Budget cuts may result in single conversion factor
Action moves to authorizing committees
Although it’s no secret that physicians took a beating in last month’s federal budget negotiations, a few trends are starting to emerge. Among the changes that will have the most impact on your wallet: switching to a single conversion factor to mirror adjustments HCFA is making to the practice expense component of Medicare’s Resource-Based Relative Value Scale (RBRVS). This change is designed to eliminate payment variations among physician specialties. In concert with other proposed budget revisions, it could mean total annual Medicare cuts for surgeons of 1% to 6%.
The conversion factor switch and the practice expense revision together slash physician Medicare payments $7.3 billion over five years. "Not a pretty scenario," notes Robert Doherty, vice president of government affairs and public policy for the American Society of Internal Medicine in Washington, DC.
The budget would replaces the current three separate conversion factors for surgery, primary care, and other nonsurgical services with a single conversion factor for all physicians. This conversion factor is part of a new so-called sustainable growth rate (SGR) concept created to replace the current Medicare Volume Performance Stan dard (MVPS) system. The MVPS is a targeted growth level based on HCFA estimates of the appropriate level of growth in Medicare service volume.
The proposed single conversion factor hits surgeons hardest. The new conversion formula means a 9% reduction in payments for surgical procedures, compared to a 3.8% payment increase for primary care physicians. Other nonsurgical services, such as consults and diagnostic tests in hospitals, would jump 9.7 %.
But surgeons shouldn’t get alarmed yet. Supporters of the new single conversion factor contend this is not as big a setback for surgeons as it seems, because cuts in surgical payments are offset by increases in the nonsurgical services they provide.
The net effect on surgeons: Based on a $37.13 single conversion factor, the likely figure suggested by the Physician Payment Review Commission (PPRC), most surgeons will see their total Medicare revenue fall between 1% and 6%, PPRC estimates.
This is one of several reimbursement cuts many physicians can expect. Under current law, and before the budget deal, Medicare fee schedule payments were already projected to decline 21% in constant 1996 dollars. "Start with a 21% real dollar cut, mix in $7 billion in additional cuts over five years, and you are talking real money," notes one lobbyist.
In turn, expect the debate over a single conversion factor to continue in committee. At issue is whether the new conversion factor should be immediately implemented or phased in over time. If phased in, then Congress would have to make up the projected lost savings from somewhere else in the Medicare budget.
This change and others are leaving medical lobbyists in Washington reeling. "Physicians appear to be the only sector targeted for absolute cuts in [Medicare] payments," complains Alan Nelson, MD, executive vice president of the American Society of Internal Medicine in a May 8 letter to Rep. Bill Archer (R-TX), chairman of the House Ways and Means committee.
"When you add the Medicare changes in with HCFA’s practice expense proposal, my doctors could be looking at a projected 50% reduction in their gross Medicare income," states Katie Orrico, director of the American Society of Neurosurgeons’ Washington, DC office.
Add in the ratcheting effect where private-payer rates tend to shadow changes in Medicare’s relative value scale, and "many neurosurgeons and other specialists could be in for a 25% to 40% across-the-board cut in payments from all payers," predicts Orrico.
While budget negotiators claim a rock-solid agreement, many lawmakers and lobbyists were still in the dark when it came to the details as this issue of Physician’s Payment Update went to press. "Specifics have been hard to come by," notes Doherty. "That tells me they probably didn’t nail all the details down. This appears to be particularly true on the physician’s side, which seems to have been left pretty vague.
"Provided they stay within agreed budget parameters, this also means Senate Finance, House Ways & Means and the other authorizing committees will probably have a lot of flexibility when it comes to fleshing out the specifics," he adds.
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