Medicare Physician Payments
Fees Could Better Reflect Efficiencies Achieved When Services Are Provided Together Gao ID: GAO-09-647 July 31, 2009Medicare's physician fees may not always reflect efficiencies that occur when a physician performs multiple services for the same patient on the same day, and some resources required for these services do not need to be duplicated. In response to a request from Congress, GAO examined (1) the Centers for Medicare & Medicaid Services' (CMS) efforts to set appropriate fees for services furnished together and (2) additional opportunities for CMS to avoid excessive payments when services are furnished together. GAO examined relevant policies, laws, and regulations; interviewed CMS officials and others; and analyzed claims data to identify opportunities for further savings.
CMS has taken steps to ensure that physician fees recognize efficiencies that occur when certain services are commonly furnished together, that is, by the same physician to the same beneficiary on the same day, but has not targeted services with the greatest potential for savings. CMS is reviewing the efforts of a workgroup created by the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) in 2007 to examine potential duplication in resource estimates for services furnished together. However, the RUC workgroup has not focused on services that account for the largest share of Medicare spending. For this and other reasons, its methodology to identify and review services furnished together likely will result in limited savings. The workgroup's process is also resource intensive because it depends on input and consensus from specialty societies. Independent of the RUC, CMS has implemented a multiple procedure payment reduction (MPPR) policy for certain imaging and surgical services when two or more related services are furnished together. Under an MPPR, the full fee is paid for the highest-priced service and a reduced fee is paid for each subsequent service to reflect efficiencies in overlapping portions of the practice expense component--clinical labor, supplies, and equipment. For example, a nurse's time preparing a patient for a medical procedure or technician's time setting up the required equipment is incurred only once. The MPPR produced savings of about $96 million in 2006 for imaging services. However, the scope of the policy is limited because the policy does not apply to nonsurgical and nonimaging services commonly furnished together, nor does it specifically reflect efficiencies occurring in the physician work component--the financial value of a physician's time, skill, and effort. For example, when two services are furnished together, a physician reviews a patient's medical records once, but the time for that activity is generally reflected in fees paid for both services. CMS has additional opportunities to reduce excess physician payments that can occur when services are furnished together and Medicare's fees do not reflect the efficiencies realized. GAO's review found that expanding the MPPR to reflect practice expense efficiencies that occur when nonsurgical, nonimaging services are provided together could reduce payments for these services by an estimated one-half billion dollars annually. GAO's review also indicated that expanding the existing MPPR policy to reflect efficiencies in the physician work component of certain imaging services could reduce these payments by an estimated additional $175 million annually. Under the budget neutrality requirement, by law, savings from reductions in fees are redistributed by increasing fees for all other services. Thus, these potential savings would accrue as savings to Medicare only if Congress exempted them from the budget neutrality requirement, as was done in the Deficit Reduction Act of 2005 for savings from the changes to certain imaging services fees.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-647, Medicare Physician Payments: Fees Could Better Reflect Efficiencies Achieved When Services Are Provided Together
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
July 2009:
Medicare Physician Payments:
Fees Could Better Reflect Efficiencies Achieved When Services Are
Provided Together:
GAO-09-647:
GAO Highlights:
Highlights of GAO-09-647, a report to congressional requesters.
Why GAO Did This Study:
Medicare‘s physician fees may not always reflect efficiencies that
occur when a physician performs multiple services for the same patient
on the same day, and some resources required for these services do not
need to be duplicated. In response to a request from Congress, GAO
examined (1) the Centers for Medicare & Medicaid Services‘ (CMS)
efforts to set appropriate fees for services furnished together and (2)
additional opportunities for CMS to avoid excessive payments when
services are furnished together. GAO examined relevant policies, laws,
and regulations; interviewed CMS officials and others; and analyzed
claims data to identify opportunities for further savings.
What GAO Found:
CMS has taken steps to ensure that physician fees recognize
efficiencies that occur when certain services are commonly furnished
together, that is, by the same physician to the same beneficiary on the
same day, but has not targeted services with the greatest potential for
savings. CMS is reviewing the efforts of a workgroup created by the
American Medical Association/Specialty Society Relative Value Scale
Update Committee (RUC) in 2007 to examine potential duplication in
resource estimates for services furnished together. However, the RUC
workgroup has not focused on services that account for the largest
share of Medicare spending. For this and other reasons, its methodology
to identify and review services furnished together likely will result
in limited savings. The workgroup‘s process is also resource intensive
because it depends on input and consensus from specialty societies.
Independent of the RUC, CMS has implemented a multiple procedure
payment reduction (MPPR) policy for certain imaging and surgical
services when two or more related services are furnished together.
Under an MPPR, the full fee is paid for the highest-priced service and
a reduced fee is paid for each subsequent service to reflect
efficiencies in overlapping portions of the practice expense component”
clinical labor, supplies, and equipment. For example, a nurse‘s time
preparing a patient for a medical procedure or technician‘s time
setting up the required equipment is incurred only once. The MPPR
produced savings of about $96 million in 2006 for imaging services.
However, the scope of the policy is limited because the policy does not
apply to nonsurgical and nonimaging services commonly furnished
together, nor does it specifically reflect efficiencies occurring in
the physician work component”the financial value of a physician‘s time,
skill, and effort. For example, when two services are furnished
together, a physician reviews a patient‘s medical records once, but the
time for that activity is generally reflected in fees paid for both
services.
CMS has additional opportunities to reduce excess physician payments
that can occur when services are furnished together and Medicare‘s fees
do not reflect the efficiencies realized. GAO‘s review found that
expanding the MPPR to reflect practice expense efficiencies that occur
when nonsurgical, nonimaging services are provided together could
reduce payments for these services by an estimated one-half billion
dollars annually. GAO‘s review also indicated that expanding the
existing MPPR policy to reflect efficiencies in the physician work
component of certain imaging services could reduce these payments by an
estimated additional $175 million annually. Under the budget neutrality
requirement, by law, savings from reductions in fees are redistributed
by increasing fees for all other services. Thus, these potential
savings would accrue as savings to Medicare only if Congress exempted
them from the budget neutrality requirement, as was done in the Deficit
Reduction Act of 2005 for savings from the changes to certain imaging
services fees.
What GAO Recommends:
GAO recommends that the Acting Administrator, CMS, ensure that
physician fees reflect efficiencies occurring when services are
commonly furnished together. GAO suggests that Congress consider
exempting any resulting savings from federal budget neutrality so that
savings accrue to Medicare. The Department of Health and Human Services
concurred with GAO, stating it plans to review these services. The
American Medical Association disagreed with aspects of our report,
including exempting savings from budget neutrality. GAO continues to
believe that Congress should consider such an exemption to help ensure
appropriate payments for Medicare physician services.
View [hyperlink, http://www.gao.gov/products/GAO-09-647] or key
components. For more information, contact James C. Cosgrove at (202)
512-7114 or cosgrovej@gao.gov.
