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How cardiologists are paid
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Earlier this year, the federal government published data on the exact amount Medicare Part B paid to 888,000 individual practitioners of the $77 billion it spent for physician claims in 2012. Although the determinants of the amounts paid to each physician are more complicated than it would seem at first glance, including payment for pharmaceuticals and technical fees as well as personally delivered professional services, the disclosure of specific payments made to individuals heralds a new era of financial transparency, intended to engage the public and foster accountability to control health care spending.
Cardiologists care for patients covered by many payers, but a majority of adult heart patients in clinical practice settings are Medicare recipients. Unlike Medicare Part A payments to hospitals, which are made not for individual services but rather on the basis of diagnosis-related groups, most Medicare Part B payments made to physicians are based on a fee-for-service system.
How we got here
When Medicare was established in 1965, physicians were paid a “usual and customary fee,” based on average fees paid to other physicians in their area who performed the same service. Intended to avoid imposing centralized price controls, disrupting existing fee structures and to preserve autonomy in the patient-physician relationship, payments based on usual and customary charges resulted in distortions of the fee structure and disparities among various physicians, specialties and geographic regions. Medicare costs skyrocketed. In 1989, President Ronald Reagan signed the Omnibus Budget Act, which created the Medicare fee schedule, setting uniform federal payment rates for 7,000 distinct physician services, classified using the American Medical Association Current Procedural Terminology (CPT).
L. Samuel Wann
Medicare B payment for each CPT code is scored using a resource-based relative value scale (RBRVS) to determine a payment. The payment formula for each service contains three relative value units (RVUs): one for physician work, one for practice expense and one for malpractice expense. Each of these three components are corrected for geographic differences in wages and overhead costs, and then multiplied by the Medicare conversion factor to obtain a final dollar amount paid to individual practitioners for each CPT service provided.
RVUs for each CPT service code are initially determined by the AMA Specialty Society Relative Value Scale Update Committee (RUC), with final adjustment and approval by Medicare, which then sets the Medicare fee schedule. The RUC comprises representatives of various medical specialty societies who negotiate among themselves to determine the relative value of one procedure or service compared with another. The RUC process has been faulted by some for favoring higher payments for procedures, tests and hospital care as compared with payment for prevention, primary care and continuing care for chronic conditions, and for the lack of objective criteria to measure the value of various aspects of care delivered in producing desirable patient outcomes.
Medicare can and does adjust the Medicare fee schedule independent of the RUC’s recommendations. In one example, Medicare reduced compensation for services such as in-office nuclear cardiology stress tests, with the intended result to reduce the volume of stress tests and echocardiograms done in the office setting billed under Medicare Part B, but with a commensurate, and perhaps unintended, increase in the number nuclear stress tests and echocardiograms done in the hospital setting, with much higher technical fees billed under Medicare Part A. The Medicare Payment Advisory Commission, or MedPAC, an independent congressional advisory agency, recently recommended reducing hospital payments to be “site neutral,” matching the lower office rates. This is a continuation of many other successful efforts by Medicare to reduce spending for all diagnostic imaging.
As part of the Balanced Budget Act of 1997, Congress imposed the sustainable growth rate (SGR) process on the Medicare fee schedule, allowing physician payment to increase at a rate no greater than the rate of increase in the gross domestic product. The conversion factor used to translate RVUs into dollars is to be adjusted on March 1 of every year, to limit total Medicare expenditures, regardless of the volume of services provided. The volume of services provided by physicians to Medicare patients has increased dramatically since 1997, greatly exceeding increases in the GDP. Congress has suspended enforcement of the SGR 16 times to avoid drastic cuts in payments to physicians, with a cumulative “deficit” of $154 billion paid in claims to physicians in excess of the budget mandated by the SGR. As the SGR has not been enforced and Medicare costs have doubled in the past decade, the percent of total expenditures paid to physicians has decreased from 17% to 12%. Physician reimbursement has not been the dominant factor in increasing Medicare costs.
The present and the future
President Barack Obama’s Patient Protection and Affordable Care Act of 2010, or Obamacare, contains many provisions, some more contentious than others, intended to control health care costs while increasing availability and insurance coverage.
Seven million Americans have now signed up for health insurance through the new health care exchanges initiated by Obamacare. Many modifications or alternatives to the Medicare fee schedule for compensating physicians are being tested and implemented, potentially replacing fee-for-service with a payment model that does not so overtly reward provision of ever higher volumes of procedures and services.
One alternative to the Medicare fee schedule is to compensate for episodes of care, rather than for each service provided. These so-called “population-based” models make health care providers responsible for providing care for their patients at a fixed total price, placing the plan at risk “accountable” for the cost of care exceeding a fixed budget. “Accountable care” plans, which would replace the fee schedule in part or in whole, are intended to improve on the fixed per capita managed care payment plans initiated in the 1970s by enforcing performance and quality incentives intended to improve the true value of care delivered. Accountable care is intended not to encourage a willy-nilly reduction in the volume of care, primarily motivated by a desire to reduce expenditures, but to direct needed, high-value care to the right patients at the right time. This, of course, is easier said than done, as accurate and fair schema for measuring quality and value of each element of care and practical information systems technology needed to apply these standards in clinical practice are yet to be validated.
