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CMS’ Review of Physician Reimbursement Methodology

By June 16, 2011Commentary

There is an old saying about sausage-making that definitely applies to Medicare reimbursement processes.  Those processes and their outcomes have assumed heightened importance over the last decade as Medicare accounts for a greater percent of total health spending and as private health plans increasingly use Medicare payment methods as the basis for their own reimbursements to providers.  Each year CMS issues a variety of payment rules for providers and at larger intervals reviews certain basic parts of the methodology.  It recently released a notice regarding its five-year review of the relative value unit component of the physician fee schedule.   (CMS Rule)

The relative value units have three components.  One is the amount of physician work required to perform a service; the other two are practice expense and malpractice costs.  Specific services are reviewed by code.  The services to be reviewed are identified from multiple sources and evaluated for changes in the five-year period which might affect the number of relative value units assigned to the service.  The end result of the review is supposed to be budget neutral, so that if some codes are assigned more RVUs, others must have reduced ones.   This is the nitty-gritty of physician Medicare service compensation.  About 220 codes were identified as needing review; 96 by CMS staff, ten by Medicare’s regional medical directors and 113 from specialty physician groups.

One striking aspect of the process is that the American Medical Association plays a key role in the evaluation process and makes recommendations on relative value assignment.  The AMA has a committee which works on these issues and which coordinates with physician specialty societies to obtain input from doctors on work effort, practice expense and malpractice cost.  Concerns raised by MedPAC and others about the AMA’s role have led CMS to be somewhat more critical and the PPACA requires it to develop new validation methods for the RVU process.  And in this five-year review, CMS appears to have disagreed with AMA recommendations a substantial portion of the time.  It is hard not to wonder, however, if CMS couldn’t figure out a way to disentangle itself from the AMA’s involvement in the reimbursement process and allow it to just be a commenter on proposed rules, as everyone else is.

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