Survey results show wide spread in ODs’ fees

Issue: October 2005

ByCharles B. Brownlow, OD

Charles B Brownlow, OD, FAAO [photo]
Charles B. Brownlow

I’ve been doing fee analyses through PMI, LLC for many years, using a format that was created more than 10 years ago.

The fee analysis produces a spreadsheet that permits doctors to see their fees in a vertical column, flanked on one side by data from a national fee survey and on the other side by fees created from Medicare’s relative values and the national average for Medicare’s conversion factor. One of the impressions I have from being exposed to the fees of hundreds of doctors of optometry and a fair number of ophthalmologists is that the fees vary widely. Even in a relatively small urban area, fees will vary by as much as 50%. This is a positive sign that doctors of optometry understand, respect and comply with state and federal laws regarding such matters in that collusion is non-existent across this class of providers.

Fees set conservatively

Another finding that leaps out from the data I’ve gathered is that doctors of optometry tend to be very conservative as they establish their fees, including their fees for medical services. The fees from the randomly selected doctors of optometry included in my survey average approximately 42% less than the 50^th percentile data from a national fee survey of MDs’ fees. That is a very striking difference, considering that the doctors of optometry are providing services described by the same definitions from Current Procedural Terminology (CPT, American Medical Association), that they are held to the identical standards in courts of law and that they provide the services with phenomenal safety and efficacy, as reflected in the very low rates for optometric professional liability insurance.

The accompanying spreadsheet is a compilation of data from 50 optometric practices, each of which was randomly selected from among several hundred fee analyses we’ve done for doctors of optometry. In each case, we were careful to draw only from fee schedules that are no longer in use, and in all cases, the data are at least 6 months old. These are conditions we believe to be important to ensure that no one reading the data would come to any improper conclusions; comparing their own fee data to the results of these calculations, for example.

The results are offered only to provide somewhat of a “snapshot” of how fees varied among this group of practices sometime in the past. We can be fairly confident that most of the schedules used for the survey have changed since they were submitted and that some of the fees have been increased and some have been decreased.

Comparing fee data

The simplest way to compare fee data across a large sample is to distill each fee schedule into a single mathematical constant. In this case, that constant is referred to as the Conversion Factor (CF) and appears at the bottom of each of the columns, 3 to 6.

This constant is calculated algebraically by beginning with the formula, Fee = Relative Value x Conversion Factor. This formula was created for Medicare in the early 1990s and now is used by Medicare and many other payers in calculating reimbursements for providers. The relative value (RV) for each CPT code was created on behalf of the Medicare system originally prior to 1992, and many have since been adjusted up or down by the Centers for Medicare and Medicaid services (CMS), the federal government’s “managers” of Medicare.

Creating relative values

The relative value of each service is meant to present each service in a side-by-side comparison with the values of all other services. For example, the process shows that a more complex service has a higher relative value than a less complex service. In eye care, we might compare the level 1 office visit for an established patient, 99211, to removal of a foreign body from the cornea using a slit lamp, 65222, to get an idea of their respective relative values. The relative value of 99211 is 0.57, whereas the relative value for 65222 is 1.87. In the minds of the creators of the relative values (collectively, Medicare’s Resource-Based Relative Value Scale), the removal of the foreign body has a “value” 3.28 times the value of the level 1 office visit, established patient.

Many factors are considered when choosing the relative values, and we don’t have the time or space to consider them in the context of this article. Suffice it to say that these relative values provide the basis for a comparison of one service to another and to create a constant with which unrelated and very disparate fee schedules can be compared.

By knowing the relative values for various services and by knowing the values assigned to each of those services by a doctor or a payer, we can derive the constant that we are looking for. We first adjust the formula to read Conversion Factor = Fee / Relative Value. Then, it is a simple matter to total the fees for a list of services and total the relative values for those same services. Again referring to the chart, the total of the fees in column 3 is $4,497.22, and the total of the relative values for those services (column 2) is 91.12. Putting these figures into the formula CF = Fee / RV, yields CF = $4,497.22 / 91.12 = $59.01. This calculation makes no reference to specific fees, it just compares the total fee schedule to other total fee schedules.

Comparing mean, median

Another illustration of the interesting data resulting from this exercise is to compare the final two columns, representing the mean (average) of the 50 fee schedules and the median – half of the values were above this number and half below. Referring to the bottom figures, we see that the conversion factors for the two columns are identical, the total fees for the two are within $3.52 of each other, yet individual fees vary dramatically between the two columns.

Consider the fees for 65220, removal of foreign body without the slit lamp. The mean value from the survey is $106.81, while the median is $76.50. For other services, the values in the “median” column are higher than those in the “average” column (e.g., 99203, 99205, 92100, 92250, etc).

The consideration of any of these data shows trends more than it shows specifics, which makes it useful for comparison without providing any clear direction to a reader as to whether his or her fees or reimbursement levels should be higher than or lower than they currently are. These figures are additional data, just as a telephone survey of other providers in the neighborhood would be, and just as a spreadsheet showing the reimbursement levels for 50 or more insurers or other payers would be.

Value of services

The most striking information from comparison of the data seems to be the spread between column 3 and column 4. It is difficult to imagine that one doctor believes the value of a service to be a fraction of what another doctor believes the value of the identical service to be. Even in the case of a very commonly provided service, such as closure of punctum by plug, 68761, the highest fee in the sample of 50 fee schedules is more than three times the lowest: $300 vs. $90.

This dramatic demonstration of the wide variance among this sample of fee schedules is also represented in the conversion factors for columns 3 and 4, $59.01 compared to $18.41. In the case of the lowest conversion factor, it is less than 50% of the conversion factor for the national average of 2005’s fee schedules for Medicare, $37.90. The wide variance is made more interesting considering, as mentioned earlier, that these services are provided by doctors with the same license, complying with the same CPT definitions and the same standards of care.

Another interesting finding is that the schedules of fees included in the survey showed no geographical pattern nor any clustering of data toward the high or the low end of the range. The spread of fees for individual services and the spread for the conversion factors were quite even among the sample. An illustration of that can be made by taking an average of the highest conversion factor and the lowest, yielding ($59.01 + $18.41) / 2 = $38.71, a number just $2 below the mean and median conversion factor.

We hope that these data will be of interest. As doctors of optometry continue to provide more medical eye care and as more payers include doctors of optometry as providers within their plans, data will become progressively more important to all involved. This column will provide additional information in future issues regarding fee data, possibly with regional comparisons or other segmentation of data to maximize the value to the reader.

For Your Information:

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.