[End of section]
Contents:
Letter:
Background:
CMS Has Recognized Efficiencies in Some Services, but Has Not Focused
on High-Spending Services:
CMS's MPPR Policy Could Be Applied to Other Services Commonly Furnished
Together and Expanded to Reflect Efficiencies in Physician Work:
Conclusions:
Recommendation for Executive Action:
Matter for Congressional Consideration:
Agency and Professional Association Comments and Our Evaluation:
Appendix I: Estimating Potential for Further Savings from Efficiencies
in Multiple Services:
Appendix II: Examples of Vignette and Practice Expense Estimate:
Appendix III: Comments from the Department of Health and Human
Services:
Appendix IV: GAO Contact and Staff Acknowledgments:
Figures:
Figure 1: Overview of Workgroup Process to Identify Misvalued Services
Furnished by the Same Physician to the Same Beneficiary on the Same
Day:
Figure 2: Example of AMA Vignette for CPT Code 92235, Eye Exam with
Photos:
Figure 3: Example of AMA Practice Expense Estimates for CPT Code 92235,
Eye Exam with Photos:
Abbreviations:
AMA: American Medical Association:
CMS: Centers for Medicare & Medicaid Services:
CPT®: Current Procedural Terminology:
CT: computed tomography:
DRA: Deficit Reduction Act of 2005:
HHS: Department of Health and Human Services:
MedPAC: Medicare Payment Advisory Commission:
MPPR: multiple procedure payment reduction:
RBRVS: Resource-Based Relative Value Scale:
RUC: AMA/Specialty Society Relative Value Scale Update Committee:
RVU: relative value unit:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 31, 2009:
The Honorable Frank Pallone:
Chairman:
The Honorable Nathan Deal:
Ranking Member:
Subcommittee on Health:
Committee on Energy and Commerce:
House of Representatives:
The Honorable Pete Stark:
Chairman:
Subcommittee on Health:
Committee on Ways and Means:
House of Representatives:
The Honorable Dave Camp:
Ranking Member:
Committee on Ways and Means:
House of Representatives:
Spending on Medicare Part B physician services grew at an average
annual rate of 6 percent from 1997 through 2008, more than twice the
growth rate in the national economy over this period.[Footnote 1] This
rapid spending growth underscores the importance of ensuring that
payments under Medicare's physician fee schedule, which includes fees
for each of over 7,000 services, such as office visits, surgical
procedures, and tests, are appropriate and encourage efficient use of
resources.
Physician fee schedule payments may be excessive for some services
because efficiencies that occur when two or more services are furnished
together are not reflected in the fee schedule, and thus Medicare
essentially pays twice for the portions of these services that overlap.
In setting payments for services under the fee schedule, the Centers
for Medicare & Medicaid Services (CMS)--the federal agency that
administers the Medicare program--estimates resources required to
provide three separate components of each service: the physician work
component (which reflects the physician's time, skill, and effort); the
practice expense component (which reflects operating expenses, such as
rent, utilities, and the salaries of nurses, technicians, and
administrative staff); and the malpractice component (which reflects
the costs of obtaining professional liability insurance).[Footnote 2]
Each service is generally considered to be discrete and stand-alone.
But when two or more services are furnished by the same physician to
the same beneficiary on the same day, efficiencies may occur because
some portions of the physician work component, the practice expense
component, or both overlap and are incurred only once. For example,
certain physician work activities--such as reviewing the patient's
medical history or dictating a report for the medical record and
following up with the referring physician after a medical procedure--
occur only once. Similarly, certain practice expenses--such as a
nurse's time spent in obtaining the patient's consent and preparing the
patient for the procedure, or a technician's time in setting up the
required equipment--are incurred only once. However, payment for these
overlapping portions is generally included in each fee, resulting in
excessive payments by Medicare.[Footnote 3]
You asked us to explore options to ensure that the physician fee
schedule appropriately reflects efficiencies occurring across all types
of services that are commonly furnished together. This report examines
(1) CMS's current efforts to ensure that Medicare physician fees
reflect efficiencies in services commonly furnished together and (2)
additional opportunities for CMS to avoid excessive payments for
Medicare physician services commonly furnished together.
To determine how CMS ensures that Medicare physician fees reflect
efficiencies for services commonly furnished together, we reviewed
CMS's relevant payment policies and applicable laws and regulations. We
interviewed officials from several organizations to discuss other
instances where the physician fee schedule could better reflect
efficiencies for these services. These organizations included CMS, the
Medicare Payment Advisory Commission (MedPAC), and 7 of the 15 Medicare
contractors that process and pay Part B claims.[Footnote 4] We also met
with representatives from the American Medical Association (AMA) and
AMA-sponsored physician panels that assist CMS in developing estimates
of resources required to deliver physician fee schedule services to
discuss their initiatives to refine resource estimates for services
commonly furnished together.
To determine additional opportunities for CMS to avoid excessive
payments for services that are commonly furnished together, we
conducted a systematic review of all pairs of services furnished by the
same physician to the same beneficiary on the same day from 2006
Medicare claims data.[Footnote 5] We excluded pairs subject to an
existing Medicare billing or payment policy that reflected efficiencies
when these services were furnished together. From the remaining service
pairs, we selected the 350 that accounted for the highest share of
Medicare spending and met with Medicare contractor Medical Directors
and their staffs in five different states to determine whether
efficiencies occurred in any of these service pairs. We also consulted
with other experts from three medical specialty societies and reviewed
AMA resource estimates of physician work and practice expenses.
[Footnote 6] On the basis of these discussions and analyses, we
estimated resulting savings to the Medicare program if fees were
adjusted to reflect efficiencies occurring in the service pairs
identified by the contractors. Our estimate of savings is based upon
the premise that providers do not change their practice patterns (for
example, by scheduling services on different days) in response to these
fee adjustments. Appendix I provides more detailed information on our
methodology to estimate the potential for further savings from service
pairs commonly furnished together.
We examined the reliability of the claims data used in this report by
performing appropriate electronic checks, including those for obvious
errors, such as missing values and values outside of expected ranges.
We also interviewed officials who were knowledgeable about the data,
including CMS and Medicare contractor officials. We determined that the
claims data we used were sufficiently reliable for purposes of our
analysis because they are used by the Medicare program as a record of
payments to health care providers. As such, they are subject to routine
CMS scrutiny.
We conducted our work from May 2008 through July 2009 in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
Background:
Medicare's physician fee schedule includes payments for over 7,000
services, such as office visits, surgical procedures, and tests.
[Footnote 7] Most services are defined as discrete and stand-alone in
that they may be furnished independently of other services, but a small
number of services are defined as supplemental because they are
commonly furnished along with other primary services.
Process for Defining Medicare Fee Schedule Services:
Services under the Medicare fee schedule are described and defined by
the AMA's Current Procedural Terminology (CPT) Editorial Panel, and
each service is assigned a five-digit identifier, or code. The CPT
Editorial Panel revises and modifies CPT codes based largely on
suggestions from specialty societies and the CPT Editorial Panel's
Advisory Committee.[Footnote 8] Code revisions require research from
both CPT staff and specialty society members who assist the CPT
Editorial Panel in its work. According to AMA officials, the CPT
process generally takes about 14 months from the time potential codes
are first identified by specialty societies to the final revision or
development of a new code.
Process for Developing and Updating Resource Estimates Used to Set
Fees:
CMS relies on the AMA/Specialty Society Relative Value Scale Update
Committee (RUC)--an expert panel that includes members from national
physician specialty societies--to develop and update on an ongoing
basis the resource estimates upon which fees are based.[Footnote 9]
Specialty societies identify services for review, gather data on
resource use, and make proposals to the RUC on resource estimates for
services. Physician work estimates are developed using vignettes of
each service furnished to a typical patient, where the specific
physician activities are described for three phases--before, during,
and after the service.[Footnote 10] Practice expense estimates
considered direct--clinical labor (that is, the nurse's or technician's
time), equipment, and supplies--are developed similarly for each of
these phases.[Footnote 11],[Footnote 12] (App. II provides an example
of a vignette and practice expense estimates for one service.) The RUC
evaluates proposals submitted by the specialty societies and makes
recommendations for final consideration by CMS. The RUC meets three
times a year, and, on average, reviews approximately 300 codes
annually. The RUC also assists CMS in the Five-Year Review process--a
review of fees for all services that the agency is required by law to
conduct at least every 5 years to account for changes in medical
practice.[Footnote 13]
While CMS may reject or modify the RUC's recommendations, from 1993
through 2009, the agency accepted over 90 percent of the
recommendations pertaining to 3,600 new and revised CPT codes. CMS may
at times also make changes to fees for services independent of RUC
recommendations.
