Next Year’s Medicare Payments to Anesthesiologists: Not Quite as Dire

CMS had announced an additional 7.9 percent decrease in the Federal Register, where it published the proposed Fee Schedule rule for 2011 in July. This cut is based on an increase in the weighting of practice expenses (PE) and professional liability (PLI) costs in the Medicare Economic Index (MEI) and a negative adjustment to the Medicare conversion factor to keep outlays budget neutral. If the 7.9 percent cut were to be added to the 23 percent Dec. 1 SGR cut plus the Jan. 1, 2011, 6.1 percent SGR cut, the national average anesthesia conversion factor (CF) would drop to $14.36 — not even $0.50 more, in absolute dollars, than the anesthesia CF on the day that the Medicare Fee Schedule was implemented, Jan. 1, 1992.

Norman A. Cohen, MD of the Oregon Health & Science University Department of Anesthesiology was kind enough to send us his personal analysis of the effect of the MEI adjustment on our specialty:

I’d like to point out that the 7.9 percent reduction due to rebasing of MEI exaggerates the actual impact on anesthesiology and the anesthesia CF.

As I understand the rebasing of MEI, [most] services will see an increase in PE and PLI RVUs at the code level with no change in work RVU. This increase will be offset by an overall 7.9 percent reduction in the CF. The net impact for any particular code will be far less than 7.9 percent. In fact some services will see an overall increase in payment and some will see a decrease. For anesthesia, the adjustment will need to take place entirely at the CF via changes in the PE and PLI shares, offset by the 7.9 percent reduction. The anesthesia CF will not see a 7.9 percent reduction but will see a smaller, albeit significant, reduction due to the work dominant nature of our services (as you noted). By my calculations, the impact on the anesthesia CF due to MEI rebasing alone will be around -3.6 percent. This is reflected in the impact table in the proposed rule that rounds the allowed charge impact for MEI rebasing to be approximately -3 percent. Of course, there are other factors that come into play, such as the 4 year PE transition [2010 being the first of those 4 years], annual MEI updates, SGR, etc. that will impact the anesthesia conversion factor as well.

Thus, following Dr. Cohen’s analysis, instead of $14.36, the average 2011 anesthesia CF would be approximately $15.18 to $15.28.

There are comparable upward adjustments to the actual practice expense (PE) and professional liability expense relative values for the non-anesthesia services including pain medicine and critical care, so total allowed charges will not be slashed as much as the “Other services” conversion factor in the updated table below would suggest, either. For example, interventional pain management services performed in a private office should see an overall payment increase of as much as 3 percent instead of the 7.9 percent MEI cut because of higher relative values. Of course, interventional pain management will not be spared the 23 and 6.1 percent SGR reductions.

We thank Dr. Cohen for sharing his expertise with our readers and note that he has done so in his personal capacity; he did not write as chair of the Section on Professional Practice within the American Society of Anesthesiologists, or on behalf of ASA. We do agree with Dr. Cohen, and with ASA, that the calculated 2011 CFs, which represent a combined total payment reduction of one-third, are completely unreasonable and unacceptable.

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