Report on the Maryland Medical Assistance Program and Maryland Children s Health Program Reimbursement Rates Fairness Act

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Report on the Maryland Medical Assistance Program

and Maryland Children’s Health Program –

Reimbursement Rates Fairness Act

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Report on the Maryland Medical Assistance Program and Maryland Children’s Health Program – Reimbursement Rates Fairness Act

September 2005 I. Introduction

Chapter 702 (House Bill 1071) of the 2001 Session and Chapter 464 (Senate Bill 481) of the 2002 Session directed the Department of Health and Mental Hygiene (the Department) to establish a process to annually set the fee-for-service reimbursement rates for the Maryland Medical Assistance Program and the Maryland Children’s Health Program in a manner that ensures participation of providers. The laws further stipulated that in developing the rate setting process, the Department shall take into account community rates as well as annual medical inflation, or utilize the Resource Based Relative Value Scale (RBRVS) methodology used in the federal Medicare program or the American Dental Association Current Dental Terminology (CDT-3) codes. The laws also directed that each year, the Department should submit a report to the Governor and various House and Senate committees on the following:

1. Progress in establishing the rate setting process mentioned above;

2. Comparison of Maryland Medicaid’s reimbursement rates with that of other states; 3. The schedule for bringing Maryland’s reimbursement rates to a level that assures

provider participation in the Medicaid program; and

4. The estimated costs of implementing the schedule in item 3 and proposed changes to the fee-for-service reimbursement rates.

The purpose of this report is to provide a status report on the progress that Maryland Medicaid has made in updating reimbursement rates.

II. Background

In September 2001, the Department prepared the first annual report in response to Chapter 702 (House Bill 1071) of the 2001 Session analyzing the physician fees that are paid by the Maryland Medicaid and Children’s Health Programs. This is the fifth annual report.

The Department’s 2001 report showed that Maryland’s Medicaid reimbursement rates in 2001 were, on average, about 36 percent of Medicare rates in 2001. The report also included the results of a survey conducted by the American Academy of Pediatrics in 1998/1999 that showed that Maryland’s physician reimbursement for a subset of procedures ranked 47th among all Medicaid programs in the country. Based on the 2001 report, the Governor and the legislature appropriated $50 million additional total funds ($25 million state funds) for increasing physician fees in the Medicaid program beginning July 2002. The increase was targeted to evaluation and management procedure codes used largely by primary care and office-based specialty care physicians.

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Senate Bill 836 of the 2005 General Assembly session, in an effort to retain health care providers in the State, alleviated the impact of recent increases in the cost of physicians’ malpractice liability insurance. This bill created the “Maryland Health Care Provider Rate Stabilization Fund” to subsidize physicians for the cost of obtaining malpractice insurance. The main revenues of the Fund are from a tax imposed on managed care organizations (MCOs) and health

maintenance organizations.

In addition to subsidizing physicians for the cost of obtaining malpractice liability insurance, Senate Bill 836 allocated funds to the Medical Assistance program to increase both fee-for-service physician fees and capitation payments to managed care organizations to enable these organizations to similarly raise their provider fees. The legislation allocated $15,000,000 State Funds ($30,000,000 Total Funds) in FY 2006 to be used by the Department to increase both fee-for-service physician fees and to pay physicians in managed care organizations’ networks “consistent with fee-for-service health care provider rates for procedures commonly performed by obstetricians (/gynecologists), neurosurgeons, orthopedic surgeons and emergency medicine physicians.” The legislation targeted the fee increase to these physician specialties because of the substantial rise in their malpractice insurance premiums. The bill also allocates additional funds each year to the Medical Assistance program for increasing and maintaining physician fee increases.

III. Analysis of Maryland Medicaid Fees A. Comparisons with Medicare Fees

Medicare fees are based on the Resource Based Relative Value Scale (RBRVS). This

methodology relates payments to the resources and skills that physicians use to provide services. Three types of resources determine the relative weight of each procedure: physician work, malpractice expense and practice expense. A geographic cost index and a conversion factor are used to convert the weights to fees. Medicare rates are adjusted annually according to a complex formula designed to control overall spending, while accounting for factors that affect the cost of providing care. In some years, including 2002, overall Medicare rates have actually decreased. However, following federal legislative mandates, Medicare physician fees were increased by 1.6 percent in 2003, by 1.5 percent in 2004 and by 1.5 percent in 2005 [1].

