2020 Payment Changes Cap Two Decades of Declining Reimbursement
By Eric C. Stiefel, M.D..

In a land far away, and a time that feels so long ago (1997-2014), Orthopaedic Surgeons would annually converge on Capitol Hill to lobby against the draconian cuts the Sustainable Growth Rate (SGR) proposed. As a brief refresher, Congress used the SGR formula to budget Medicare spending on physician fees and called for spending cuts when Medicare’s total spending was above target rates. As a result of grassroots advocacy efforts from physicians, the SGR cuts were mostly averted from 1997 to 2014, with an annual “doc fix” or legislative waiver of budget neutrality replaced with fee-schedule increases of 2-4%.

In 2015, Congress permanently repealed the SGR, and replaced it with the Medicare Access and CHIP Reauthorization Act (MACRA), which included a plan where physician fees were scheduled to increase by 0.5% until 2019 and then remain flat from 2020-2025. When examining the impact of these policies, it’s important to compare annual payment updates with changes in the consumer price index or “inflation” during the same time period. Simply put, the modest increases that Congress budgeted into the physician fee schedule have been outpaced by inflation, and these discrepancies have added up over the last 20 years. According to the U.S. Bureau of Labor Statistics, health insurance prices were 79.8% higher in 2020 vs. 2005. In other words, a plan costing 500$/month in 2005 would cost 898.86$/month in 2020. Several recent studies have highlighted the fact that Orthopaedic Surgeons are working more and making less. In a recent article by Campbell et al., the authors reported that average work relative value units (RVUs) billed per Orthopaedic Surgeon increased by about 10% between 2000 and 2016, but the inherent value of the RVU decreased by 39%. Additionally, evidence supports the fact that the pay cuts providers take are not necessarily translating into savings for the U.S. health care consumer. In a study by LaPrade et al., reviewed charges for arthroscopic rotator cuff repair found that surgeon charges (not payment) increased by 33% while hospital charges increased by 136% between 2005 and 2014. Finally, More et al. examined reimbursement for the 20 most common arthroscopic procedures and found that, when adjusted for inflation, reimbursement rates declined by 29.81%!

Before 1965, physicians’ charges were based on market principles of supply and demand. In 1965, Medicare introduced the “usual, reasonable and customary” (URC) standard to provide more uniformity to the physician payment system. Providers were no longer allowed to bill outside of the standard rates their peers used. However, even under this system, the market continued to drive reimbursement. Regional averages were used as a benchmark for customary charges, so as subspecialty increased expertise, technology advanced and delivery cost went up. Providers responded by increasing fees, which increased the URC rates.

In 1992, the resource-based relative value scale (RBRVS) and Current Procedural Terminology (CPT®) were introduced as part of the “omnibus spending bill” to curtail increasing spending. This shifted the power to set fees from the providers to the legislator. The RBRVS valuation system included a formula to account for physician work, risk, expertise and the practice expense of each clinical service. Each procedure or diagnostic service is assigned a numeric CPT® “code” and RVU. The American Medical Association (AMA) maintains the CPT® code set and RVU database through two committees: the CPT® Editorial Panel and the Relative Value Scale Update Committee (RUC).

Each year, the RUC recommends changes to the CPT® code set for overvalued, undervalued or new codes. The RUC then presents these changes to Congress, which historically accepts about 90% of the recommendations. Congress examines these changes along with utilization and spending in the year prior to create a budget for the current year. Congress reviews these items and is required by legal statute to adjust for budget neutrality. They then report updated spending as percent increase or decrease in total spend and adjust the conversion factor (a multiple used to convert RVUs to real dollars) to hit projected spending targets. For example: If the RVU value of your procedures remains the same and the conversion factor decreases, you will get paid less money for the procedure. Essentially, the AMA, RUC and Congress get to pick the winners and losers each year.

On December 21, 2020, Congress passed a year-end spending bill that finalized the long-awaited changes to the Evaluation & Management (E&M) code set. The result: the largest single-year loss in value for some of the most common orthopaedic procedures in the past 40 years. The E&M changes called for increased valuation of office-based, or “cognitive,” care, which (again, due to mandated budget neutrality) triggered a downward correction in the Medicare conversion factor. This RVU decline will disproportionately impact surgeons who generate a significant portion of income billing for procedures, which are now lower monetarily valued CPT® codes. The reason for decreased value is twofold. First, the RVU update for office-based services will not be applied to the global package follow-up visits, which contributes to the total RVU of surgical codes. Second, the conversion factor for 2021 is $34.89, a $1.20 decrease from 2020 (remarkably, this is even lower than the $38.26 conversion factor used 20 years ago.) Finally, the updated physician fee schedule included specific reductions to the RVU of total hip and total knee procedures. In 2021, reimbursement for total hip and total knee procedures is set to decrease by about 6.5%.

This law calls for an overall increase in Medicare spending of 3.75% for 2021. As a result of these changes, the American Academy of Orthopaedic Surgeons (AAOS) estimates that Orthopaedic Surgeons in general will see the same overall Medicare reimbursement in 2021 as they did in 2020. However, the impact will vary among individuals depending on the provider’s surgical volume versus office-based charges. These cuts, along with the stagnate reimbursement levels of the last two decades, represents a disturbing and incessant trend for procedural specialists.

Surprise Billing
One hot topic in the past year was what appeared to be a unique bipartisan support surrounding the issue of surprise billing reform. After more than two years of focused lobbying efforts from special interest groups like the American Health Insurance Providers (AHIP), lawmakers passed a reform bill.

