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Centers for Medicare and Medicaid Services announce new fee schedule
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The Centers for Medicare and Medicaid Services (CMS, formerly Health Care Financing Administration) have announced final changes in their method for reimbursing providers and in the 2002 Medicare Fee Schedule. The federal government had reimbursed all providers based upon percentages of the providers’ fees until 1992, when it introduced the Resource-Based Relative Value System (RBRVS). RBRVS was based upon a study conducted at Harvard University, in which each service in Current Procedural Terminology (CPT) was assigned a numeric value. The value of each service was assigned based upon its relationship to all other services.
For example, a level one office visit for established patients was given a lower relative value (.52) than a comprehensive ophthalmological service for an established patient (2.29). This type of comparison was made for all office visit codes, all surgical codes and all special ophthalmological service codes, establishing a set of relative value units for them all. That set was named RBRVS.
Further, each of the values is meant to reflect the actual costs involved in providing the service (e.g., office overhead), the amount of time and skill involved, the risk to the doctor and patient, the severity of the patient’s condition and other factors. No dollar amount is associated with the relative values for each service.
The conversion factor
To establish its fee schedule, Medicare simply multiplies the relative value units for all services (more than 7,000 separate services) by a conversion factor that it calculates each year. Thus, the fee equals the relative value unit multiplied by the conversion factor. Medicare arrives at its conversion factor possibly by estimating the numbers and types of services it expects its insured will require during the year and estimating how much money it expects to spend for that care. Then it is a simple matter of adding the total relative value units for all services and dividing that number into the total dollars available to create the conversion factor. That conversion factor is then multiplied by the relative value for each service to create the Medicare Fee Schedule.
Those of you who have been around for a while may remember that the conversion factor for the first year of RBRVS, 1992, was about $30.11. Thus, in 1992, the fee for services with the relative values referred to earlier would have been .52 × $30.11 = $15.66 and 2.29 × $30.11 = $68.95.
A new schedule for 2002
The first few years of the new system for reimbursing providers caused some problems, however, as some of the resulting fees were dramatically different than usual and customary fees for the same services. Medicare addressed those differences by permitting the new system to phase in over a period of years. Hence, 2002 will be the first year that the entire schedule will be computed purely from the relative values and next year’s conversion factor. Usual and customary charges will no longer be involved in the development of the fee schedule.
Keep in mind that the provider is required to report to Medicare all covered services and to report the services with the fees normally charged by the provider. Medicare then pays the lower of the doctor’s fee or the fee from the Medicare Fee Schedule.
The actual fee schedule for 2002 will be published in the federal government’s official newspaper, The Federal Register, this month and will take effect Jan. 1, 2002. Information about the Medicare Fee Schedule is public and is available to all citizens, including health care providers. The current schedules are always available for download from the HCFA Web site (probably soon to become the CMS Web site) at www.hcfa.gov/medicare. A lot of other good information’s contained there, too, including copies of the 1997 Documentation Guidelines for use in choosing Evaluation and Management office visit codes.
Values increased for office settings
As another promise for next year’s Medicare Fee Schedule, fees for office-based services will again get a boost. This is a continuation of Medicare’s effort to increase the relative values for services provided in office settings — where the provider’s overhead is higher — and to decrease relative values for services provided in other settings, such as hospitals and nursing homes. Optometry will fare very well here again because most of our services are office based, whereas some surgical specialties will see their fees reduced again.
Providers who are working exclusively in hospitals, nursing homes or surgical centers will likely see decreases in their fees again next year, whereas providers working in offices will see single-digit increases in their fees for 2002.
Glaucoma eye exams covered
As another favorable change we can expect in 2002, eye examinations will be covered services when performed for the purpose of ruling out the presence of glaucoma in Medicare patients. This is an extension of a policy common to nearly all states in 2001 that considered eye exams to be medically necessary if the doctor is checking for ocular side effects of systemic diabetes, even if none had been previously identified or found during the examination.
Again, those of you who know Medicare well know that Medicare has never covered routine services or examinations to rule out the presence of disease or departures from normal. Coverage for eye exams to rule out glaucoma and ocular complications from systemic diabetes indicates that Medicare is recognizing the importance of early detection and treatment of eye conditions.