In addition, Medicare fees are adjusted depending upon where a procedure is performed. Medicare payments for some procedures are lower if they are performed in hospitals or skilled nursing facilities rather than in offices or other places. A more detailed description of Medicare fees is included in Appendix 1.

When the Department raised physician fees in 2002 and again in 2005, the Department used the Medicare physician payment methodology. (A summary of the methodology to determine the new physicians’ fees is presented in Appendix 2.) After the July 2005 increase in Medicaid fees, Maryland Medicaid’s overall physician reimbursement rates are, on average, about 68 percent of 2005 Medicare rates. The 1,600 procedures targeted in the 2005 increase, though, increased from an average of 65 percent to 99.6 percent of Medicare fees. In addition, the evaluation and

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management procedures targeted in the 2002 increase are about 76 percent of 2005 Medicare fees.

However, there is a wide variation in the fees for individual procedures compared to Medicare fees. There are a number of procedures that are well below the 68 percent average. For instance, for about 2,500 procedures, the Maryland Medicaid fee is 29 percent of the 2005 Medicare fees.1 In addition, within those 2,500 procedures, 300 of the procedures are still lower than 10 percent of Medicare fees.

B. Comparisons with Other States

Like Maryland, the neighboring states have their own Medicaid fee schedules. Our review of literature indicates that most states, including Maryland, had previously used different relative value studies as benchmarks for setting their physician fees. The relative value studies were precursors to the Medicare Resource Based Relative Value Scale method.

The American Academy of Pediatrics conducted a survey of Medicaid reimbursement rates across the country in 2001 [2]. Based on the 2001 survey data and Maryland’s July 2002 fees for Evaluation and Management procedures, Maryland’s rank was 13. Ranks of neighboring states were: Delaware: 6, District of Columbia: 47, Pennsylvania: 46, Virginia: 15, and West Virginia: 11.

For this report, we conducted a new survey of the neighboring states of Delaware, Pennsylvania, Virginia, West Virginia and Washington, DC. We requested that they provide their state’s current Medicaid fees for about 100 high volume procedures. Although Pennsylvania did not participate in our survey, we reviewed their February 2004 physician fee schedule that was available on their web site. The 100 procedures include a sample of procedures that were targeted in the 2002 and 2005 fee increase. .

The following Table 1 compares Maryland Medicaid fees for high volume evaluation and management procedures with neighboring states’ Medicaid fees and with the corresponding Medicare fees.

1

The 2,500 procedures exclude Evaluation and Management procedures, radiology and laboratory procedures, and procedures with zero Medicare fee, as well as the 1,600 procedures that were the target of July 2005 fee increase.

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Table 1 - Fees for High-Volume Evaluation and Management Procedures

CPT

Code CPT Procedure Description DC DE PA

a

VA W

VA MD

Medi careb 99201 Office/outpatient visit; new Minimal $25 $35 $25 $25 $26 $29 $38 99202 Office/outpatient visit; new Moderate $33 $63 $25 $44 $47 $51 $68 99203 Office/outpatient visit; new Extended $49 $93 $25 $65 $70 $77 $101 99204 Office/outpatient visit; new Comprehensive $69 $132 $25 $92 $100 $109 $143 99205 Office/outpatient visit; new Complicated $88 $167 $30 $117 $127 $139 $181 99211 Office/outpatient visit; established Minimal $15 $21 $25 $15 $15 $17 $23 99212 Office/outpatient visit; established Moderate $19 $37 $25 $26 $27 $30 $41 99213 Office/outpatient visit; established Extended $27 $51 $25 $36 $37 $42 $55 99214 Office/outpatient visit; establ. Comprehensive $42 $79 $30 $56 $59 $66 $86 99215 Office/outpatient visit; established Complicated $62 $115 $45 $81 $87 $97 $125 99241 Office consultation Minimal $32 $48 $30 $34 $36 $39 $53 99242 Office consultation Moderate $46 $88 $30 $62 $67 $73 $96 99243 Office consultation Extended $61 $118 $30 $83 $90 $97 $128 99244 Office consultation Comprehensive $87 $166 $49 $116 $126 $137 $180 99245 Office consultation Complex $113 $215 $49 $151 $164 $178 $232

a

- Pennsylvania’s fees correspond to 2004. All other states’ and Washington, DC’s fees correspond to 2005.

b

- Medicare Fee schedule for 2005.

