Table Of ContentBrandeisUniversity
Health Policy
Research Consortium
incooperationwith AdministrativeOfficesat:
BostonUniversity IHellerGraduateSchool
BrandeisUniversity
CenterforHealth 415SouthStreet
EconomicsResearch Waltham,Massachusetts
02254-9110
UrtjanInstitute (617)736-3900
I
HealthPolicyResearch
Consortium
iHBerlalnedreGisraUdnuiavetresiStcyhool
415SouthStreet
Waltham,Massachusetts
02254-9110
(617)736-3900
SURGICALGLOBALFEEPACKAGES
FinalReport
Submittedby
:
BrookeHarrow,B.A.
JanetB.Mitchell,Ph.D.
CenterforHealthEconomicsResearch
300WaFilftthhAavme,nMueA,06t2h15F4loor
March15,1991
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UrbanInstitute AdministrationtoBrandeisUniversityHealthPolicyResearch
Consortium.
GLOPll/2
Thetotalbudgetforthisprojectwas$49,811.24. Onehundredpercentofthe
totalcostofthisprojectwasfinancedwithFederalfunds.
41
GLOPll/2
TABLE or CC»rrEHTS
PAGE
1. IHTRCMJOCTIOB 1-1
1.1 Statement of the Problem 1-1
1.2 The Proposed Surgical Global Fee Policy 1-2
1.3 Executive Summary 1-4
1. Overview of the Report 1-5
2.0 DATAANDMETHODS 2-1
3.0 PHYSICIANBIIJ[.INGS DURINGGLOBAL FEE PERICX) 3-1
3.1 Preoperative Billing 3—1
3.1.1 Initial Evaluation or Consultation 3-1
3.1.2 Additional Preoperative Visits 3-3
3.2 Same Day Billing 3-5
3.2.1 Intra-operative Procedures 3-5
3.2.2 Minor Surgical Procedures (endoscopies and starred
procedures) 3-7
3.3 Postoperative Billing 3-8
4.0 POLICY RECCMfEMDATIONS 4-1
4. C4o.1n.v1ersPiroenopeFraacttiovre visit Adjustments 44--12
4.1.2 Minor Surgical Procedures 4-4
4.1.3 Postoperative Visit Adjustments 4-5
4.2 Historic Payment Level Adjustments 4-6
4.2.1 Preoperative Payment Adjustments 4-6
4.2.2 Minor Surgical Procedures 4-7
4.2.3 Postoperative Payment Adjustments 4-8
APPENDIX A Mean Number of Postoperative Outpatient Visits by
Primary Surgeon
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1. INTRODUCTICMI
1. Statement of the Problem
The Omnibus Budget Reconciliation Act of 1989 PL-101-239 has provisions
that significantly change the wayMedicare reimburses for physician services.
The current reasonable charge payment mechanism of actual, customary, and
prevailing charges will be replaced by a resource-based relative value scale
(RBRVS) fee schedule beginning in 1992. The fee schedule amount for a given
service in a given locality will be computed by taking the national relative
value components for the service, adjusting them by the geographic practice
cost indexes for the locality, summing the results, andmultiplying by a
national conversion factor.
Basing physician payment on national relative values makes it necessary
for the establishment of national definitions of services. For surgical
procedures this becomes particularly important. Most major surgical
procedures have traditionally been reimbursed through a global fee that covers
the operation itself and some predefined amount of pre and postoperative
care. In the past. Medicare carriers have had considerable discretion in
determining the types of services to be included and the duration of the time
period covered.
With a national fee schedule, global fee definitions for surgery should
be consistent across the country for two reasons. First, the resource-based
relative values for surgical procedures are calculated using a standardmix of
pre and postoperative services. Thus, RBRVS-based payments will be based on
the assiomption that a fixed number of follow-up visits, etc. are being
provided by the surgeon. Second, in the absence of a consistent set of global
fee definitions, surgeons may begin to extra-bill for related services in
order to offset any revenue losses due to the fee schedule. Based on input
fromphysicians and carriers and after consideration of the Physician Payment
Review Commission recommendations, HCFA has developed standard global fee
definitions; they will apply to all major surgeries performed in all parts of
the country.
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The use of standard global fee definitions also raises two important
technical issues related to the implementation of the new fee schedule.
First, HCFA is calculating a multiplier called the conversion factor which
transforms relative values into payment amounts. The initial conversion
factor is to be budget neutral relative to what Medicare expenditures would
otherwise be without the fee schedule . This conversion factor will be
calculated by dividing the estimated 1991 payments for physician services by
the total number of relative value units (RVUs) expected to be provided in
1991. This conversion factor is a national number which applies to all
services. With a uniform global fee definition, HCFAmight want to factor in
the RVUs for any additional visits that may be billed separately under the new
standardized global fee definition and subtract the RVUs for visits that will
no longer be permitted.
The second implementation issue is calculation of transition payments.
The new fee schedule will be phased in over four years, beginning in 1992,
with the new rules fully in place in 1996. During the years of transition,
the old payment amounts will be blended with the new. Average allowed payment
amounts based on the customary and prevailing charges may need to be adjusted
to account for the new global surgical definition to make the historic payment
amounts comparable to the new fee schedule aunount. These adjustments would be
made on a carrier specific basis. Carriers with global fee definitions
narrower than the national global fee policy may need to adjust their historic
payment amounts upwards to reflect the charges for those visits no longer paid
separately under the Medicare Fee Schedule. In a similar fashion, carriers
with global fee definitions broader than the national policymay need to
adjust their historic payment amounts downward, subtractingthe charges for
visits that will be billed separately under the Medicare Fee Schedule.
