Process Provides Opportunity to Improve Physician Payments

Companies must introduce potentially undervalued procedures early in process.

Tim Hunter, MCRA, LLC

The process plays out in the same manner each November. Medical technology companies examine the Medicare Physician Fee Schedule final rule to understand whether the Medicare physician payment for a particular procedure or service related to one of its products has increased or decreased for the upcoming calendar year.¹ This is a particularly important strategic consideration for manufacturers, as physicians must be appropriately compensated for performing a procedure that utilizes the company’s technology, regardless of whether the physician is responsible for the technology cost itself.

In addition to monitoring these changes, orthopedic companies also may wish to analyze whether a Medicare payment for the procedure appropriately compensates a provider for the work required and performed and consider strategies to improve the payment rate. This article briefly describes the upcoming Centers for Medicare and Medicaid Services (CMS) five-year physician work relative value unit (Work RVU) update process and the opportunity for companies to partner with physicians and other stakeholders to positively impact physician payments.

Background

Since 1992, Medicare has reimbursed physicians for services performed based upon the resources utilized.² Every five years, CMS performs a general review and update of  Work RVUs, an important component in determining Medicare payments to physicians for all procedures and services performed.³ The Work RVU is intended to represent the time required to perform the procedure as well as the associated skill, professional judgment, mental judgment and related complexities of the procedure.

Timing of the Next Update

While the next Medicare Work RVU five-year update will not become effective until Jan. 1, 2012, companies wishing to highlight procedure payment inadequacies must introduce potentially

undervalued procedures early in order to provide stakeholders with enough time to consider and act on the concern.

Specialty societies likely will have identified and submitted procedures for evaluation by the full American Medical Association Relative Value Scale Update Committee (AMA RUC) by mid-year 2010.⁴

Considerations

If a medical technology company believes that an associated procedure is or may be undervalued, it may wish to develop an advocacy strategy to address the deficiency. Important considerations include the following:

•Understand the Work RVU five-year revision process. The last Work RVU five-year update proposed notice provides an excellent overview of the update process.⁵ Companies wishing to advocate for a particular procedure should be aware of the general timeline and process for updating Work RVUs, including any society-specific deadlines for consideration.

• Understand the rules. The Medicare Work RVU five-year update is a budget-neutral exercise. A RVU increase for one procedure will require a reduction elsewhere, likely within the affected specialty. RVU revision (particularly substantial revision) requires compelling evidence that the procedure is undervalued in contrast to other comparable procedures.

• Determine whether a procedure is appropriately reimbursed. Companies can work directly with physician customers to identify whether a problem exists. In many cases, the physicians themselves may initiate this discussion.

• Measure the inequity. If physician stakeholders believe that payment is inadequate relative to others, companies may consider developing a survey to measure the inequity. Survey results can be used to demonstrate the inequity during coalition building.

• Work with relevant specialty societies. As a stakeholder directly impacted by a potentially undervalued procedure, the relevant physician specialty society must decide whether and how to address the issue. The effort may or may not succeed, even with organized physician and specialty society support, but it almost certainly will fail without it.

• Start now. Companies wishing to advance an issue for consideration should be prepared to initiate the effort immediately. Issue identification and validation take time as does coalition building. Specialty societies will need sufficient time to evaluate the payment issue and determine how best to support a potential RVU increase.

Ultimately, the process for improving Medicare physician payment for a particular procedure is an involved process requiring considerable coordination. For select cases, such a strategy can improve physician reimbursement and advance utilization of related technologies.

References

1. Information regarding the 2010 Medicare Physician Fee Schedule Proposed Rule can be found at www.cms.gov.

2. 71, Federal Register, No. 125. June 29, 2006.

3. The Work RVU is only one part of the Medicare physician payment calculation. Additional variables include practice expense and malpractice RVUs, as well as a standardized conversion factor against which the total RVUs are multiplied to derive a payment amount. Individual physician payments for a service are varied based upon several factors including geographic location.

4. During the last five-year update, relevant AMA RUC meetings were held one year before the release of the CMS proposed notice. The corresponding dates for the upcoming cycle indicate AMA review during the middle or second half of 2010.

5. 71 Federal Register, No. 125. June 29, 2006.

Tim Hunter is the director of reimbursement for MCRA LLC, which provides comprehensive consulting services to the orthopedic industry. Tim has advised medical device, biologic, and drug companies on issues related to coverage, reimbursement, and adoption of novel technologies for more than 10 years. Please send inquiries to Tim at [email protected].