Medicare Redistribution is a Step in the Right Direction

The reimbursement redistribution from specialists to primary care physicians that has been a long time coming may have begun last week when CMS announced what amounts to a nearly 8% reimbursement increase for primary care and a double-digit decrease for some specialties.

But read just a little bit of the 1128-page proposed rule for the 2010 Medicare Physician Fee Schedule and you'll start to get an idea of just how convoluted and arbitrary the current physician reimbursement system can be.

The cuts aren't coming from most of the procedures specialists perform. The real target is imaging.

CMS is proposing to adjust the practice expense relative value units (PE RVUs), which provide reimbursement for the building space, equipment, and office supplies that are used for physician services.

Physicians who own imaging equipment receive payment via PE RVUs to offset some of their investment and maintenance costs. However, CMS thinks it has been overpaying physicians by underestimating how often physicians really use the equipment.

The current reimbursement formula assumes a 50% utilization rate—25 hours out of a 50 hour work week. However, a MedPAC study in 2006 found that MRI and CT machines are used at nearly twice that rate, meaning CMS has been paying too much (more usage means less need for a subsidy).

CMS has suspected this for some time but has admitted that there wasn't empirical evidence to justify another utilization rate. Essentially, the 50% estimate was a shot in the dark. Now, CMS wants to increase the estimate to 90% for all equipment over $1 million, which will reduce practice expense payments. But again there is little empirical evidence.

The MedPAC estimates were based on a survey of imaging providers in six markets that were not nationally representative, plus a survey of CT providers. Specialists that are lobbying against the change can use that shaky evidence to poke holes in CMS' estimates.

If you're a specialist who may lose reimbursement from this change, consider that piece of ammo a gift, because you may not like what I have to say next.

Although most physicians are in favor of increasing primary care reimbursement as long as it doesn't come from specialists' piece of the pie, that mutually beneficial outcome doesn't seem possible in an environment where costs are such a major concern. So this rebalancing of reimbursement is the best option and a necessary step in the right direction.

Most of the specialties hit hardest by this—cardiology, radiology, nuclear medicine, radiation oncology—already make over $400,000 at the median levels of MGMA's compensation surveys (for a full list of specialty reimbursement changes, see p. 716 of the fee schedule proposal). Primary care is still under $200,000, so this change will by no means close the payment gap.

I don't mean to dismiss the concerns of a cardiologist or radiologist looking at a potential 11% drop in reimbursement. I may not be making friends here, but I am trying to look at it from the perspective of what's best for the larger health system, and this change addresses two of its more significant problems—the lack of primary care physicians and the overutilization of imaging services.

And it's not that specialists' work is suddenly no longer valued. Most of the reimbursement for actual clinical work remains unchanged; it's just the subsidy for equipment expenses that took a hit. And you could argue they were being overpaid in the first place.

CMS' methodology could have been better and it would be nice to have some empirical evidence to show that CMS isn't now overestimating equipment utilization. But as the agency says in the proposed rule, it's hard to believe so many physicians would be making capital investments in expensive equipment that they only use 50% of the time.