As the data in this table show, Maryland Medicaid fees for evaluation and management

procedures are lower than the corresponding Medicare and Delaware fees, but they are generally higher than the corresponding fees for the other neighboring states. The fee for only one

procedure in Pennsylvania (procedure code 99211) is higher than Maryland fee.

Similarly, the following Tables 2, 3, 4 and 5 compare Maryland’s old and new Medicaid fees for orthopedic, obstetric/gynecology, neurosurgery, and emergency medicine procedures with the corresponding Medicare and the neighboring states’ Medicaid fees.

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Table 2. Fees for Orthopedic Procedures

CPT

Code CPT Procedure Description

MD-Old2 DC DE PA a VA W VA MD-New3 Medi-careb 20550 Injection tendon sheath/ligament $15 $31 $56 $32 $39 $43 $61 $61 20552 Injection trigger points; 1 or 2 muscles $22 NC $52 $42 $37 $39 $56 $57 20605 Drain or inject intermediate joint or bursa $18 $30 $55 $22 $39 $42 $60 $60 20610 Drain or inject major joint or bursa $17 $36 $67 $24 $47 $50 $73 $73 20680 Removal of deep support implant $86 $180 $461 $172 $323 $335 $505 $507 22845 Insert spine fixation device $182 $386 $745 $1,000 $531 $620 $800 $803 25600 Treat distal radial fracture, without manipulation $58 $152 $259 $115 $182 $194 $282 $283 26600

Treat metacarpal fracture, without manipulation,

each bone $33 $130 $213 $70 $150 $158 $233 $233

26720 Treat finger fracture; without manipulation, each $26 $100 $170 $56 $119 $126 $185 $185 29075 Application of forearm (elbow to finger) cast $17 $38 $78 $46 $55 $58 $85 $85 29125 Apply forearm to hand splint; static $15 $31 $61 $26 $43 $45 $67 $67 29405 Apply short leg cast (below knee to toes) $19 $40 $81 $51 $57 $61 $88 $88 29515 Application lower leg splint (calf to foot) $14 $31 $61 $35 $43 $46 $67 $67 29580 Strapping; application of paste boot $15 $27 $47 NA $33 $35 $51 $51 29881

Knee arthroscopy/surgery with meniscectomy,

medial/lateral $245 $341 $580 $544 $410 $455 $627 $629

NC: Procedure is Not Covered.

a

b

The data in Table 2 show that, except for one procedure, new Maryland Medicaid fees for orthopedic procedures are higher than the corresponding fees in the neighboring states and Washington, DC. For procedure code 22845, Pennsylvania has the highest fee.

2

MD-Old in all relevant tables refers to Maryland Medicaid fees prior to the July 2005 fee increase.

3

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Table 3. Fees for Obstetric/Gynecology Procedures

CPT

Code Procedure Description

MD-Old DC DE PA a VA W VA MD-New Medi-careb 57452 Exam of cervix w/scope $65 $64 $107 $40 $101 $82 $116 $116 57454 Biopsy of cervix and endocervical curettage $65 $87 $154 $69 $145 $120 $166 $167 58300 Insert intrauterine device $18 $139 NC $17 $87 $69 $101 $101 58611 Laparoscopy; remove adnexal structures $58 $50 $79 $175 $75 $64 $85 $85 58670 Laparoscopy; tubal cautery, fulgurate oviducts $525 $197 $345 $317 $325 $273 $525 $373 59000 Amniocentesis; diagnostic $31 $67 $133 $50 $126 $102 $145 $145 59025 Fetal non-stress test $18 $24 $40 $18 $38 $32 $43 $43 59050 Fetal monitor during labor w/report $24 $35 $52 $100 $50 NC $56 $56 59051 Fetal monitor/interpretation only $21 $32 $43 $53 $41 NC $46 $46 59400