Pay-for-performance and value models are attractive at the population or health system level, rewarding organizations that efficiently provide complex clinical services that improve measurable patient outcomes in large, risk-adjusted groups of patients and healthy individuals. It is much more difficult to determine the value of an individual physician’s contribution to the enterprise when he or she provides isolated processes of care for individual patients.
Nevertheless, CMS is moving forward with a system to measure quality and cost for both hospitals (hospital value-based purchasing) and individual physicians (physician value-based payment modifier). When implemented, this system may reward or penalize individual physicians as much as 2% of their incomes. It is more likely that hospital operations will be responsive to this stimulus than any direct effect modifying individual physician behavior. Accurate and fair attribution of quality and cost to an individual physician operating in a complex environment, which includes primary care physicians, cardiologists and other specialists and non-physician providers, is a daunting if not insurmountable challenge.
Value of patient outcomes
How does one calculate the value contributed to an individual patient’s eventual outcome by the cardiologist who sees a patient in the coronary care unit as compared with the value provided by the cardiologist who interprets the echocardiogram, another who performs a coronary angiogram and yet others who perform electrophysiology procedures or implant left ventricular assist devices, often all in the same patient? Or, how does one compare those values to the value of a primary care practitioner who has been treating the very same patient’s hypertension and hyperlipidemia for the previous 20 years? And, patients themselves must also accept responsibility for their role in optimizing their own health care outcomes, particularly in the areas of prevention and care of chronic illness, avoiding expensive hospital stays.
Global payments for episodes of care delivered to individual patients by organizations that integrate primary and specialty physicians, inpatient and outpatient and preventive services sounds easy until one tries to precisely define an “episode” of care and then devise a system for issuing paychecks to individuals within this integrated system, attempting to fairly align incentives for all team members to be cost conscious in delivering high-quality, high-value care to patients. How can all work together to redesign our system of health care, aligning incentives to eliminate unnecessary and inappropriate care, increase efficiency and minimize redundancy and reduce costs while simultaneously maximizing our ability to deliver high quality, appropriate care to more and more patients?
Changes, solutions, alternatives
Fundamental change of this magnitude encounters massive inertia from a health care system in which payers, health care systems and practitioners have all invested billions of dollars in a fee-for-service infrastructure, much of it directed toward delivering an ever-increasing number of highly specialized services in hospital settings, rather than community-based, primary and preventive care. We cardiologists are quite uncomfortable with the prospects of working in a system in which procedures are viewed as cost centers rather than profit centers. Already, some private insurance carriers are excluding from their networks physicians who are deemed “high utilizers” of expensive tests and procedures without regard to whether this use was medically appropriate.
It is unlikely that the fee-for-service system will disappear. Traditionally insured patients will continue to provide revenue for cardiologists under a fee-for-service paradigm, and even if systems of integrated care and bundled payments for episodes of care prevail and accountable care organizations continue to expand, payments to individual cardiologists working within such systems will likely still be determined by some iteration of an RVU system, based on a fee-for-service model. The RVU fee-for-service model has proven resilient in motivating physician effort, measuring work and promoting individual accountability. The diversity of our health care system may be an advantage in developing and refining new methods for reimbursing cardiologists that combine elements of fee-for-service, salary, capitation and pay-for-performance models.
Many different solutions to controlling health care costs are being developed in both the private and public sectors. All have implications for how cardiologists are paid. Alternatives to Obamacare, other than outright repeal, include measures that would allow “balance billing.” Medicare Part B pays physicians 80% of the amount approved by the Medicare fee schedule, but to receive this payment, physicians must accept the fee schedule as full payment. Balanced billing would remove this restriction; physicians would set their own fees, and patients (and their private insurance policies) would be responsible for the full amount in excess of Medicare payment. US Rep. Paul Ryan, R-Wis., has proposed controlling Medicare expenditures by replacing the mandatory fee schedule with a defined benefit or “voucher” system. Fixed payments would be made to all Medicare recipients, giving patients and their insurance companies responsibility for negotiating fees and paying for their health care. The Ryan plan would essentially do away entirely with the federally mandated Medicare fee schedule. Indiana’s Republican Gov. Mike Pence announced plans to bypass both Obamacare and Medicaid to create a system of insurance premium assistance and health savings accounts for low-income workers, empowering patients themselves to control health care spending.
To come
These and many other proposals will be debated in Congress and statehouses and with voters in the months and years to come. We are all challenged to deliver desired and needed health care to an increasing number of patients while controlling costs.
Disclosure: Wann reports no relevant financial disclosures.