Initiatives to Account for Efficiencies in Multiple Services:
Efficiencies in multiple services that are furnished together may be
factored into fees primarily in two ways. First, the RUC and specialty
societies generally attempt to consider whether other services are
typically furnished along with the service they are reviewing to avoid
duplication of the resources associated with physician work and
practice expenses that may be incurred only once. For example, certain
activities included in the practice expense component, such as
preparing the patient before a procedure and cleaning the room after
the procedure, are performed only once when two services are furnished
together. However, the RUC has not reviewed every service; therefore,
estimates are outdated for a large portion of services and may no
longer reflect current technology and medical practice. For example,
resource estimates for certain image-guided surgeries were developed
when a surgeon performed the surgery and a radiologist performed the
related imaging, whereas in current medical practice, a single
physician tends to do both tasks. Further, for supplemental services,
the RUC ensures that the physician work and practice expense resources
required before and after the service are not duplicated.
Second, CMS has, independent of the RUC and specialty societies,
implemented its own policies to recognize efficiencies occurring in
certain services. CMS has a long-standing policy called a multiple
procedure payment reduction (MPPR) to avoid duplicate payments for
portions of practice expenses that are incurred only once when two or
more surgical services are furnished together by the same physician
during the same operating session.[Footnote 14] CMS expanded the MPPR
to include certain diagnostic imaging services in 2006.[Footnote 15]
Under the MPPR policy, the full fee is paid for the more expensive
service, but a reduction is applied to the fees for each subsequent
service. Generally, a 50 percent reduction is applied to fees for
surgical services performed during the same operating session and a 25
percent reduction is applied to fees for certain imaging services that
are furnished together.[Footnote 16]
Budget Neutrality:
By law, updates to fees are required to be budget neutral--that is,
they cannot cause Medicare's aggregate payments to physicians to
increase or decrease by more than $20 million.[Footnote 17] As a
result, any "savings" realized from reducing the fees for particular
services do not accrue to the Medicare program but are redistributed
across all services, resulting in a slight increase to the fees for all
other services. In some instances, Congress has overridden budget
neutrality to ensure that payment changes result in savings to
Medicare. For example, through the Deficit Reduction Act of 2005 (DRA),
Congress mandated that savings resulting from the MPPR for certain
imaging services that were furnished together be exempted from budget
neutrality.[Footnote 18] As a result, annual savings of approximately
$96 million were not redistributed across all services, but accrued as
savings to the Medicare program in 2006.
CMS Has Recognized Efficiencies in Some Services, but Has Not Focused
on High-Spending Services:
CMS has taken steps to recognize efficiencies for services commonly
furnished together through the use of the RUC process and the MPPR, but
has not targeted services with the greatest potential for savings, and
the RUC process depends on specialty societies. The MPPR is limited in
scope because it does not apply to a broad range of services, nor does
it capture efficiencies occurring in the physician work component.
RUC Workgroup Examines Efficiencies in Services Commonly Furnished
Together, but Does Not Target Services with Greatest Potential for
Savings:
CMS stated that it is reviewing the efforts of a workgroup recently
created by the RUC to identify efficiencies in services that are
commonly furnished together. In March 2006 MedPAC criticized the RUC
for recommending more increases than decreases in resource estimates,
largely because the RUC had focused on services that specialty
societies believed were undervalued. In response, the RUC established
the Five-Year Review Identification Workgroup in October 2006 to
identify potentially misvalued services. The workgroup used several
criteria to identify these services, one of which was to examine
services commonly furnished together to determine if such services
should be bundled to reduce duplication in the physician work
component. The workgroup requested data from CMS on services commonly
furnished together in 2007. CMS forwarded a list of over 2,200 service
pairs that were furnished together more than 50 percent of the time,
but did not tell the workgroup how to prioritize its review of the
services. Instead, the workgroup developed its own methodology,
targeting service pairs that were almost exclusively furnished
together.
While the methodology represents a reasonable first step to identify
potentially misvalued services, and the workgroup has expended
considerable effort and resources in implementing it, the methodology
will likely result in limited savings to Medicare. This is because the
group did not systematically focus on services that accounted for a
large share of Medicare spending, nor did it exclude supplemental
services with limited potential for savings.
The workgroup focused on service pairs in which the two services were
performed together at least 90 percent of the time. The workgroup
classified service pairs into two types: type A, in which both services
in the pair were performed together at least 90 percent of the time,
and type B, in which one service was performed with another service at
least 90 percent of the time in a unidirectional relationship (that is,
when the first service was performed, the second service was also
performed at least 90 percent of the time, but when the second service
was performed, the first service was not performed at least 90 percent
of the time). The workgroup identified 22 type A and 31 type B service
pairs where possible duplication was occurring in physician work.
[Footnote 19]
However, these service pairs would likely result in limited savings.
First, 19 of the 22 type A pairs and 20 of the 31 type B pairs included
supplemental services for which further reductions in fees would likely
be small. For example, in performing a three-dimensional heart wall
imaging study (also known as a myocardial perfusion imaging study),
physicians may take additional measurements of blood flow or heart wall
function. These additional services are supplemental to the primary
service and are therefore already priced to exclude overlap in practice
expenses incurred before and after the service. Second, spending for
the lower-priced service in the remaining pairs was minimal: $27
million for the remaining 3 type A services and $117 million for the
remaining 11 type B services. Thus, potential savings from combining
the remaining service pairs would likely be no more than half these
respective amounts, assuming a 50 percent discount was applied to the
lower-priced service--a generous assumption, since that is the maximum
discount that CMS has applied to services under the MPPR.
Another limitation of the workgroup's review of services commonly
furnished together is that its process is resource intensive. This
element is inherent in a process based on input and consensus from
specialty societies. The workgroup follows the RUC's process in that it
solicits proposals from specialty societies for potential revisions to
the service pairs. The proposals must then be approved by the CPT
Editorial Panel, the RUC, and CMS (see figure 1).
Figure 1: Overview of Workgroup Process to Identify Misvalued Services
Furnished by the Same Physician to the Same Beneficiary on the Same
Day:
[Refer to PDF for image: illustration]
1) Workgroup forwards service pairs to related specialty societies for
proposals to combine services.
2) Specialty societies survey their members and make proposals to the
workgroup.
3) If the specialty societies and the workgroup concur that services
should be combined or revised, the proposed services are forwarded to
the CPT Editorial Panel.
4) The CPT Editorial Panel considers the proposals. Decisions to
combine or revise services are forwarded to the RUC.
5) The RUC recommends resource estimates for the new services after
receiving input from specialty societies.
6) CMS reviews RUC recommendations and issues a proposal in the Federal
Register for up to 60-day public comment period.
7) After reviewing comments, CMS issues its decisions in final rule.
Source: GAO analysis.
[End of figure]
To date, the workgroup has identified only a limited number of
misvalued services commonly furnished together. Since the review of
service pairs that was started in 2007, the workgroup has identified
three misvalued services; at the workgroup's recommendation, these
(echocardiography) services were combined into a single code in 2009.
The earliest any additional changes might be implemented for the type A
and B service pairs first identified in 2007 would be 2010.[Footnote
20]
Finally, the workgroup is required to undertake other tasks, including
reviewing services because of technological changes or because of high
growth, utilization, or intensity.[Footnote 21] These reviews also
require involvement from the specialty societies, in addition to their
efforts to revise estimates of physician work and practice expenses an
ongoing basis as well as for the Five-Year Reviews. Despite the demands
of these tasks, the RUC has stated that CMS should continue to rely on
the workgroup to identify opportunities for efficiencies, rather than
implement an MPPR, which it perceives to be an imprecise tool for
reducing duplicate payments for portions of services furnished only
once.