It’s difficult to obtain a clear history on the root cause of this issue. Most studies examine ongoing trends for in- or out-of-network charges and provide data on prevalence, but not causation. According to one study, one in five emergency room (ER) visits resulted in out-of-network charges to patients. While researching the issue online, one will find anecdotal reporting on incidences of physicians charging enormous fees. It is possible that some providers may have taken advantage of the system by opting out of commercial networks to balance bill patients. With that said, it is unlikely that the prevalence of these physicians is significant enough to drive the issue to the forefront of political discussion.

So where did all the surprise bills come from? Over the past several years, some insurance companies have implemented policies that deny coverage for out-of-network care while simultaneously narrowing networks to cut costs. Another source of “surprise bills” or, perhaps more accurately, “surprise non-emergent coverage” are policies that retrospectively deny care for services deemed not medically necessary. The Emergency Medical Treatment and Labor Act (EMTALA) requires hospitals and providers to treat patients presenting with an emergency medical condition. The term “emergency medical condition” has been defined as “acute symptoms of sufficient severity (including severe pain) such that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in progression of illness.” In response to legislative requirement to render care, several states enacted “prudent layperson laws” that prevent insurers from denying coverage for patients seeking care in ER settings. However, over the past few years, some insurance companies have tested these standards by passing policies that retrospectively deny coverage based on final diagnosis, which is not the “prudent layperson standard.” For example, Anthem Blue Cross Blue Shield has implemented similar policies in Georgia, Indiana, Kentucky, Missouri, New Hampshire and Ohio, all states with legislative statutes requiring coverage based on the “prudent layperson standard.” So, whether the problem is rogue physicians or flawed payment policies, the issue of surprise billing was brought to the forefront of political discussion in 2020.

Back to the new legislation passed in December 2020. The new laws require health plans to hold patients harmless from surprise medical bills. Patients are only required to pay the in-network, cost-sharing amount for out-of-network emergency care, as well as for out-of-network care provided at in-network facilities. The law also includes arbitration processes for payment disputes between provider and payer, referred to as the Independent Dispute Resolution (IDR).

Further detail on the dispute resolution process explains that the IDR is required to consider the median in-network rate for the procedure(s) in dispute. This would incentivize payers to cut ties with upper payment tier providers to depress in-network averages. According to a report by the Congressional Budget Office, providers could expect to see a decline in reimbursements of 15% because of the surprise billing reform. In fact, four years after similar legislation passed in New Jersey, there are actually more out-of-network charges due to narrowed networks.

While the principal solutions offered in this legislation release the patient-from-payment liability, the real challenges will come when providers attempt to negotiate fee schedules with commercial insurance plans after losing leverage that opting out previously afforded. Perhaps the most important nuance of this new legislation is that the states will maintain the right to designate the IDR and benchmark rates for physicians. We would encourage AANA members to engage with state medical societies’ efforts to advocate for favorable benchmark rates.

Moving forward, we should not expect that the dramatic changes in reimbursement will be confined to 2020. While we may not agree on social or political issues, we should agree that there are concerted efforts to devalue our work. We should maintain relationships with physician-friendly policy makers and our leadership should prioritize engagement efforts on our behalf in these issues. We should also educate AANA members on our challenges, wins and losses. What we do have is medical expertise, professional integrity and members willing to participate in grassroots campaigns. AANA is committed to keeping the membership up to date on these and other important issues affecting patient access and member reimbursement.

We need your input to focus our efforts! If you would like to share your thoughts on these or other payment policy issues, please forward comments to info@aana.org. The AANA Advocacy Committee will review your comments and share your thoughts with the AANA Board of Directors and AAOS representatives.

References

1. Quinlan, L.D., Chen, D.Q., Browne, J.A., Werner, B.C. “Surgeon Reimbursement Unchanged as Hospital Charges and Reimbursements Increase for Total Joint Arthroplasty” Arthroscopy: The Journal of Arthroscopic and Related Surgery. 2020 Mar; 35(3):605-612. doi: 10.1016/j.arth.2019.10.015. Epub 2019 Oct 14.
2. LaPrade, M.D., Camp, C.L., Brockmeier, S.F., Krych, A.J., Werner, B.C. “The Cost of Outpatient Arthroscopic Rotator Cuff Repairs: Hospital Reimbursement Is on the Rise While Surgeon Payments Remain Unchanged.” Arthroscopy: The Journal of Arthroscopic and Related Surgery. 2020 Sep;36(9):2354-2361. doi: 10.1016/j.arthro.2020.03.038. Epub 2020 May 1.
3. Walker, R., Morrison, Z., Campbell, M. “Trends in Orthopedic Surgery Reimbursement From 2000 to 2015” Orthopedics. 2020;43(3):187-190. https://doi.org/10.3928/01477447-20200213-0
4. Lane Moore, M. “A Comprehensive Analysis of Medicare Reimbursement to Physicians for Common Arthroscopic Procedures: Adjusted Reimbursement Has Fallen Nearly 30% From 2000 to 2019.”
5. “A Congressional Budget Office (CBO) Report on Surprise Billing Legislation.” Cbo.gov. https://www.cbo.gov/system/files/2019-09/hr2328.pdf
6. The American College of Emergency Physicians (ACEP) and the Medical Association of Georgia (MAG). “MAG & ACEP Applauding Court’s Decision to Revive Lawsuit Forcing Anthem/Blue Cross Blue Shield of Georgia to Rescind its Retroactive ER Claims Review Policy.” Medical Association of Georgia. 29 October 2020. https://www.mag.org/e_news/cat/acep-mag-applauding-courts-decision-to-revive-lawsuit-forcing-anthem-blue-cross-blue-shield-of-georgia-to-rescind-its-retroactive-er-claims-review-policy/