Obstetrical care including ante-partum care,

vaginal delivery and postpartum care $895 $1,500 NC NC $1,495 NC $1,694 $1,700

59409 Obstetrical care, vaginal delivery only $860 $900 $787 NC $750 $987 $860 $845 59410 Vaginal delivery including postpartum care $895 $900 $879 $800 $838 $1,100 $942 $945 59430 Postpartum care only $32 $66 $139 NC $132 $170 $149 $150 59510

Cesarean delivery, including ante-partum &

postpartum care $948 $1,550 NC NC $1,694 NC $1,919 $1,926

59514 Cesarean delivery only $916 $950 $787 NC $885 $1,166 $993 $997 59515 Cesarean delivery, including postpartum care $948 $950 $879 $800 $999 $1,307 $1,124 $1,128 59812 Treatment of miscarriage $118 $158 $269 $182 $255 $221 $289 $290 59820 Care of miscarriage $125 $172 $338 $194 $320 $267 $366 $367 NC: Procedure is Not Covered.

a

b

The data in Table 3 show that new Maryland fees for 9 of the 18 listed obstetric/gynecology procedures are lower than Pennsylvania, West Virginia or Washington, DC fees. However, for the remaining listed procedures, the new Maryland Medicaid fees (shown in bold) are higher than the corresponding fees in the neighboring states and Washington, DC.

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Table 4. Fees for Neurosurgery Procedures

CPT

MD-Old DC DE PA a VA W VA MD-New Medi-careb 61795 Brain surgery using computer $103 $188 $246 NA $174 $202 $264 $265 62223 Establish brain cavity shunt $480 $565 $867 $832 $616 $712 $932 $936 62230 Replace/revise brain shunt $378 $415 $702 $675 $499 $579 $755 $757 62270 Spinal fluid tap; lumbar diagnostic $18 $100 $153 $42 $107 $109 $168 $169 62310 Inject spine cervial or thoracic $26 $138 $250 $170 $175 $178 $274 $275 62311 Inject spine lumbar/sacral (caudal) $72 $133 $240 $172 $168 $169 $263 $264 62319 Inject spine w/cath lumbar/sacral (caudal) $73 $137 $255 $173 $178 $181 $279 $280 62368 Analyze spine infusion pump $19 $36 $55 $33 $26 $29 $59 $59 64450 Injection for nerve block; other peripheral nerve $15 $52 $96 $21 $67 $73 $104 $104 64475 Injection paravertebral lumbar/sacral $66 $123 $308 $156 $215 $214 $339 $340 64476 Injection paravertebral lumbar/sacral add-on $62 $57 $116 $148 $81 $83 $127 $127 64483 Injection foramen epidural lumbar/sacral $74 $197 $363 $175 $253 $253 $399 $401 64614 Destroy nerve; extremity/trunk muscle $79 NC $202 $188 $141 $147 $220 $221 64640 Injection treatment of nerve $41 $191 $263 $74 $184 $195 $286 $287 64721 Carpal tunnel surgery $177 $212 $376 $300 $265 $288 $408 $409

a

b

The data in Table 4 show that except for one procedure, Maryland has the highest fees for neurosurgery procedures, followed by Delaware. For procedure code 64476, Pennsylvania has the highest fee in the region.

Table 5. Fees for Emergency Procedures

CPT

MD-Old DC DE PA a VA W VA MD-New Medi-careb 99281 Emergency dept visit, Level 1 $13 $11 $16 $20 $20 $13 $17 $17 99282 Emergency dept visit, Level 2 $21 $17 $26 $35 $19 $21 $28 $28 99283 Emergency dept visit, Level 3 $48 $31 $59 $35 $43 $47 $63 $64 99284 Emergency dept visit, Level 4 $74 $48 $93 $50 $67 $74 $99 $99 99285 Emergency dept visit, Level 5 $116 $75 $145 $50 $104 $117 $155 $156

a

b

The data in Table 5 show that for emergency procedure codes 99281, Pennsylvania and Virginia have the highest Medicaid fees. For procedure codes 99282, Pennsylvania has the highest Medicaid fees. However, the new Maryland Medicaid fees for the remaining emergency

procedures are the highest among the neighboring states and Washington, DC. Delaware fees are second highest.