1.2 The Proposed Surgical Global Fee Policy
The Health Care FinancingAdministration (HCFA) has recently announced
its proposed national standardization of global surgery policy (Federal
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Register, Vol.56, No.5, January 8, 1991, p. 699-704). HCFA is considering
the implementation of this policy on July 1, 1991. The following provisions
are included in this proposed policy:
• Pthreeoipnairtaitailwepvearliuaotdi:onMeodriccaornesuwlotuatlidonpaybystehpearastuerlgeyonf.or
All normal preoperative visits, in or out of the hospital
made by the primary surgeon after the initial visit will
be included in the global fee. No specific number of
preoperative days has been attached to this policy.
• Jinnttrraa--ooppeerraatficviev aseerrvviicceess:reAqlulireudsuafloranpderfnoercmeasnscaeryof the
surgery would be included in the global surgery fee. HCFA
is working with the Physician Payment Review Commission
c(oPmPRmCu)ni,tycatroriedrevmeeldoipcaalldisitrecotforussuaalndatnhdenpehcyesssiacriyan
intra-operative services for each surgery,
• Pdaoysstopaefrteartivthmepedartieodo:f Aslulrgeproys,topweirtahtiavelovnigseirtsperupiotdofo9r0
certain specific procedures that require a longer recovery
period would be included in the global fee, e.g.
orthopedic procedures, open heart surgery. HCFA is
currently requesting suggestions for which procedures
should be given a longer postoperative global fee period.
• Minor surgical procedures (starredprocedures and
w"hsecnopitehse")su:rgMeerdyicoarreendwoosulcdopynotispapyerffoorrmevidsiutnslestshatothoecrcur
documented services are performed at the same time. All
postoperative services related to a surgery or "scopy"
that occur within 30 days after the procedure is performed
wouldbe included in the global fee.
This project has three main objectives. First, we produce descriptive
baseline data on the visit billings of primary surgeons in addition to the
global fee for surgical procedures. Second, we provide technical support for
HCFA's calculations of a budget neutral national conversion factor. Third, we
calculate what adjustments may be necessary to the historical payment amounts
for use in the blended transitional rates. We use historical data to
determine the average number of visits allowed by individual carriers in
addition to the national global fee definitions. If desired, HCFA can use this
information to instruct the carriers how to adjust their historical payment
levels to include the same mix of services as the fee schedule amounts.
1-3
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1.3 Executive Summary
The primary data base for this study is a physician claims abstract with
information on the top 100 Medicare surgical procedures from the 1988 BMAD
beneficiary file. Top procedures were identified based on their total
contribution to total Medicare surgical spending, regardless of site of
service. Additional procedures which were in the same "family" of related
procedure codes as one of the top 100 Medicare procedures were also chosen for
analysis. Included in the claims abstract are all bills submitted by the
primary surgeon for a period extending from 30 days prior to surgery to 90
days following. Other data sources used for this study are a carrier survey
conductedby HCFA's Bureau of ProgramOperations (BPO) and two alternative
lists of intra-operative procedures, one provided by the Physician Payment
Review Commission (PPRC) and one providedbyMassachusetts Blue Cross and Blue
Shield (BCBS)
HCFA is proposing a preoperative surgical global fee period that begins
after the initial consult or evaluation. For most of the major surgical
procedures that we examined, at least one preoperative visit is billed 50
percent of the time. The procedures with preoperative billed visit rates of
70 percent or more are procedures that historically have not been coveredby a
global fee policy (temporary pacemaker, coronary angioplasty, and heart
catheterization). These same surgeries are also more likely to have multiple
visit bills during the 30 day preoperative period.
We examined the frequency of intra-operative billings for major surgical
procedures, using the two alternative lists of intra-operative procedures.
For the majority of major surgical procedures, billing for intra-operative
procedures is trivial, and often non-existent.
Under the model fee schedule the postoperative global fee periodwill be
a standard 90 days for almost all procedures. We examined the number of
postoperative visits billed for carriers with short global fee periods
(shorter than 90 days postoperative). Actual reimbursement practice was
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sometimes different from stated carrier policy. Carriers with longer
postoperative global fee periods often demonstrated as many postoperative
visit bills as those carriers with shorter global periods.
Finally, it appeared that some technical adjustments might be necessary
as part of the fee schedule transition process. First, the RVU base used to
calculate the conversion factor might be constructed so as to reflect
expected, rather than actual, 1991 billings. If surgeons will be prohibited
from submitting postoperative visit bills, then the RVUs associated with those
bills should logically be excluded from the base. Our results suggest that a
substantial number of visits wouldbe affected by these adjustments,
particularly if the standard global fee policy is appliedto procedures that
traditionally have not been reimbursed under a global fee, e.g. pacemaker
insertion and cardiac catheterization.
Second, carriers with limited global fee definitions might want to
calculate historic payment aunounts so as to adjust for those same day and
postoperative visits that previously were billed separately. While algorithms
can be developed to help carriers do this, the frequent lack of correlation
between carrier policy and observed billings suggests that in some cases this
type of adjustment might be unnecessary.
1.4 Overview of Report
Chapter 2 describes the data source for this study. Chapter 3 presents
tables that document surgeon billing patterns throughout the global fee
period. Finally, chapter 4 provides our policy recommendations for national
standardization of the global fee policy.
1-5
