Reimbursement News. HCFA issues 1998 anesthesia Medicare conversion factors: Anesthesia services receive 2.1% payment increase

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1 Reimbursement News BILLIE C. BRADFORD, BA AANA Director of Managed Care and Reimbursement HCFA issues 1998 anesthesia Medicare conversion factors: Anesthesia services receive 2.1% payment increase Key words: Conversion factors, CPT anesthesia codes, Health Care Financing Administration, medical direction for single procedure, Medicare physician fee schedule. The Health Care Financing Administration (HCFA) has issued the 1998 Medicare conversion factors (CFs) for nonmedically directed CRNAs and for anesthesiologists who are Medicare participating physicians (those who agree to accept the Medicare allowable fee and cannot balance-bill the patient for charges other than the 20% copayment due from the patient or secondary carrier). Effective January 1, 1998, the payment for medically directed cases is the same payment an anesthesiologist or a nonmedically directed CRNA is paid for performing the procedure alone, split 50/50 between the anesthesiologist and the CRNA. In 1997, the transition payment for the anesthesia care team was 105% of the solo anesthesiologist fee, split 50/50. Beginning in 1998, the payment for all medically directed cases regardless of whether they are provided in the 1:1, 1:2, 1:3, or 1:4 medical direction ratios, will be split 50/50 between the anesthesiologist and the CRNA at the same reimbursement level as the anesthesiologist personally providing the service alone. Example of 1998 payment for anesthesia care team in Oakland, California A medically directed CRNA and the anesthesiologist providing medical direction will be paid as follows in 1998 for a 93-minute hernia repair of a Medicare patient: 4 base units time units x $17.70 CF = $ total. The $ split 50/50 between the CRNA and anesthesiologist = $90.27 to the CRNA and $90.27 to the anesthesiologist. HCFA's annual review of changes/adjustments in relative value units Section 1848(c)(2)(B) of the Social Security Act provides that adjustments in relative value units (RVUs) resulting from an annual review of those RVUs may not cause total physician fee schedule payments to differ by more than $20 million from what they would have been had the adjustments not been made. Thus, the statute allows a $20 million tolerance for increasing or reducing total expenditures under the physician fee schedule. HCFA determined that net increases because of changes to the physician fee schedule would have added approximately $300 million to projected expenditures in calendar year Therefore, HCFA made the budget neutrality adjustment required by changes in payment policy and Physicians' Current Procedural Terminology February 1998/ Vol. 66/No. 1

