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Physician Compensation Report

4.5% Medicare Pay Hike Will Send RVU Rate Above $38 in 2001

Good News: 4.5% Medicare Pay Hike Will Send RVU Rate Above $38 in 2001

HCFA Nov. 1 raised the pay rate per relative value unit (RVU) for physician services under Medicare Part B by 4.5%, from $36.6137 in 2000 to $38.2581 in 2001. Combined with last year’s 5.5% hike, the compounded two-year increase is 10.1%.

Unlike last year’s increase, which was mainly a direct, congressionally granted raise, the 2001 increase resulted from a number of factors that HCFA takes into account under the statute establishing the Resource Based Relative Value System (RBRVS): higher physician pay, higher staff and supply costs, and most importantly, a shortfall of actual spending for physician services in comparison to “allowed” spending computed under complex formulas in the statute. Thus, the cuts that many specialties have suffered over the last few years in RVU counts for various procedures appear to have created an overall spending shortfall that, under the 1999 Balanced Budget Refinement Act, was offset by the upcoming hike in the RVU pay rate. In fact, HCFA indicated the basic formula would have put the raise at more than 6%, but some mandated caps and subtractions pared it to 4.5%.

The hike “is good news for America’s seniors and the physicians who care for them,” said AMA chair Ted Lewers, M.D. He noted that AMA spearheaded the drive for the 1999 legislation.

The chances for another sizable increase in the RVU pay rate in 2002 seem pretty good right now, but the situation could change dramatically by October 2001, when HCFA must decide the next rate change. The “sustainable growth rate” (SGR) in physician spending for the year ahead, a harbinger of future rate hikes because it’s used to figure “allowed” spending in the formula, is 5.6% now, compared to just 2.1% in the fall of 1999.

M+C and GDP Estimates Changed

A significant RVU pay hike had been forecast (PCR 9/13/00 p. 6), based on two main factors:

* Medicare+Choice enrollment. In April 2000, HCFA forecasted robust growth of 10% in the M+C program in 2001. Because that growth has slowed to a trickle in 2000, HCFA shifted its forecast of growth in traditional Medicare enrollment in 2001 from -.6% to +.9%. This contributed to the higher SGR number. But HCFA said that, because the basic formula would have raised the RVU pay rate so much more than the actual 4.5% increase, the change in M+C enrollment did not, by itself, change the 2001 pay rate.

* Real per capita gross domestic product (GDP) growth. This factor, also part of the SGR calculation, is currently more than 4%. HCFA raised its forecast for 2001 from 1.8% (April 2000) to 2.7%. A higher forecast might have been justified by current economic data, but this would not have affected the RVU pay rate, for the same reason that the M+C data had no direct impact.

In addition to raising the RVU pay rate, HCFA changed, added — or discussed but declined to change — between 200 and 300 specific RVU numbers for particular procedures. It made no policy change on several RVUs that have been controversial because they have cut Medicare revenues for particular specialties.

* Colonoscopies and endoscopies. Gastroenterologists have been able to bill Medicare less and less over the last three or four years, despite increases in the RVU pay rate. The reason is that, in general, they have not been able to bill for practice expense for these major procedures (PCR 10/25/00 p. 5).

* Cataract surgery. HCFA has cut the RVUs for this procedure — the most common major item in most ophthalmology practices — by 50% or more over the last five years (see article p. 4).

For the Federal Register entry containing the RVU pay and coding changes, go to www.hcfa.gov/medicare/pfsmain.htm.

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