CMS's MPPR Policy Reflects Efficiencies but Is Limited in Scope:
CMS's MPPR policy reflects efficiencies for certain imaging and
surgical procedures commonly furnished together, but it is limited in
scope. CMS estimated that its use of the MPPR for certain imaging
procedures produced savings of about $96 million in 2006.[Footnote
22],[Footnote 23] In this instance, Congress exempted these savings
from the budget neutrality provision; as a result, the $96 million was
not redirected to other services but accrued as savings to the Medicare
program.
In principle, an MPPR can be implemented quickly to reflect
efficiencies for services performed together. In developing the list of
services to be selected for an MPPR, CMS does not formally solicit
opinion from specialty societies or others until the MPPR is published
as a proposed rule. For example, in developing the imaging MPPR, CMS--
acting independently of the RUC and specialty societies, on MedPAC's
recommendation--identified imaging services that were commonly
furnished together and determined an appropriate discount to account
for efficiencies occurring in the practice expense component.[Footnote
24] CMS then published these decisions in its August 2005 proposed rule
for specialty society and public comment and finalized its decisions in
November 2005 after evaluating and responding to stakeholder comments.
These changes went into effect on January 1, 2006.
The MPPR as currently used by CMS does have limitations. First, the
MPPR does not apply to nonsurgical and nonimaging services that are
commonly furnished together. When CMS developed the MPPR for surgical
services in 1996, it acknowledged that efficiencies likely also occur
for nonsurgical services. However, other than the imaging MPPR, CMS has
not implemented an MPPR policy for nonsurgical services.[Footnote 25]
Contractors we interviewed identified many opportunities to expand the
MPPR policy to areas where services are commonly furnished together.
For example, they stated that similar efficiencies occur when certain
types of tests--such as nerve conduction studies or pulmonary function,
vision, and hearing tests--are performed together. However, as of July
2009, CMS had not published proposals to systematically review services
commonly furnished together by focusing on the most expensive services
with the greatest potential for savings to Medicare.
Second, the MPPR only reflects efficiencies occurring in practice
expenses, not in the physician work component, where certain physician
activities may occur only once.[Footnote 26] For example, a physician's
review of a patient's medical history and prior imaging or other test
results before the service, and dictation of the final report for the
medical record, occur only once. Under the current payment methodology,
the time spent on these activities is included in each service because
the services are assumed to be furnished separately. Several
organizations we interviewed stated that an MPPR for the physician work
component was warranted to avoid duplicate payments to physicians for
activities that they perform only once. In its 2006 report, MedPAC
similarly recommended that CMS examine efficiencies that might be
occurring in the physician work component but are not reflected in the
fee schedule.[Footnote 27] However, CMS has not conducted such a
review.
CMS's MPPR Policy Could Be Applied to Other Services Commonly Furnished
Together and Expanded to Reflect Efficiencies in Physician Work:
Our review of Medicare claims data indicated the potential for reducing
excessive physician payments by implementing an MPPR to reflect
efficiencies generally occurring in the practice expense component of
certain nonsurgical and nonimaging service pairs commonly furnished
together. In addition, our analysis of certain imaging services
indicated potential for further reducing excessive payments by
implementing an MPPR to reflect efficiencies in the physician work
component when these services are performed together.
Potential Exists for Reducing at Least One-Half Billion Dollars in
Excessive Payments Annually through an MPPR to Reflect Efficiencies in
the Practice Expense Component:
Our systematic review of a sample of the most costly service pairs
showed potential for annual savings of over one-half billion dollars
with implementation of an MPPR to reflect efficiencies in the practice
expense component. Contractor Medical Directors we met with determined
that an MPPR was appropriate for 149 (over 40 percent) of the 350 most
costly service pairs we reviewed with them. The contractor Medical
Directors recommended these MPPRs to reflect efficiencies occurring in
practice expenses for services that were furnished only once. The 149
service pairs included interventional radiology procedures, physical
therapy services, and various tests, such as additional imaging,
pulmonary function, vision, hearing, and pathology.[Footnote 28] For
example, a cardiovascular stress test is commonly furnished with a
three-dimensional heart imaging test. However, the Medical Directors
cautioned that CMS would need to carefully monitor utilization of these
services to ensure that physicians did not change their behavior by
scheduling services on different days to avoid reduced fees for those
subject to an MPPR.
Potential Exists for Reducing about $175 Million Annually through
Expanding the Current MPPR for Imaging Services to Reflect Efficiencies
in the Physician Work Component:
Our analysis of 118 imaging service pairs suggests that efficiencies in
physician work occur when services are furnished together, and an MPPR
policy that reflected these efficiencies could save Medicare over $175
million annually.[Footnote 29] We sought the advice of contractor
Medical Directors and other experts, who agreed that efficiencies occur
in physician work when two or more services are furnished together and
that an MPPR would be appropriate to account for these efficiencies.
Our savings estimate is based on reducing fees for the lower-priced
service in each service pair to reflect efficiencies in physician time
spent on activities performed before and after the service that are
already included in the higher-priced service. For example, the service
pair that accounted for the largest share of spending across all
imaging service pairs was the physician's interpretation of two
computed tomography (CT) scans: CT of the abdomen with dye and CT of
the pelvis with dye.[Footnote 30] Of a total of 18 minutes allotted for
interpretation of the second (lower-priced) service, 8 minutes were
allotted for activities such as reviewing the patient's prior medical
history before the service and reviewing the final report and following
up with the referring physician after the service. Since time spent on
these activities was already included in the first (higher-priced)
service, we discounted the fee for the lower-priced service by 44
percent (that is, 8 minutes ÷ 18 minutes).[Footnote 31] While the
results of our analysis cannot be generalized to all service pairs, the
concept of applying an MPPR for the physician work component could be
applied to other services.
Our analysis focused on efficiencies in activities performed before and
after each service, but there are also likely efficiencies occurring
during, or within, the intraservice phase. For example, a practicing
radiologist we interviewed stated that when two CT scans of contiguous
body areas (e.g., the abdomen and pelvis) are taken at the same time,
the total number of actual CT images reviewed is lower than if each
scan were performed separately. This is because an abdominal CT
generally includes margins of the pelvis and vice versa, and the images
of these overlapping margins are examined only once by the radiologist.
Other efficiencies relating to technology advances, such as digital
storage and retrieval of imaging, may also be realized during the
intraservice phase.
Conclusions:
The RUC and specialty societies may be limited in their ability to help
CMS quickly identify opportunities for further savings from
efficiencies occurring when services are commonly furnished together.
The RUC's methodology for identifying additional services is not
focused on finding savings for the Medicare program. Moreover, the RUC
workgroup's dependence on specialty societies limits its ability to
make progress. CMS, on the other hand, has the tools in place to
readily expand its MPPR policy to reflect efficiencies occurring in the
practice expense and physician work components of services that are
commonly furnished together. However, as of July 2009, the agency did
not appear to have conducted a systematic review of claims data to
identify opportunities with the greatest potential for further savings.
Further, unless specifically exempted by Congress (as was done in the
DRA for fee changes for certain imaging services), savings would be
redistributed to other services in accordance with the budget
neutrality provision, and the Medicare program would not realize
savings.
Recommendation for Executive Action:
The Acting Administrator of CMS should take further steps to ensure
that fees for services paid under Medicare's physician fee schedule
reflect efficiencies that occur when services are performed by the same
physician to the same beneficiary on the same day. These efforts could
include:
* systematically reviewing services commonly furnished together and
implementing an MPPR to capture efficiencies in both physician work and
practice expenses, where appropriate, for these services;
* focusing on service pairs that have the most impact on Medicare
spending; and:
* monitoring the provision of services affected by any new policies it
implements to ensure that physicians do not change their behavior in
response to these policies.