2 (CPT) codes through the conversion factor (CF). HCFA defines a CF as a national value that converts RVUs into payment amounts. Effective January 1, 1998, there will be one CF, as specified by the Balanced Budget Act of 1997 (Public Law ), enacted on August 5, Anesthesia has a separate CF but is paid using a different formula. The CF is updated annually. HCFA made the necessary estimated adjustments to achieve budget neutrality. As a result, the total projected expenditures from the revised fee schedule are estimated to be the same as they would have been had HCFA not changed the RVUs for any individual codes or added new codes to the fee schedule. Three components of the fee schedule payment Under the formula set forth in Section 1848 (b)(1) of the Social Security Act, the payment amount for each service paid for under the provider fee schedule is the product of three factors: 1. A nationally uniform relative value for the service. 2. A geographic adjustment factor (GAF) for each provider fee schedule area. 3. A nationally uniform CF for the service. The CF converts the relative values into payment amounts. For each physician fee schedule service, there are three relative values: 1. An RVU for physician work. 2. An RVU for practice expense. 3. An RVU for malpractice expense. For each of these components of the fee schedule, there is a geographic price cost index (GPCI) for each fee schedule area. The GPCIs reflect the relative costs of practice expenses, malpractice insurance, and physician work in an area compared to the national average for each component. Single conversion factor established for 1998 A single CF was established in the Balanced Budget Act of 1997 for Part B provider services to update the physician fee schedule effective January 1, Currently, there are three CFs used: surgery services ($ ), nonsurgical ($ ), and primary care ($ ). The single 1998 CF of $ was determined by using the 1997 conversion factor for primary care services ($ ) as increased by the estimate of the weighted average of the three separate updates that would otherwise occur. The initial dollar amount of the 1998 CF was $37.13 with adjustments for other payment policy modifications included in the 1998 provider fee schedule. A new annual update formula to match spending to a "sustainable growth rate" will reflect growth in gross domestic product rather than historical volume and intensity of provider services and is estimated to save $5.3 billion over the next five years. In subsequent years, the CF will be the one which was established for the previous year, adjusted by the update. Anesthesia services will continue to have a separate national CF of $ that will be set at 46% of the CF applicable to other physician services, as adjusted by work, practice expense, or malpractice relative value units. Please see Table I for the specific anesthesia anesthesia locality CF for each of the 92 different areas. Table II demonstrates the method for calculating both the national and the locality specific anesthesia CFs for The 1998 Medicare CFs were released as an attachment to a memorandum from the HCFA national office to HCFA Program Carriers. For each locality for 1998, the nonmedically directed CRNA CF is the same as the participating anesthesiologist anesthesia CF. Medical direction payment policy applies to single procedure For anesthesia services furnished in 1998, HCFA will begin to apply the medical direction payment policy if both a CRNA and an anesthesiologist are involved with a single case. When this is applicable, the CRNA service should be submitted to the carrier with the same "-QX" modifier as has previously been used for reporting "medicallydirected" anesthesia services in the 2:1 through 4:1 anesthesia care team (ACT) setting. A new HCFA Common Procedure Coding System modifier to denote the medical direction service of the anesthesiologist with respect to a single anesthesia case will be required. If you recall, after long months of negotiating and lobbying in Washington, AANA was successful in having this reimbursement provision included in the 1995 Balanced Budget Bill. Unfortunately, this bill was vetoed by President Clinton because of other unrelated controversial Medicare provisions. It is estimated that hospitals employing CRNAs will gain $ million annually from the implementation of this provision whereby a CRNA and the anesthesiologist who is involved in a single procedure will each be paid 50% of the allowance otherwise allowed if the service were personally performed individually by either an anesthesiologist or a CRNA. There is no change for 1998 in the current policy under which the Medicare carriers can, on the basis of medical necessity, recognize full payment for the services of each of two anesthesia providers if both providers are needed in a single an- 36 Journal of the American Association of Nurse Anesthetists

3 Table I 1998 Medicare participating CRNA/physician anesthesia conversion factors Carrier # Locality # Locality name 1998 Par CF +/- Per unit Alabama $ $ Alaska $ $ Arizona $ $ Arkansas $ $ Anaheim/Santa Ana, CA $ $ Los Angeles, CA $ $ Marin/Napa & Solano, CA $ $ Oakland/Berkeley, CA $ $ San Francisco, CA $ $ San Mateo, CA $ $ Santa Clara, CA $ $ Ventura, CA $ $ / Rest of CA ('98 going from 2 to 1) $ $ Colorado $ $ Connecticut $ $ Delaware $ $ DC & MDNA Suburbs $ $ Ft. Lauderdale, FL $ $ Miami, FL $ $ Rest of FL $ $ Atlanta, GA $ $ Rest of GA $ Hawaii &Guam $ $ Idaho $ $ Chicago, IL $ $ East St. Louis, IL $ $ Suburban Chicago, IL $ $ Rest of IL $ $ Indiana $15.66 No Change Iowa $ $ Kansas $ $ Kansas $ $ Kentucky $ $ New Orleans, LA $ $ Rest of LA $ $ Southern Maine $ $ Rest of Maine $ $ Baltimore/Surr. Ctys, MD $ $ Rest of MD $ $ Boston, MA (Metropolitan) $ $ Rest of MA $17.16+$ Detroit, MI $ $ Rest of MI $ $ Minnesota $ $ Mississippi $ $ Kansas City, MO (Metropolitan) $ $ St. Louis, MO (Metropolitan) $ $ Rest of MO $ $ Rest of MO - $ Montana $ $.07 V~tbDD 00 Nebraska $ Nevada $ New Hampshire $ New Jersey (Northern) $ Rest of NJ $ New Mexico $ $.02 +$.24 +$.27 +$.22 +$.18 + $.05 Continued next page February 1998/ Vol. 66/No. I 37

