2019 HSC Section 2 - Practice Management

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Barbieri et al

charges, which were determined by surveying local charges. However, spurred by concerns about market inefficiencies, a team of researchers at the Harvard School of Public Health conducted a series of studies that discussed a potential shift to reimbursement based on resource costs. 1,2 With the Omnibus Budget Reconciliation Act of 1989, this work was translated into a new payment methodol- ogy for Medicare, the Resource-Based Relative Value Scale (RBRVS), which went into effect in 1992. 3 This RBRVS assigns relative value units (RVUs) to physician services based on 3 components: physician work, practice expense, and professional liability insurance. Physician work, which accounts for an average of 50.9% of the total RVUs for each service, is comprised of 4 factors: (1) the time it takes to perform the service; (2) the technical skill and physical effort; (3) the required mental effort and judgment; and (4) the stress caused by the potential risk to the patient. Practice expense, which accounts for an average of 44.8% of the total RVUs for each service, is based on the cost of equipment, supplies, and staff support needed to provide the service. Professional liability insurance, which accounts for an average of 4.3% of the total RVUs for each service, is determined by the expected liability of providing the service. 4 Each of these subcomponents is then multiplied by the geographic pricing cost index (GPCI) to arrive at the total RVUs for the service. In 2017, work GPCI varied from 1.00 to 1.09, practice expense GPCI varied from 0.85 to 1.36, and professional liability GPCI varied from 0.34 to 2.53. This has face validity, considering the resource cost of an individual’s work varies little between location, but supply costs do vary, and malpractice costs can vary greatly. Thus, the total RVUs for a procedure or service can be defined as

RVUs can impact relative reimbursement for services, the absolute value of reimbursement is ultimately controlled by CMS and the Medicare budget. Since most other insurers use the RVUs set by Medicare as the basis for their fee schedules, the RVUs used in the RBRVS also affect reimbursements outside of Medicare. FORMATION OF THE RELATIVE VALUE SCALE UPDATE COMMITTEE The AMA and RUC was created in 1991 to provide clinicians with an opportunity to participate in the RBRVS process. This multispecialty committee regularly reviews the RVUs associated with codes for medical services and procedures to determine whether they are appropriate, undervalued, or overvalued and then makes recommendations to CMS based on these analyses. In addition, the RUC makes recommendations regarding the development of new codes. Although the RUC is not required to submit recommendations to CMS and the final decisions about RVUs are made by CMS, the RUC recommendations frequently influence this decision-making process. THE COMPOSITION OF THE RUC The RUC is currently comprised of a volunteer group of 31 voting physician members and [ 300 physician and staff advisors. Twenty-one of these voting members are appointed by major national medical societies, and there is currently 1 dermatologist on the RUC, who is appointed by the American Academy of Dermatology. Voting members on the RUC serve 3-year terms with no term limits. The RUC Chair is appointed by the AMA Board of Trustees to 2-year terms, with a limit of 3

Total RVUs ¼ ð Work RVU 3 Work GPCI Þ 1 ð Practice Expense RVU 3 Practice Expense GPCI Þ 1 ð Professional Liability RVU 3 Professional Liability GPCI Þ

Finally, to arrive at a dollar amount of reimburse- ment for the service, the total RVUs are then multiplied by a conversion factor, which is statutorily determined by the Centers for Medicare and Medicare Services (CMS) as part of the budgetary process and updated on a yearly basis; in 2017, the conversion factor was $35.89, a 0.24% increase from that in the prior year. 5,6 It is important to note that the actual dollar amount of reimbursement is inextricably tied to the conversion factor, which is determined by CMS; as a result, while changes to

terms. CMS representatives are included as participating observers but are not members of the committee. 7 For recommendations related to CPT codes, there is a separate 17-member CPT Editorial Panel, which largely parallels the RUC with respect to structure and function. The CPT Editorial Panel is comprised of 13 volunteer members chosen by the AMA, as well as representatives from the Blue Cross Blue Shield Association, America’s Health Insurance Plans, American Hospital Association, and CMS.

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