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C. Trauma Center Payment Issues

Trauma centers are facing serious financial constraints nationwide due in large part to the high percentage of uninsured patients served in trauma centers. If the patient is uninsured, physicians are not compensated for their services. Trauma physicians, therefore, rely more heavily on public insurance for their income. This coupled with the fact that Medicaid’s rates for trauma services tend to be low and malpractice insurance costs have risen over the years, has placed significant staffing challenges on trauma centers.

In addition to low reimbursement levels, trauma physicians typically are not compensated for being on-call to respond to accidents and other trauma cases. Physicians are increasingly unwilling to devote long hours to standing by for no compensation.

In response, during the 2003 Session the Maryland legislature passed and the Governor signed into law Senate Bill 479, which created a Trauma and Emergency Medical Fund that is financed by motor vehicle registration surcharges. The Maryland Health Care Commission (MHCC) and the Health Services Cost Review Commission (HSCRC) have oversight responsibility for the Fund. Based on the legislation, Maryland Medicaid is required to pay physicians 100 percent of the Medicare rate (the Baltimore-facility Medicare rate) when they provide trauma care to Medicaid’s fee-for-service and HealthChoice programs enrollees. The enhanced Medicaid fee is limited to trauma surgeons, critical care physicians, anesthesiologists, orthopedic surgeons and neurosurgeons. In addition, the enhanced Medicaid fee only applies to services rendered in a Maryland Institute for Emergency Medical Services Systems (MIEMSS)-designated trauma center for patients who are placed on Maryland’s Trauma Registry. The MHCC and HSCRC fully cover the additional outlay of general funds that the Maryland Medicaid program incurs due to enhanced trauma fees (relevant percent of the difference between 100 percent of Medicare rates and Medicaid’s current rates). MHCC pays physicians directly for uncompensated care and on-call services.

D. Reimbursement for Oral Health Services

Historically, the Maryland Medicaid program has had low dental fees. Despite some recent changes, the rates continue to lag behind commercial reimbursement rates. Unlike physician services, no federal public program, such as Medicare, exists which could serve as a benchmark for oral health service rates. However, the American Dental Association publishes a survey reporting the national and regional average charges for about 165 most commonly used dental procedures, offering data for comparisons.

During the 2003 session of the General Assembly, the legislature included budgetary language in House Bill 40 which stated: “It is also the intent of the General Assembly that $7.5 million of the funds included in the CY 2004 Managed Care rates for dental services be restricted to increasing fees for restorative procedures.” The $7.5 million funding increase was based on a University of Maryland Dental School analysis of the impact of increasing certain restorative procedure fees to the American Dental Association (ADA) 50th percentile levels.

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In compliance with the budgetary language, effective March 1, 2004 MCOs were required to reimburse their contracted providers at the ADA 50th percentile levels as of 2001 for twelve restorative procedure codes. At the same time, Medicaid increased fee-for-service rates to the ADA 50th percentile levels as of 2001 for the same restorative procedures.

The following Table 6 shows the progress Maryland has made in improving reimbursement to dentists for some of the more common services. On average, Medicaid tripled reimbursement rates for dentists in July 2000, and then increased reimbursement for twelve restorative procedures in 2004. The last column shows the average fee charged by dentists in 2003 in the South Atlantic Region [3]. It is important to note, however, that the South Atlantic Average is based on the fees charged by dentists for the service performed, which does not equate to the average payment received as reimbursement from insurance companies or private pay patients.

Table 6 - Oral Health Reimbursement Schedule - Selected Procedures

CDT-3 CDT-2 Description MA Fee before 7/1/00 rate increase MA Fee after 7/1/00 rate increase MA Fee after 3/1/04 restorative rate increase South Atlantic 50th Percentile of Charges