4 Table I 1998 Medicare participating CRNA/physician anesthesia conversion factors-continued / - Per unit - Carrier # Locality # Locality name Par CF Manhattan, NY $ $ NYC Suburbs & Long Island, NY $ $ Poughkeepsie, North NYC $ $.38 Suburbs, NY Queens, NY $ $ Rest of NY $ $ North Carolina $ $ North Dakota $ $ Ohio $ $ Oklahoma $ $ Portland, OR $ $ Rest of OR $ $ Philadelphia, PA (Metropolitan) $ $ Rest of PA ('98 going from 3 to 1) $ $.29 - $.78 - $ Puerto Rico $ $ Rhode Island $ $ South Carolina $ $ South Dakota $ $ Tennessee $ $ Austin, TX $ $ Beaumont, TX $ $ Brazoria, TX $ $ Dallas, TX $ $ Ft. Worth, TX $ $ Galveston, TX $ $ Houston, TX $ $ Rest of TX $ $ Utah $ $ Vermont $ $ Virgin Islands $ $ Virginia $ $ Seattle, WA (King County) $ $ Rest of WA State $ $ West Virginia $ $ Wisconsin $ $ Wyoming $ $.04 esthesia case. Thus, the Medicare carriers should continue, based on medical necessity, to allow full payment for the service furnished by each anesthesia provider in a single case whether this includes the continuous presence of an anesthesiologist and a CRNA, two anesthesiologists, or two CRNAs. Resource-based practice expenses to be reevaluated The Balanced Budget Act of 1997 instituted a one-year delay in incorporating resource-based practice expense relative value units (RVUs) into the fee schedule. During the interim, HCFA must review the process it used to develop preliminary practice expense RVUs that were published in June 1997 and then develop and publish revised RVUs by May 1998, with a 90-day comment period. In order for the transition to begin on January 1, 1999, a final rule would need to be published by October 31, The law also required a fouryear phase-in of the final resource-based practice expense RVUs CPT code changes for anesthesia The American Medical Association (AMA) CPT Editorial Panel approved the revision of two descriptors of existing anesthesia procedure codes, as well as the addition of two new codes to the Medicine Section of CPT 1998 for the reporting of conscious sedation by an attending physician with 38 Journal of the American Association of Nurse Anesthetists

5 Table II Calculation of national anesthesia conversion factor (CF) 1998 Single Physician CF 1998 Anesthesia CF 1998 Anesthesia Work Share 1998 Anesthesia PE Share 1998 Anesthesia Malpractice Share = $ = $ (.46 x $ ) =.7194 =.2134 = Calculation of Locality Specific CF (CF(a)): GPCI(w) = Locality Specific GPCI for Work GPCI(pe) = Locality Specific GPCI for Practice Expense GPCI (m) = Locality Specific GPCI for Malpractice Expense CF(a) = $ x ((.7194 x GPCI(w)) + (.2134 x GPCI(pe)) + (.0672 x GPCI(m)) the assistance of an independent trained observer. Information in the Anesthesia Guidelines includes additional information and must be reviewed to assure appropriate reporting compliance. The procedures impacted by these changes effective January 1, 1998, are: * Anesthesia section code changes Anesthesia for thoracotomy procedures involving lungs, pleura, diaphragm, and mediastinum (including surgical thoracoscopy); intrathoracic procedures on the trachea and bronchi. (This descriptor change was approved to allow Code to be expanded in usage to procedures of the trachea or bronchi which may or may not be due to trauma.) Regional IV administration of local anesthetic agent or other medication (upper or lower extremity). (Code was revised to include "or other medication" so that the code could encompass regional IV therapy as well as IV administration of local anesthetic agents.) * Medicine section includes new codes for conscious sedation Sedation with or without analgesia (conscious sedation); intravenous, intramuscular or inhalation Sedation with or without analgesia (conscious sedation); oral, rectal and/or intranasal The CPT guidelines for the reporting of these codes state the following: "Sedation with or without analgesia (conscious sedation) is used to achieve a medically controlled state of depressed consciousness while maintaining the patient's airway, protective reflexes, and ability to respond to stimulation or verbal commands. Conscious sedation includes performance and documentation of pre- and post-sedation evaluations of the patient, administration of the sedation and/or analgesic agent(s), and monitoring of cardiorespiratory function (i.e., pulse oximetry, cardiorespiratory monitor, and blood pressure). The use of these codes requires the presence of an independent trained observer to assist the physician in monitoring the patient's level of consciousness and physical status. "(If the sedation with or without analgesia (conscious sedation) is administered in support of a procedure provided by another physician, see Anesthesia Section.)" February 1998/ Vol. 66/No. 1 39