Matter for Congressional Consideration:
To ensure that savings are realized from the implementation of an MPPR
or other policies that reflect efficiencies occurring when services are
furnished together, Congress should consider exempting these savings
from budget neutrality.
Agency and Professional Association Comments and Our Evaluation:
We obtained written comments on a draft of this report from the
Department of Health and Human Services (HHS), which are reprinted in
appendix III. We obtained oral comments from representatives of the
AMA.
HHS Comments:
HHS concurred with our recommendation and stated that CMS plans to
perform an analysis of nonsurgical codes that are furnished together
between 60 and 70 percent of the time to determine whether efficiencies
occur in the physician work and practice expense component of these
services. HHS stated that it would implement policies to reflect these
efficiencies, as appropriate, and agreed that CMS should focus on
service pairs that have the most impact on Medicare spending. HHS also
agreed on the need to monitor physician utilization of services if the
MPPR is expanded. HHS suggested that we include in an appendix to the
report the specific service pairs that we identified.
We did not include such an appendix because our report focuses on
illustrating the value of CMS's taking a more systematic approach,
rather than focusing on specific service pairs, to ensure that the fee
schedule reflects efficiencies when services are provided together.
However, we will work with CMS officials and share information to aid
in the agency's efforts.
AMA Comments:
AMA representatives expressed three broad concerns about the draft
report. First, they disagreed with our assessment of the RUC
workgroup's efforts to ensure that services are appropriately coded and
valued. Second, they stated that a broad application of the MPPR to
account for efficiencies in practice expenses and physician work was
not appropriate. Third, they opposed our matter for congressional
consideration that suggests that any savings from implementing the
report's recommendations be exempted from budget neutrality
requirements.
RUC Workgroup's Efforts:
AMA representatives disagreed with the report draft's characterization
of the efficacy of the RUC workgroup, noting that the RUC workgroup's
efforts have been aggressive, timely, and efficient. They also stated
that the specialty societies had developed proposals to combine the
type A and B service pairs that would result in significant savings
should CMS implement them in 2010 or 2011. As an example, they
projected that the proposals to combine 14 myocardial perfusion
services of the workgroup's 53 type A and type B service pairs would
result in annual savings of about $40 million from efficiencies
occurring in the physician work component. In addition, they said that
while they did not have an estimate, they believed that savings for the
practice expense component would also likely be significant. Finally,
representatives stated that in its review of potentially misvalued
services, the workgroup may have already identified and made
recommendations on some of the unique codes or pairs included in our
list of 149 code pairs.
We acknowledge in the draft the time and effort the workgroup has
expended in identifying potentially misvalued services. However, based
on our review of the workgroup's processes and progress to date, we
continue to believe that these processes are resource intensive and
will likely limit CMS's ability to quickly identify opportunities for
savings from those service pairs that account for a high share of
Medicare spending. In addition, as stated in the draft, the workgroup
has not prioritized its review to systematically focus on services with
the greatest potential savings for Medicare. While it is possible that
some of the type A and type B service pairs the workgroup identified
may be relatively costly, its methodology does not systematically focus
on such services. We believe our assessment of the workgroup's progress
remains accurate--as of 2009 the workgroup had identified only three
misvalued services that were combined. Finally, from our list of 149
code pairs (which included 116 unique codes), the workgroup had
identified only one code pair and 21 unique codes in its review of
potentially misvalued codes.
Broader Application of MPPR:
AMA representatives stated that a "blanket reduction" of 25 percent for
the 149 code pairs based on duplication in time spent on certain
preservice and postservice tasks was not appropriate. They contended
that for an average service, the intensity of time spent on tasks in
the preservice and postservice phases is less than the intensity of
time spent on intraservice tasks. AMA representatives added that in
some instances a 25 percent reduction may be too high, whereas in other
instances it might be more appropriate. They said that for some of the
newer codes, the RUC had already taken any potential efficiencies into
account, but for some of the old codes, which have not been revalued by
the RUC, the 25 percent discount may be more reasonable. The AMA
representatives also stated that the RUC workgroup's efforts result in
a more accurate and credible system of coding and valuation of services
and thus is more effective than the application of "arbitrary policies"
such as an MPPR.
In the draft report, we acknowledge the limitations of our approach and
state that the results of our analysis cannot be generalized to all
service pairs. Our draft also states that the discount of 25 percent we
applied to the 149 code pairs is consistent with the imaging MPPR that
reflects efficiencies in the practice expense component. We do not
recommend that CMS adopt our specific methodology; rather we present it
as an illustration of potential efficiencies occurring in the physician
work component that can be uncovered through a systematic review of
service pairs. However, we continue to believe that CMS should
undertake a systematic review of services and, where appropriate,
expand the MPPR to ensure that physician fee schedule payments reflect
efficiencies when services are performed by the same physician to the
same beneficiary on the same day.
Exempting Savings from Budget Neutrality Requirement:
AMA representatives disagreed with the draft's statement that spending
on physician services has recently grown at an average annual rate of 6
percent, and opposed our suggestion that Congress consider exempting
any savings from implementation of the report's recommendations from
federal budget neutrality requirements. AMA representatives told us
that the growth rate of per beneficiary spending on Part B physician
services has slowed to an annual rate of 3 percent in 2006 and 2007.
Regarding our suggestion that Congress consider exempting any savings
from budget neutrality, AMA representatives expressed concern that the
exemption would have an adverse effect on primary care services that
could benefit from the redistribution of savings and stated that
savings would be spent on other programs.
We agree that the annual rate of growth in per beneficiary spending on
physician services slowed somewhat in 2006 and 2007, but even taking
this into account, annual spending from 1997 to 2008 grew an average of
6 percent. We recommend that Congress consider exempting potential
savings from budget neutrality to help ensure the fiscal health of the
Medicare program. As we noted in the draft, there is recent precedent
for exempting savings from budget neutrality. We agree that primary
care services are important, but Congress has other mechanisms for
altering payment for these services.
AMA representatives also provided technical comments, which we
incorporated as appropriate.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to the Acting Administrator, CMS, and relevant congressional
committees. This report also will be available at no charge on the GAO
Web site at [hyperlink, http://www.gao.gov].
If you or your staffs have any questions, please contact me at (202)
512-7114 or cosgrovej@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix IV.
Signed by:
James C. Cosgrove:
Director, Health Care:
[End of section]
Appendix I: Estimating Potential for Further Savings from Efficiencies
in Multiple Services:
In this appendix, we describe the processes we used to determine
opportunities for the Centers for Medicare & Medicaid Services (CMS) to
avoid excessive payments for services commonly furnished together.
Estimating Potential for Further Savings from Efficiencies in the
Practice Expense Component of Multiple Services through Systematic
Review of Medicare Claims Data:
To determine additional opportunities for CMS to avoid excessive
payments for services that are commonly furnished together, we
conducted a systematic review of Medicare claims data using the 2006
Medicare Physician/Supplier Part B 5 Percent Standard Analytic File.
[Footnote 32] To conduct this review, we selected physician services
that were paid under the resource-based payment methodology.[Footnote
33] We generated a list of all service pairs that were furnished by the
same physician to the same beneficiary on the same day and made the
following exclusions:
* service pairs with low utilization--those that were billed fewer than
5,000 times annually;
* service pairs containing only the professional portion of a service;
[Footnote 34]
* service pairs that were already subject to payment policies that
reduced payments for one of the services in the pair;[Footnote 35]
* service pairs containing supplemental services, which are priced to
exclude duplication of physician work and practice expenses that are
already included in the primary service;[Footnote 36] and:
* service pairs containing duplicate services.
