The previous two options assume that a single conversion factor would apply to
physician services and that the policy decisions regarding differentials, if any, for non-physician practitioners would be considered in determining the appropriate conversion factor. Option 3 is intended to maintain current payment levels by type of service and to reduce the redistributions that would occur in adopting the Medicare RB-RVS. This option is not consistent with the goal of aligning payments with resource requirements. Because it would perpetuate the existing
discrepancies between payments and the costs of providing services, it is not recommended as a long-term policy option. As discussed later in this chapter, it could be part of a transition payment methodology.
We have not suggested that specialty-specific cost-neutral conversion factors be considered because implementation of a policy that would employ those factors would be problematic for several reasons:
• A substantial proportion of services are billed by multi-specialty clinics or hospitals.
• There is no commonly accepted definition of “physician specialist.” Most payer designations of specialists include both board-certified physicians and self-designated physicians.
• Physicians who provide a different mix of services than other physicians in the same specialty could receive substantially higher or lower payments than those at the current levels.
In contrast, the current OMFS is a precedent for differential conversion factors by type of service and should not impose a substantial administrative burden after the initial cost-neutral conversion factors are determined. However, there may still be a significant impact on program payments to an individual physician if the relative values for the procedures within the service category provided by the physician have substantially larger increases or decreases than the average change for the service category.
The current OMFS conversion factors cannot be used to establish cost-neutral conversion factors because of the change to resource-based relative values. However, the WCRI (Eccleston et al., 2002) and The Lewin Group studies provide rough estimates of the conversion factors that would be applicable (see Table 3.8). The WCRI results are taken from their analysis of California differentials for a market basket of services. From The Lewin Group study, we estimated the multiplier by dividing estimated OMFS payments for the type of service by the estimated total Medicare RB-RVUs and comparing the result to the Medicare conversion factor. This estimate accounts for the proportion of time a procedure is furnished in office versus facility settings and the average GAF adjustment. The multipliers are quite similar for evaluation and management services, surgery, and radiology. Further analysis is needed to confirm the reasons for the large differences for general medicine and physical medicine; however, we believe it is largely attributable to definitional differences. The Lewin Group used the types of service as defined by the OMFS, which includes chiropractic manipulative treatments as a subcategory under
medicine. WCRI included chiropractic services in physical medicine. The Lewin Group
multipliers for medicine and physical medicine are more consistent with the current structure of the OMFS.
Table 3.8
Estimated Cost-Neutral Multipliers to the Medicare Conversion Factor by Type of Service
Anesthesia Evaluation
and
Management Surgery Radiology Medicine
Physical Medicine
WCRI study N/A 0.90 1.36 1.14 1.59 0.99 Lewin Group
study 1.91 0.93 1.36 1.16 1.22 1.18 SOURCE: RAND estimates based on Eccleston et al. (2002) and The Lewin Group (2002).
Transitional Payment Policies
The impact of significant increases or decreases in payment levels can be softened through transitional payment policies that limit the annual amount of change in payment. Next, various policies are identified that have been used by Medicare and/or other workers’
compensation programs to phase in the payment changes. The first three options are based on a comparison of the service-specific conversion factors with the conversion factor under the new payment systems. These options involve less administrative burden than the fourth option, which would make payment comparisons on a procedure-specific basis. These options eliminate the need to crosswalk obsolete OMFS codes to new procedure codes and to maintain both the old and new payment amounts for each procedure. The major shortcoming of these options is that they are based on the average payment change within the service category and do not take into account the actual mix of services provided by an individual physician. A physician with an atypically high proportion of services with above-average payment reductions will not receive as much protection as under a comparable policy applied on a procedure-specific basis.
We have used the estimated current expenditures and Medicare RB-RVS RVUs from The Lewin Group analyses to estimate the length of the transition and the impact on program
expenditures of the first three options. For each option, we assumed that the OMFS conversion factor is set for 2003 by applying a 1.15 multiplier to the Medicare conversion factor. We
estimated that the conversion factor is $44.84 and assumed that it is updated in subsequent years based on the CMS Office of the Actuary’s forecasted rates of change in the Medicare Economic Index.43 Comparable estimates for procedure-specific transition policies require additional simulations using claims data that are not within the scope of this report.
Option 1: Establish Floors and Ceilings on Maximum Annual Changes in Service-