a major step toward unraveling that process.

While radiology may not feel the effects of this decision as much as other physicians, it has the attention of nearly everyone else in medicine. “Everybody talks about how much the radiology spend is, but even for a high-volume service it is less than 10% of codes billed by Medicare,” Schoppe said. “Half of the budget is E&M codes—Level 1,2,3,4,5. CMS proposes collapsing them down to two levels, a non-physician code and a physician-level code, period. On aggregate, the same amount of money will be distributed, but anyone who deals with complex patients—academic medical centers, the specialties with complex patients—they all will take a huge pay-cut while straightforward, typically suburban, well-to-do practices with not that many ill patients just got a whole lot more. This is the law of unintended consequences.” 

According to Schoppe, organized medicine was shaken by the flouting of the established process for valuation of professional services, causing many organizations to reassess their strategies. “If this pattern from CMS continues, this is what your professional RVU reimbursement is going to look like—a lot of serial cuts,” he predicted. 

Convergence of HOPPS and MPFS

Hospitals and radiology practices with technical exposure also are poised to feel pressure, beginning with the convergence of HOPPS and MPFS. “The DRA mandates that outpatient payment be the lower of HOPPS or MPFS,” noted Schoppe. Due to multiple MPFS cuts in the latter half of the 2010s, practices with technical assets have learned to live on the MPFS.

“The problem is that HOPPS has had so many cuts recently that a lot of those HOPPS payments are crossing below the MPFS payment,” Schoppe said. “We are seeing examples of where, say, ultrasound previously at a hospital was being billed at $112 and now that site-neutral policy cuts it by 50% to $56. That is just one example.”

Practices that own outpatient imaging centers are already being paid at the HOPPS rate for a number of codes, costing the House of Radiology about $70 million in 2017, Schoppe said. With many more codes within 5% to 15% of falling below the HOPPS threshold, the technical component of a number of MR and CT codes are in danger of dropping precipitously if the ACR does not succeed in convincing CMS to change how it calculates the MR and CT cost centers.

Site Neutral Payments

Hospitals are under great pressure from CMS’s site-neutral payment policy, and now the agency has started to chip away at hospital exceptions that were grandfathered into HOPPS. Schoppe offered the following example: if an off-campus hospital-based outpatient site adds a service for which the MPFS rate is lower after Medicare’s deadline, then they will no longer get an exception and that service will be paid at the lower rate. “This affects capital planning,” he said.

Furthermore, private payors are steering patients to outpatient imaging sites. United Healthcare has joined Anthem in saying it won’t pay for certain hospital-based CT and MR imaging procedures in 2019 if the service can be performed in an outpatient setting.

Schoppe said CMS was empowered to use alternative methodologies to value the technical portion of a code by the Protecting Access to Medicare Act of 2014, which gave the Secretary of Health and Human Services the discretion to use alternative methods to value technical reimbursements. This is how StrategyGen came to be hired by CMS to develop a proposal for pricing CT, MR, US in the outpatient office setting. 

He shared that StrategyGen arrived at higher numbers than Medicare for CT and MR technical payments, but the technical reimbursement for US was based on a room cost that was roughly one third of what Medicare currently uses, resulting in technical component cuts of 50%, which Medicare proposes to phase in over four years.

The unintended consequence of big reductions in direct practice expense components is that a few big cuts on the radiology side in US affects all of radiology because it reduces the radiology RVU technical pool (via shifting indirect practice expenses away from radiology since they are calculated based on the proportion of direct expenses a specialty has in the overall RVU pool). “They’re coming at you from all sides, because everything costs too much, but they are going to pursue it with a hammer not a scalpel,” Schoppe said.

In wrapping up his first talk, Schoppe emphasized that although CMS is heading toward value-based payment, the FFS fundamentals will remain integral to how we will account for services, build new reimbursement models, and live in an ACO world.

“It is our job as leadership or administrators to enable our practices to operate in ways that people want from their health care,” he said. “What they want is to see your values and feel your compassion. How do you put that back into medicine and get credit for it, while we sit here and deal with unintended consequences from Medicare? That is your collective action problem.”


Subscribe to Hub
News from around the coalition and beyond

Hub is the monthly newsletter published for the membership of Strategic Radiology practices. It includes coalition and practice news as well as news and commentary of interest to radiology professionals.

If you want to know more about Strategic Radiology, you are invited to subscribe to our monthly newsletter. Your email will not be shared.