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The 2001 Medicare fee schedule: good news for all internists

From the January 2001 ACP-ASIM Observer, copyright © 2001 by the American College of Physicians-American Society of Internal Medicine.

By Robert B. Doherty

This year, internists will be pleased to discover that Medicare's latest iteration of payment policies and rules will actually help them. Instead of making further cuts in physician service payments, Medicare has increased payments across the board.

Average gains for internal medicine

For the specialty as a whole, total Medicare payments will increase 5% on average. Rheumatologists will gain 9%, neurologists and nephrologists will gain 4% and pulmonologists will gain 3%.

Even two internal medicine subspecialties that absorbed deep payment cuts in past years escaped the ax this time around. Gastroenterologists will break even, while cardiologists will gain 1% in total Medicare payments.

(The specialty impact estimates are based on regulatory changes published in the Nov. 1, 2000, Federal Register under "Final rule on the CY 2001 Medicare Fee Schedule." The estimates include the combined impact of Medicare's fee schedule update, practice expense transition and other changes that affect payments for internists' services.)

Payments for office visits will increase substantially, with the biggest gains going to higher level visits billed disproportionately by internists. Payment for a midlevel established patient office visit (CPT 99213) increased almost 7% this year. Level 4 and 5 established patient office visits went up approximately 8%.

The positive changes for internal medicine did not happen accidentally. They resulted from effective advocacy by ACP-ASIM, the AMA and subspecialty societies to change the Medicare dollar conversion factor, resource-based practice expenses and other payment and coding issues.

The dollar conversion factor

The biggest single reason for internal medicine's strong showing is the fact that HCFA changed the way it calculates the annual update in the Medicare dollar conversion factor.

To determine the allowed fee schedule payment for a physician service, HCFA multiplies the conversion factor by the Medicare relative value units (RVUs). By law, HCFA must update its Medicare dollar conversion factor each year. HCFA determines that update by looking at how much Medicare spent during the previous year on physician services and comparing that figure to a target rate of allowed growth called the sustainable growth rate (SGR).

The SGR helps assure that Medicare expenditures on physician services do not grow faster than per capita changes in the economy's gross domestic product. (The SGR also takes into account enrollment trends and regulatory changes that may increase or decrease Medicare expenditures.) If actual expenditures are lower than the SGR, Medicare's annual inflation update is increased by that amount. If actual expenditures exceed the SGR, the inflation update is reduced by that amount.

The bottom line for internists is that HCFA was forced to use a higher (and more accurate) SGR to calculate the 2001 update. Because the SGR was higher, the conversion factor update is higher. The calendar year 2001 conversion factor update is 4.5%, so overall Medicare payments for physician services increased by this amount on Jan. 1. (Payment updates for specific services will be higher or lower than 4.5%, however, depending on changes in the relative value units for each service).

The SGR and 2001 update are both higher because ACP-ASIM, along with the AMA and other specialty societies, successfully lobbied Congress in 1999 to enact legislation requiring HCFA to use the most current, accurate data available to calculate the SGR. Before 1999, HCFA used inaccurate, outdated estimates of the gross domestic product and Medicare enrollment trends, costing physicians billions of dollars in reduced annual payment updates.

Resource-based practice expenses

The gains internists will see this year support ACP-ASIM's contention that improving the dollar conversion factor is the best way to address the continued controversy over resource-based practice expenses (RBPEs).

RBPEs are intended to pay physicians for their services based on relative differences in the practice expenses incurred providing each service. In 2001, 75% of practice expense payments are based on RBPEs and 25% on historical charges.

RBPEs continue to be a major source of controversy within internal medicine. Under RBPEs, most internists will gain when Medicare payments are calculated, but some will lose.

Along with the RVUs for work and malpractice costs, RBPEs determine the size of the slice from the physician payment pie that each physician (and each specialty) receives. It is the conversion factor, however, that determines how large the pie is. A higher conversion factor means a bigger pie—and a larger slice—for every internist.

For the majority of internists who gain from the continued transition to RBPEs, the higher dollar conversion factor for 2001 means an even greater gain in total Medicare payments. For those internists who lose from the transition to RBPEs, the higher conversion factor update in 2001 offsets the reductions caused by the continued transition to RBPEs, allowing them to break even in total payments. The College intends to continue advocating for changes in the law to increase the size of the pie for physician services, producing a win-win outcome for the entire specialty of internal medicine.

More good news

For the first time, Medicare will now pay for certification and recertification of home health care plans, a move strongly encouraged by the College. Medicare will now pay for initial certification at the level of a midlevel established patient office visit. HCFA also restored cuts it made last year to payments for critical care services, another change championed by ACP-ASIM and internal medicine subspecialties.

The final rule also changes HCFA RBPE methodology. HCFA decided to use more recent survey data on practice costs, as recommended by ACP-ASIM. It restored payments for gastroenterologists' nonphysician office personnel who provide services related to endoscopies done in a hospital or other health care facility, a change advocated by ACP-ASIM and the gastroenterology subspecialty societies.

HCFA's improvements don't satisfy all the concerns raised by the College and internal medicine subspecialties. Continued refinement and improvement remain important. But the improvements made in the final rule show the agency's good faith effort to address concerns about the RBPEs methodology.

Even without further improvements, Medicare's new payment policies should make 2001 a happy new year for all internists, regardless of their subspecialty.

Robert B. Doherty is ACP-ASIM's Senior Vice President for Governmental Affairs and Public Policy.

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