The remaining list of service pairs was our universe of pairs that
represented opportunities for savings from efficiencies that resulted
when the two services were furnished together.[Footnote 37] To target
our review to the service pairs that accounted for a large share of
Medicare spending, we ranked the service pairs based on spending for
the lesser-priced service (since the multiple procedure payment
reduction (MPPR) and other policies usually apply to that service) and
selected the 350 costliest service pairs based on total spending. We
met with contractor Medical Directors and their staffs in five
different states to determine if there were efficiencies taking place
in the practice expense component when these service pairs were
furnished together. To ensure consistency of review across the five
contractors, we developed a standard set of questions that each
contractor followed in evaluating the service pairs. We asked
contractors to examine service descriptions and definitions, as well as
coding instructions from the Current Procedural Terminology (CPT)
manual and from CMS, and use their clinical judgment and knowledge to
assess whether there were efficiencies occurring because certain
practice expenses were incurred only once before and after each service
in the service pairs. We also asked contractors to determine the
payment policy that best captured these efficiencies. For example,
contractors determined whether the services in each pair should be
combined into a single code, there should be no payment for one service
in the service pair because it was inherently included in the other, or
an MPPR should be applied. If an MPPR should be applied, contractors
determined the approximate discount that was most appropriate. Since
all five contractors determined that an MPPR was the most appropriate
payment policy to reflect efficiencies in all 149 of the 350 service
pairs they identified as having potential, we estimated total savings
to the Medicare program by applying the appropriate discount to
spending for the lower-priced service in each pair.
Our estimate of savings is conservative for several reasons. First, we
excluded services that were billed multiple times on the same day by
the same physician, since our focus was on potential savings when two
unique services were furnished together. To the extent that there is
overlap of physician work and practice expenses in the preservice and
postservice phases of these duplicate services, an MPPR should be
applied to account for this overlap. Second, we generally applied a
discount of 25 percent or less to the service pairs to mirror CMS's
discount on imaging service pairs, although, in certain instances, a
higher discount was warranted based on the extent of duplication in
practice expenses.
Estimating Potential Savings from an MPPR to Reflect Efficiencies in
Physician Work Component:
To estimate potential savings from applying an MPPR to account for
duplication of physician work activities occurring before and after
each service in the service pairs, we first examined the American
Medical Association (AMA) database--the Resource-Based Relative Value
System (RBRVS) Data Manager--to determine if data on these activities
were available for all service pairs. The RBRVS Data Manager contains
vignettes describing the physician's work for a specific procedure for
a typical patient in three phases: preservice, intraservice, and
postservice.[Footnote 38] The AMA/Specialty Society Relative Value
Scale Update Committee (RUC) bases its estimates of physician work and
practice expenses on these vignettes. Because we found that vignettes
were missing for a large proportion of services, we used physician
time--the amount of time it takes a physician to perform a service--as
a proxy for physician work, and discounted the fee for the lesser-
priced service in each service pair for the extent of overlap in
physician time spent on the preservice and postservice phases across
the two services.[Footnote 39] Using the physician time file on the CMS
Web site, we calculated this discount as the sum of time spent on the
preservice and postservice phases of the lesser-priced service divided
by total time for that service.[Footnote 40] We limited our analysis to
the imaging service pairs that we had identified from our review of
Medicare claims data because we wanted to examine a homogenous group of
services where the activities included in the pre-and postservice
phases were generally the same across different imaging services, and
therefore the time spent on pre-and postservice phases was also likely
to be relatively uniform across this group of services. We applied the
discount to the professional fee of imaging services, since the
professional fee captures the physician's work in interpreting the
imaging service. We discussed our approach with several experts in the
Medicare physician payment system. These included an experienced
contractor Medical Director; a Medicare Payment Advisory Commission
(MedPAC) official who is an expert in Medicare physician payment
policy; and a practicing radiologist and leading expert in the field
who has written extensively on Medicare payment policy and
reimbursement issues. They concurred that our methodology was a
reasonable approach to estimating potential savings from an MPPR for
physician work.
[End of section]
Appendix II: Examples of Vignette and Practice Expense Estimate:
This appendix contains examples of a vignette and a practice expense
estimate. The vignette (figure 2) is used by specialty societies to
develop estimates of physician work resources for a service. The
practice expense estimate (figure 3) describes the nonphysician
clinical labor, supplies, and equipment resources required for each
service.
Figure 2: Example of AMA Vignette for CPT Code 92235, Eye Exam with
Photos:
[Refer to PDF for image: illustration]
This illustration is from RBRVS Data Manager 2008:
Vignette:
An 82-year-old female with age-related macular degeneration noted
blurred vision and on examination was found to have a hemorrhage in the
macula Fluorescein angiography is ordered to determine the cause.
Pre-Service:
The patient's history is reviewed. Previous and current fundus photos
are evaluated. Previous retinal fluorescein angiograms are reviewed.
The patient and family are informed of the value of an angiographic
fundus evaluation, and the risks and benefits are explained. The nurse
starts the intravenous line for administration of the intravenous dye.
Intro-Service:
The transit, mid-phase, and late-phase angiographic frames are studied
and an interpretation is developed. Angiographic findings are compared
with previous studies, A report is prepared.
Post-Service:
The report is dictated. The referring physician is informed of the
outcome.
Source: 2008 American Medical Association.
[End of figure]
Figure 3: Example of AMA Practice Expense Estimates for CPT Code 92235,
Eye Exam with Photos:
[Refer to PDF for image: illustration]
AMA/Specialty Society RVS Update Committee Recommendations:
Location: In-office:
CMS Staff Type, Medical Supply, Or Equipment Code:
CPT code: 92235; Code Descriptor: Eye Exam with Photos:
Total Clinical Labor Time:
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 67.
Service Period:
Start When patient enters office for surgery/procedure.
Pre-service:
Review charts;
CMS Staff Type, Medical Supply, Or Equipment Code: Certified Retinal
Angiographer;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 2.
Greet patient and provide gowning;
CMS Staff Type, Medical Supply, Or Equipment Code: Certified Retinal
Angiographer;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 2.
Obtain vital signs;
Provide pre-service education/obtain consent;
CMS Staff Type, Medical Supply, Or Equipment Code: Certified Retinal
Angiographer;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 5.
Prepare room, equipment, supplies.
Pre-service: Prepare and position patient/monitor patient/set up IV;
CMS Staff Type, Medical Supply, Or Equipment Code: RN/Other;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 10.
Sedate/apply anesthesia.
Intra-service:
Assist physician in performing procedure;
CMS Staff Type, Medical Supply, Or Equipment Code: Certified Retinal
Angiographer;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 40.
Post-service:
Monitor patient following service/check tubes, monitor drains;
CMS Staff Type, Medical Supply, Or Equipment Code: RN/Other;
CPT code: 92235; Code Descriptor: Eye Exam with Photos:
5.
Clean room/equipment by physician staff.
Complete diagnostic forms, lab and X-ray requisitions.
Review/read X-ray, lab and pathology reports.
Label and file photos/slides with patient chart;
CMS Staff Type, Medical Supply, Or Equipment Code: Certified Retinal
Angiographer;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 3.
Other clinical activity (please specify).
End: Patient leaves office.
Medical Supplies:
Pack, ophthalmology visit (w-dilation);
CMS Staff Type, Medical Supply, Or Equipment Code: SA082
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 1.
Applicator, cotton-tipped, non-sterile bin;
CMS Staff Type, Medical Supply, Or Equipment Code: SG008;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 2.
IV infusion set;
CMS Staff Type, Medical Supply, Or Equipment Code: SCO18;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 1.
18 gauge filter needle;
CMS Staff Type, Medical Supply, Or Equipment Code: SC027;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 1.
Needle, butterfly 20 to 25 gauge;
CMS Staff Type, Medical Supply, Or Equipment Code: SC030;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 1.
Syringe 5-6 ml;
CMS Staff Type, Medical Supply, Or Equipment Code: SC057
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 1.
Band aid 3/4"x3";
CMS Staff Type, Medical Supply, Or Equipment Code: SG021;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 2.