D0120 00120 Periodic oral evaluation $5 $15 $15 $30

D0220 00220 Intraoral periapical first film $3 $9 $9 $15

D0272 00272 Bitewings-two films $3 $15 $15 $26

D0330 00330 Panoramic film $21 $42 $42 $75

D1110 01110 Prophylaxis-adult $12 $36 $36 $65

D1120 01120 Prophylaxis-child $8 $24 $24 $45

D1201 01201 Topical application of fluoride with prophylaxis $17 $35 $35 $60

D1203 01203 Topical application of fluoride - no prophylaxis $17 $14 $14 $26

D1351 01351 Sealant-per tooth $3 $9 $9 $35

D1510 01510 Space maintainer – fixed – unilateral $42 $84 $84 $200

D1515 01515 Space maintainer – fixed – bilateral $48 $144 $144 $293

D2140 02140 Amalgam – one surface, Primary or permanent $13 $37 $70 $75

D2150 02150 Amalgam - two surfaces, Primary or permanent $19 $45 $88 $95

D2330 02330 Resin – one surface – anterior $13 $39 $84 $90

D2331 02331 Resin – two surfaces – anterior $19 $48 $102 $115

D2332 02332 Resin – three surfaces – anterior $22 $56 $125 $140

D2930 02930 Prefabricated stainless steel crown - primary $27 $75 $154 $174

D3220 03220 Therapeutic pulpotomy $16 $60 $60 $100

D9230 09230 Analgesia $6 $18 $18 $30

Note: The South Atlantic 50th percentile of charges is based on data from the 2003 American Dental Association survey. The procedures identified in italics are among the 12 restorative procedures targeted for the 2004 restorative fee increase.

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IV. Physician Participation in the Maryland Medicaid Program

Physicians’ claims and encounter data pertaining to FY 2002 (the year before the July 2002 fee increase), FY 2003 and FY 2004 were analyzed for the number of physicians who had either partial or full participation in the Medicaid program4. Physicians who had fewer than 25 claims during the fiscal year were excluded from the data in the following tables. Physicians who had more than 25 claims but less than 50 patients were considered partial participants in the

Medicaid program. Physicians were considered full participants in the Medicaid program if they had visits with at least 50 patients during the year.

Tables 7 and 8 show the percentage changes in the numbers of participating physicians of all specialties (including primary care) who participate in fee-for-service (FFS), MCO networks, and the total Medicaid program. As the data in these tables indicate, there were significant increases in the participation of physicians in fee-for-service, MCO networks, and total Medicaid program for both fiscal years 2003 and 2004.

Table 7. FY 2002-03 Percent Change in Number of Participating Physicians of All Specialties

FFS MCO Networks Total Medicaid Partial Participation 8.0% 10.7% 12.5% Full Participation 12.1% 9.6% 10.1%

Table 8. FY 2002-04 Percent Change in Number of Participating Physicians of All Specialties

FFS MCO Networks Total Medicaid 5 Partial Participation 14.6% 30.0% 36.9% Full Participation 24.8% 18.9% 21.9%

Caveats for Tables 7 and 8:

It should be noted that percent increases in the number of physicians with partial participation in Medicaid in Tables 7 and 8 represent change in:

• The number of physicians who did not participate in the Medicaid program before the fee increase, and after the 2002 fee increase started to partially participate in the program, minus the number of physicians who were partial participants in the program before the fee increase, and decided to fully participate in the program after the 2002 fee increase.

4

The data in these tables pertain to FY 2002 through FY 2004. Therefore, these tables do not measure the impact of 2005 fee increase for the four physician specialties on participation of physicians in the Medicaid program.

5

Because some physicians participate in both fee-for-service and MCO networks, total numbers of physicians participating in the Medicaid program are not the sum of FFS and MCO network physicians.

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Similarly, percent increases in number of physicians with full participation in tables 7 and 8 represent change in:

• The number of physicians who were partial participants in the program before the 2002 fee increase, and decided to fully participate in the program after the fee increase, plus the number of physicians who did not participate in the Medicaid program before the 2002 fee increase, and after the 2002 fee increase started to fully participate in the program.

V. Future Fee Increases

Senate Bill (SB) 836 of the 2005 General Assembly session allocated $15 million ($30 million total funds) in FY 2006 for increasing physicians’ reimbursement rates. Moreover, SB 836 provides additional funding each year for increasing and maintaining provider reimbursement rates. This funding will allow the Department to eventually raise the fee for all procedures to the Medicare level.

