How We Get Paid

1. How We Get Paid Richard I. Fogel, MD CEO The Care Group, LLC Indianapolis, Indiana

2. Introduction For most cardiology practices, 50%-60% of patients are covered by Medicare Understanding how Medicare determines reimbursement rates is critical to understanding the financial viability of your practice and your future under healthcare reform

3. The Formula Reimbursement = RVU x Conversion Factor RVU = relative value unit Conversion factor: Annually determined by CMS Multiple inputs including: Sustainable growth rate formula � as determined by law Budget neutrality factor

4. What Is an RVU? Each service provided by a physician is assigned an RVU The RVU is a numeric value that is used to compare the "value" of a physician service with all other physician services RVU is comprised of 3 components: Work RVU (approx 52%) Time, skill, judgment, stress Practice expense RVU (approx 44%) Clinical labor, supplies, medical equipment Malpractice RVU (approx 4%) RVU = work RVU + practice expense RVU + malpractice RVU

5. Who Sets the RVU? RVUs are determined by CMS based on recommendations of the AMA Relative Value System Update Committee (RUC) RUC is a committee of the AMA comprised of 29 members including 23 from the professional medical societies: ie, the ACC has a RUC representative

6. How Is the RVU Determined? RVUs for a given service are determined: (1) when a new code is developed � ie, a new procedure; (2) on a 5-year review cycle; or (3) when CMS believes that the RVU for a given service is mis-valued To determine a new RVU, the specialty society (ie, the ACC) conducts a survey of its members as to the time it takes to perform the service, the skill involved, the judgment involved, and the intensity and stress of the service

7. How Is the RVU Determined? The survey process is rigorous and formal Typically 100-150 surveys are sent out and there is a 30%-50% response rate Based on the survey results, the specialty society generates what they believe is an appropriate RVU for the service A representative from the specialty society then presents the survey results, analysis, and proposed RVU to the RUC The RUC analyzes, challenges, and debates the recommendations of the specialty society and determines an RVU This RVU is sent to CMS who either chooses to accept the RVU or makes modification The next year, the final RVU is used in the reimbursement calculation

8. What About the Practice Expense Component of the RVU? Determined by a subcommittee of the RUC, called the Practice Expense Review Committee (PERC) Similar process except instead of basing the RVU value on time, skill, and judgment, the practice expense component is based on a survey of practices' indirect and direct costs for offering the service: This can include nonphysician labor, supplies, as well as the cost of medical equipment used for a procedure The PERC submits its recommendation to the full RUC who then incorporates the practice expense RVU into the total RVU value

9. What Is the Conversion Factor and Why Is it so Important? The RVU multiplied by the conversion factor = the reimbursement for the procedure Whereas each service has a unique RVU, the conversion factor is the same for all physician services: Thus the conversion factor affects the reimbursement for all Medicare physician services In simplest terms, a 1% decrease in the conversion factor results in a 1% decrease in Medicare physician expenditures. The conversion factor can therefore have a powerful role in controlling Medicare costs

10. Conversion Factor and SGR The most important determinant of the conversion factor is the SGR SGR is sustainable growth rate SGR methodology and formula were legislatively enacted by Congress in 1998: Because it is law, it can only be changed or modified by new law. It literally takes an act of Congress The intent was to adjust annually Medicare physician fees to control Medicare spending

11. SGR History Over the past several years, the SGR methodology has called for a reduction in the conversion factor. This is statutory (ie, CMS just calculates the SGR but has to follow the formula set forth by Congress) For the past several years however, Congress has enacted a last-minute freeze or slight positive update in the SGR, thus preventing an across-the-board cut in reimbursement for physicians For 2010, the SGR formula calls for a 21.2% reduction in the conversion factor In December 2009, Congress passed a 2-month freeze to the SGR reductions. The issue will need to be revisited by Congress in early 2010

12. Summary Medicare physician reimbursement = RVU x conversion factor RVU = work RVU + practice expense RVU + malpractice RVU RVU is determined by CMS based on the recommendations of the RUC and PERC Conversion factor is statutorily set and determined by the SGR formula

13. Why Is all This Important? Compensation should be appropriate for the work and expense provided If you don't participate in the RUC survey process, it is likely the survey will not accurately reflect the physician work involved in the service or the practice expense to provide the service, and your services will undervalued If Congress does not repeal or "fix" the SGR, physicians will be faced with substantial (> 20%) decreases in the reimbursement for their services over the next several years