Fluorescein inj (5m1 uou);
CMS Staff Type, Medical Supply, Or Equipment Code: SH033;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 1.
Povidone son, (Betadine);
CMS Staff Type, Medical Supply, Or Equipment Code: SJ041;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 10.
Film, Tri-x 35mm BW (per exposure);
CMS Staff Type, Medical Supply, Or Equipment Code: SK030;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 24.
Paper, photo printing (8.5 x 11);
CMS Staff Type, Medical Supply, Or Equipment Code: SK058;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 2.
Photographic stop bath;
CMS Staff Type, Medical Supply, Or Equipment Code: SK065;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 8.
Equipment:
Electric table;
CMS Staff Type, Medical Supply, Or Equipment Code: EF030;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 1.
Exam Lane;
CMS Staff Type, Medical Supply, Or Equipment Code: EL005;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 1.
Topcon Retinal Camera, incl. monitor, printer, etc. ($78,000);
CMS Staff Type, Medical Supply, Or Equipment Code: ED008;
CPT code: 92235; Code Descriptor: Eye Exam with Photos: 1.
Source: American Medical Association.
[End of figure]
[End of section]
Appendix III: Comments from the Department of Health and Human
Services:
Department Of Health & Human Services:
Office Of The Secretary:
Assistant Secretary for Legislation:
Washington, DC 20201
July 6, 2009:
James Cosgrove:
Director, Health Care:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, DC 20548:
Dear Mr. Cosgrove:
Enclosed are comments on the U.S. Government Accountability Office's
(GAO) report entitled: "Medicare Physician Payments: Fees Could Better
Reflect Efficiencies Achieved When Services Are Provided Together" (GAO-
09-647).
The Department appreciates the opportunity to review this report before
its publication.
Sincerely,
Signed by:
Barbara Pisaro Clark:
Acting Assistant Secretary for Legislation:
Attachment:
[End of letter]
Department Of Health & Human Services:
Centers for Medicare & Medicaid Services:
200 Independence Avenue SW:
Washington, DC 20201:
Date: July 2, 2009:
To: Barbara Pisaro Clark:
Assistant Secretary for Legislation:
From: [Signed by] Charlene Frizzera:
Acting Administrator:
Subject: Government Accountability Office's Report: "Medicare Physician
Payments: Fees Could Better Reflect Efficiencies Achieved When Services
Are Provided Together" (GAO-09-647):
Thank you for the opportunity to review and comment on the Government
Accountability Office's (GAO) draft report entitled "Medicare Physician
Payments: Fees Could Better Reflect Efficiencies Achieved When Services
Are Provided Together."
Medicare has a longstanding policy of reducing payment for multiple
surgical procedures performed on the same patient, by the same
physician, on the same day. The multiple procedure payment reduction
(MPPR) for surgery is largely based on the efficiencies recognized in
practice expenses for pre and post-surgical services.
In 1995, the MPPR was extended to six nuclear medicine diagnostic
procedures performed on the same patient on the same day. For surgical
and nuclear medicine diagnostic procedures, payment is made in full for
the highest priced procedure, and at 50 percent for the second
procedure.
In 2006, the MPPR was extended to certain diagnostic imaging procedures
performed on contiguous areas of the body in the same session. In such
cases, most clinical labor activities and most supplies are not
performed or furnished twice. The payment reduction applies to over 100
procedure codes within 11 families of codes. When 2 or more procedures
within a family are performed on the same patient in a single session,
the technical component (TC) of the highest priced procedure is paid at
100 percent; the TC of each subsequent procedure is paid at 75 percent.
The reduction does not apply to the professional component.
The GAO estimates that considerable additional savings may be realized
by expanding the MPPR to additional non-surgical, non-imaging
procedures and by applying the MPPR to physician work, as well as to
practice expense.
GAO Recommendation:
The Centers for Medicare & Medicaid Services should take further steps
to ensure that fees for services paid under Medicare's physician fee
schedule reflect efficiencies that occur when services are performed by
the same physician to the same beneficiary on the same day.
CMS Response:
We concur with GAO's recommendation. In the 2009 Physician Fee Schedule
final rule (73 FR 69882) we indicated that we plan to perform a data
analysis of non-surgical Current Procedural Terminology codes that are
often billed together (e.g., 60-70 percent of the time) to determine
whether there are efficiencies that would justify a payment reduction.
We further indicated that we plan to review physician work as well as
practice expense inputs. We agree that we should focus on code pairs
that have the most impact on Medicare spending. We also agree that
monitoring physician behavior will be necessary if the MPPR is
expanded.
If reductions are warranted, we may propose either to expand the
application of the MPPR or bundle additional services, as appropriate.
Any proposed changes in our payment policy will be made through
rulemaking and be subject to public comment.
In order to facilitate analysis of the issues raised by the GAO, we
strongly urge GAO to include, as an appendix to this report, all the
specific code pairs identified and used by the GAO in preparation of
this report.
The Centers for Medicare & Medicaid Services appreciates GAO's analysis
of the effects of expanding the MPPR, both in terms of the range of
procedures and in applying it to physician work as well as to practice
expense.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
James C. Cosgrove, (202) 512-7114 or cosgrovej@gao.gov:
Acknowledgments:
In addition to the contact named above, Phyllis Thorburn, Assistant
Director; William A. Crafton; Iola D'Souza; Richard Lipinski; and
Elizabeth T. Morrison made key contributions to this report.
[End of section]
Footnotes:
[1] Medicare Part B covers physician and other outpatient services.
[2] On average, the physician work component accounts for about 52
percent of the total fee for each service, the practice expense
component accounts for about 44 percent, and the malpractice component
for about 4 percent.
[3] CMS also uses resource estimates for physician work and practice
expenses to calculate indirect expenses--such as overhead, office
equipment, and administrative staff salaries--for each service; thus,
duplication of these resource estimates when services are commonly
furnished together further contributes to excess payments.
[4] The seven contractors we interviewed together process claims in 28
states across the nation. CMS is in the process of integrating the
administration of Medicare Part A (which covers hospital and other
inpatient services) and Part B to new entities known as Medicare
Administrative Contractors. The transition must be completed by October
2011.
[5] For this report, we will use "services commonly furnished together"
to mean services performed by the same physician to the same
beneficiary on the same day.
[6] We interviewed experts from the American College of Cardiology and
American College of Radiology who had published articles on appropriate
payments for Medicare physician services. We also interviewed an expert
from the American Society of Interventional Radiology to understand how
certain interventional radiology procedures are valued by the AMA-
sponsored physician panels, since these procedures are commonly
furnished on the same day with other services.
[7] Not all of the services included under the physician fee schedule
are performed by physicians; some services (such as chemotherapy
services or routine tests) may be performed by nurses or technicians.
[8] Primarily composed of physicians from the specialty societies, the
Advisory Committee makes recommendations to the CPT Editorial Panel for
either the creation of new codes or revisions to existing codes. The
CPT Editorial Panel meets three times a year, and its actions can
result in three outcomes: (1) a new or revised code is approved, (2)
the proposal is postponed pending further information, or (3) the
proposal is rejected.
[9] Estimates for physician work are developed by the RUC, while
estimates for practice expenses are first reviewed by a subcommittee of
the RUC--the Practice Expense Subcommittee, then submitted to the RUC
for final recommendation to CMS.
[10] These phases are referred to as preservice, intraservice, and
postservice. The RUC maintains a database that includes vignettes and
physician work estimates for services that it has reviewed.
[11] Indirect expenses--overhead, administrative labor, and office
expenses--are calculated by CMS in proportion to direct expenses and
the physician work or clinical labor involved in providing each
service.
[12] Medicare's physician payment system ranks services on a common
scale based on the amount of resources needed to provide each service
relative to a benchmark service--defined as a midlevel office visit.
