Medicare fees expected to remain stable for eye care in 2005

Issue: October 2004

ByCharles B. Brownlow, OD

Charles B. Brownlow, OD, FAAO, is executive vice president of the Wisconsin Optometric Association and a health care consultant. He can be reached at PMI, LLC, 321 W. Fulton St., PO Box 608, Waupaca, WI 54981; (715) 942-0410; fax: (715) 942-0412; e-mail: Brownlowod@aol.com.

The early word is that ophthalmology services will receive a small increase in fees for next year — about one-fourth of the expected increase in the cost of living index. The Centers for Medicare and Medicaid Services (CMS), the federal government’s “managers” of Medicare, continue to study the relative values for all covered services, adjusting the values as they see the need. The relative values of many ophthalmology services have suffered sizeable reductions during the past 2 years, notably gonioscopy (92020), retinal imaging (92135) and pachymetry (76514).

The relative values for all services were originally established by Medicare in 1992, based upon many different factors, including the various elements required to provide each service:

office overhead
number of staff involved
education level of the provider of the service
malpractice expenses for the provider
office space (one room or two)
value of any equipment and supplies used

The values are relative, meaning that each service is compared to all other services. This theoretically permits CMS to arrive at an objective measure of the value, regardless of dollars, before creating its fee schedule.

The fee for each service is actually created by multiplying its relative value by a dollar amount, a constant. In Medicare’s system, the values are known as the Resource-Based Relative Value Scale (RBRVS), the values are called relative value units (RVUs) and the constant is referred to as the conversion factor (CF). Thus, each fee in Medicare’s system is established by multiplying the service’s relative value by Medicare’s conversion factor: Fee = RVU x CF.

Using this system, Medicare can control its costs by either controlling the relative values, the conversion factor or both, without considering doctors’ usual charges. The only role that doctors’ charges play in the equation anymore is that Medicare continues to pay the lesser of a doctor’s usual charge or the Medicare Fee Schedule amount on every claim.

At the time of this writing, Medicare expects a 1.5% across-the-board increase in fees to providers. The changes expected to be implemented next year do not affect each profession equally, however, as the values of some services have gone up and others have gone down.

In 2004, for example, the overall increase in Medicare reimbursements was set at 1.5%, while some of the ophthalmology services suffered dramatic decreases in reimbursement. Gonioscopy decreased by nearly 45%, and imaging decreased by approximately 39%, creating real financial issues for doctors providing care to significant numbers of glaucoma patients covered by Medicare. These were weakly counterbalanced by increases in other services provided by eye doctors, such as some of the office visits and a few of the surgical procedures and special ophthalmological services.

Set fees independent of Medicare

The whole discussion of Medicare reimbursement seems somewhat out of balance when doctors consider their entire patient base. Providers pay too much attention to what Medicare is doing with its reimbursement levels and too little attention to what their services are worth. Keep in mind that Medicare’s mission is to get as many services for Medicare recipients as possible for as little money as possible. If they could get enough doctors to work for $1 per patient, they’d do it.

In reality, a typical eye care practice in the United States will vary in its gross income attributable to Medicare, of course, with some offices having less than 20% of their gross from Medicare services and others having as high as 40%. Basing your fees upon Medicare’s fee schedule is a clear example of putting the cart before the horse or the tail wagging the dog.

Regardless of your percentage, however, it is still up to you to establish the value of the services you provide your patients. Medicare and other payers expect the providers to do their own thinking and planning and to report each service with a dollar value that the provider believes is appropriate. The payer receives the claim form, compares what the doctor bills to what its fee schedule allows and pays accordingly.

National fee survey data indicate that the fees for the 50^th percentile of MDs for exactly the same services ODs provide are nearly double the average of Medicare fees. In other words, based on those data, MDs at the 50^th percentile among their peers establish their usual fees at nearly 200% of the Medicare fee schedule. The main point here, however, is that they don’t set their fees based upon Medicare or any other payer. They set their fees based upon their own concept of their value to the patient and to the health care system.

It’s also very unlikely that they establish their fees so that they don’t have to write anything off when the payments arrive. Third parties intend to pay you less than you believe your services are worth. In other words, write-offs or adjustments are the norm in health care.

Let the games begin

Sometime in the next few months, Medicare will announce its intention to increase providers’ payments by an average of 1.5% or so. Providers’ groups will lobby Congress like crazy, filling campaign coffers in the process so that we can be bombarded with more inane political ads before the first Tuesday of November. Representatives and senators will feel the pain of the providers and will pass legislation to override the CMS and will award the providers with a larger increase than CMS proposed. CMS will respond by lowering the RVUs for a few commonly used services, probably including some eye care services, and life will go on.

Take-home point? Set the fees for your office based upon your understanding of the value of those services. Charge all payers, including private pay patients, the fees straight from your fee schedule. Smile when you’re paid in full by some payers, and smile when you have to write off some bucks when paid by others. Smile broadly when you have to write off a lot, because it means you finally have pride in your services, understand your value to your patients and are setting your fees accordingly.