These relative resources are expressed as relative value units (RVU).
(Thus, if a midlevel office visit has an RVU value of 1.0, a service
with an RVU of 1.5 is estimated to be 50 percent more costly to
provide.) RVUs for each service are converted into fees by adjusting
them to reflect geographic differences in resource costs, then
multiplying by a dollar conversion factor. For further details on the
process CMS uses to set fees, see GAO, Medicare Part B Imaging
Services: Rapid Spending Growth and Shift to Physician Offices Indicate
Need for CMS to Consider Additional Management Practices, [hyperlink,
http://www.gao.gov/products/GAO-08-452] (Washington, D.C.: June 13,
2008), and Medicare Physician Fees: Geographic Adjustment Indices Are
Valid in Design, but Data and Methods Need Refinement, [hyperlink,
http://www.gao.gov/products/GAO-05-119] (Washington, D.C.: Mar. 11,
2005).
[13] See 42 U.S.C. § 1395w-4(c)(2)(B)(i),(ii).
[14] Supplemental services are exempt from the MPPR.
[15] The MPPR applies only to the fee for the provision of the imaging
test--generally performed by a technician. It does not apply to the fee
for the interpretation of the imaging test--generally performed by a
radiologist or other physician.
[16] Although the reduction is applied to the entire fee for each
subsequent service, according to the rules we reviewed, the MPPR
reflects duplication in practice expenses, not physician work. See 56
Fed. Reg. 59,502, 59,514-15 (Nov. 25, 1991); 62 Fed. Reg. 33,158,
33,171 (June 18, 1997); and 73 Fed. Reg. 69,726, 69,882 (Nov. 19,
2008).
[17] See 42 U.S.C. § 1395w-4(c)(2)(B)(ii).
[18] See 42 U.S.C. § 1395w-4(c)(2)(B)(v).
[19] The workgroup told us that it intends to review pairs that are
performed together at a threshold below 90 percent after it completes
review of the type A and B pairs.
[20] As of May 2009, specialty societies had recommended that each of
the 22 type A and 31 type B service pairs be combined into single
codes. The CPT Editorial Panel and the RUC have reviewed 25 of these
proposals, and the RUC has forwarded its recommendations to CMS. CMS
officials stated that they will publish these proposals and the
agency's decisions in the proposed rule for 2010. (The proposed rule
for 2010 was published on July 13, 2009.) The proposals on the
remaining 28 service pairs are slated to be reviewed at upcoming CPT
meetings.
[21] In addition to the workgroup's task of examining services commonly
furnished together, the RUC is examining other misvalued services. For
example, in June 2008, CMS forwarded a list of several hundred codes
for its review. The list included codes in three different categories:
(1) 114 services with the fastest growth, (2) 2,900 services with
physician work estimates that had been developed over 20 years ago, and
(3) over 320 services with rapid growth in practice expenses. The April
2009 RUC meeting agenda included over 2,000 pages of materials
pertaining to these codes as well as other policies proposed by CMS.
[22] Estimates of excessive payments that were avoided for surgical
services subject to the MPPR have not been available since this policy
was implemented over 10 years ago.
[23] CMS recently expanded the imaging MPPR to include 10 additional
services.
[24] MedPAC, Report to the Congress: Medicare Payment Policy
(Washington, D.C.: 2006).
[25] CMS stated, in the 2009 final rule, that it will conduct data
analysis and seek input from the RUC, MedPAC, and specialty societies
to determine if an MPPR should be expanded to other (nonsurgical and
nonimaging) services. See 73 Fed. Reg. 69,726, 69,882 (Nov. 19, 2008).
Officials also told us that they expect to publish proposals for
expanding the MPPR to other services in the proposed rule for 2010.
(The proposed rule for 2010 was published on July 13, 2009.)
[26] Although the reduction is applied to the entire fee for each
subsequent service, according to the rules we reviewed, the MPPR
reflects duplication in practice expenses, not physician work. See 56
Fed. Reg. 59,502, 59,514-15 (Nov. 25, 1991); 62 Fed. Reg. 33,158,
33,171 (June 18, 1997); and 73 Fed. Reg. 69,726, 69,882 (Nov. 19,
2008).
[27] MedPAC, Report to the Congress: Medicare Payment Policy.
[28] Interventional radiology procedures generally include one or more
surgical procedures that are accompanied by imaging services. While the
surgical procedures are subject to the surgical MPPR, the imaging
services are not. Physical therapy services are generally valued as 15-
minute sessions. Officials from the AMA explained that time spent on
preservice and postservice activities is spread across the number of
services in a "typical" session to avoid duplication of practice
expenses. However, we found that there was duplication of certain
activities in the intraservice period. For example, time spent testing
range of motion or muscle flexibility was duplicated in the physical
therapy service pairs that we examined.
[29] We could not estimate savings from an MPPR for the physician work
component of all service pairs because the RUC had not reviewed these
services and the data required for this analysis were missing.
[30] AMA officials informed us that the RUC has recommended changes for
this service pair that CMS could incorporate into the 2011 physician
fee schedule.
[31] Experts we interviewed agreed that this methodology was a
reasonable way of estimating efficiencies in physician work.
[32] The 5 Percent Standard Analytic File contains final action claims
data submitted by noninstitutional providers, including physicians,
physician assistants, clinical social workers, nurse practitioners,
independent clinical laboratories, ambulance providers, and stand-
alone ambulatory surgical centers.
[33] Thus, we excluded Part B services provided or ordered by
physicians but paid under other fee schedules, such as prescription
drugs, laboratory, and Durable Medical Equipment. We estimated that
these services account for approximately one-third of total Medicare
spending on physician-billed services.
[34] Certain services, including imaging tests, have two separate
portions--a professional portion that represents the physician's
interpretation of the test, and a technical portion that represents the
actual performance of the test, generally by a technician. As such, the
professional portion reflects the physician's work. We excluded
services with a professional portion since CMS currently does not have
policies in place to recognize efficiencies in physician work.
[35] These policies fell into three broad categories: (1) the National
Correct Coding Initiative, which disallows payment for the second
service because it is either a component of the first service or cannot
reasonably be performed with the first service; (2) the global surgery
payment policy, which generally disallows separate payment for certain
services--such as evaluation and management--performed before and after
a surgical service over a defined period of time, because reimbursement
for these evaluation and management services is included in the
surgical fee; and (3) the multiple procedure payment reduction (MPPR),
which reduces payment for the second and subsequent services for
certain surgical and imaging services. CMS officials we met with
concurred that while they routinely issue payment policies on other
individual services that are performed together, the three policies
that we identified are the most comprehensive.
[36] We identified supplemental services as those listed in Appendix D:
"Summary of CPT Add-on Codes" and Appendix E: "Summary of CPT Codes
Exempt from Modifier 51", of the 2008 AMA CPT Manual.
[37] The total list of service pairs generated before any exclusions
was approximately 165,000 pairs. After the exclusions, that number
dropped to approximately 64,000. We then selected the top 350 service
pairs that accounted for at least one-half of 1 percent of the total
savings potential from the 64,000 service pairs.
[38] Preservice describes the activities involved prior to performing a
specific procedure, such as obtaining a patient history; intraservice
reflects the primary service performed, such as interpretation of an
imaging test; and postservice includes activities performed following a
procedure, such as signing a final report and discussing the findings
with the referring physician.
[39] Physician time does not account for either the complexity and
intensity of a procedure and the risk to the patient or the physician's
skill required, but the time spent on activities in both the preservice
and postservice phases is likely to be duplicated for procedures
performed together by the same physician on the same patient on the
same day.
[40] For example, if a service takes a total of 20 minutes, and the
time spent on the preservice and postservice phases was 3 minutes and 2
minutes, respectively, the discount would be 25 percent.
[End of section]
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