Preliminary estimates indicate that the total cost of increasing fees for all procedures (except the four specialty procedures for which fees were increased in July 2005) to 80 percent of Medicare fees in FY 2007 is about $67 million (Total Funds). The estimate excludes the four specialties procedures because their fees are already above 80 percent. The estimated total funds cost of increasing fees for all procedures to 100 percent of Medicare fees is about $129 million (Total Funds). The cost estimates of increasing fees are based on the assumption that all fees will increase at the same time in FY 2007 to 80 percent or 100 percent of Medicare fees. Because Medicaid enrollment and utilization, as well as Medicare fees, increase over time, if it takes longer to implement the fee increases, it will result in higher actual costs of increasing fees to certain percentage of Medicare. Since the fee increases will be implemented in several phases over time, the actual costs would be higher than the cost estimates presented here.

SB 836 requires that future fee increases are determined by the Department in consultation with a variety of stakeholders, including managed care organizations, the Maryland Hospital

Association, the Maryland State Medical Society, the Maryland Chapter of the American

Academy of Pediatrics, and the Maryland Chapter of the American College of Emergency Room Physicians. SB 836 also requires that the Department submit a plan for increasing the fees to the General Assembly prior to adopting regulatory changes.

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Table 9 – Fees for High-Volume, Non-Evaluation and Management Procedures

CPT

Code Procedure Description DC DE PA

a

VA W VA MD

Medi-careb

31500

Intubation, endotracheal, Insert emergency

airway $66 $111 $72 $78 $90 $31 $119

31622

Bronchoscopy, (rigid or flexible);

diagnostic $125 $315 $166 $220 $227 $113 $346

32020 Tube thoracostomy / Insertion of chest tube $130 $207 $211 $147 $167 $42 $223 36620 Arterial catheterization; percutaneous $36 $53 $58 $37 $43 $21 $57 43239 Upper GI endoscopy; biopsy $182 $321 $212 $225 $232 $234 $352 44950 Appendectomy $292 $563 $302 $399 $455 $206 $607 69436

Tympanostomy; Create eardrum opening,

general anesthesia $81 $161 $99 $113 $121 $83 $176

90780

Intravenous infusion for therapy/diagnosis;

1 hour $24 $87 NA $62 $60 $29 $97

90801 Psychiatric diagnostic interview $77 $147 NA $103 $113 $41 $159 90935 Hemodialysis; one evaluation $115 $70 NA $49 $53 $15 $76 90937

Hemodialysis procedure requiring repeated

evaluation $92 $115 NA $80 $88 $15 $124

92015 Determination of Refractive state $80 $69 $5 $48 $48 $5 $76 92552 Pure tone audiometry; air only $10 $17 $8 $12 $12 $5 $19 92567 Tympanometry (impedance testing) $12 $21 $12 $15 $15 $5 $23 93000

Electrocardiogram; complete with

interpretation & report $16 $26 $22 $18 $18 $13 $28

93010

Electrocardiogram interpretation & report

only $6 $9 $8 $6 $7 $7 $9

93042 Rhythm ECG; interpretation & report only $5 $8 $8 $6 $6 $3 $9 93303

Transthoracic echocardiography for

congenital anomalies $125 $215 NA $151 $155 $38 $237

93307

Echocardiography, transthoracic, with

image documentation $117 $196 $158 $138 $141 $34 $217

93320 Doppler echocardiography; complete $51 $86 $77 $61 $62 $52 $95 93325 Doppler color flow velocity mapping $66 $117 NA $82 $83 $10 $130 93510

Left heart catheterization, from brachial

artery; percutaneous $941 $1,677 $188 $1,176 $1,196 $80 $1,856

93970

Duplex exam of extremity veins, complete

bilateral study $112 $232 $117 $163 $168 $20 $256

94010

Spirometry, include graphic record

(breathing capacity test) $22 $32 $15 $22 $22 $13 $35

94640

Airway inhalation treatment for obstruction

or diagnosis $15 $12 NA $8 NC $5 $13

94760 Measure blood oxygen level $5 $2 $5 $2 $2 $6 $2 96110

Developmental test; limited, with

interpretation & report $20 NC NA $9 $12 $13 $13

96111

Developmental test; extended,with

interpretation & report per hour $39 NC $50 $98 $109 $75 $150

96410 Chemotherapy; infusion method, up to 1 hr $34 $162 $48 $114 $110 $29 $180 97110

Therapeutic exercises, one or more areas,

15 minutes each $15 $27 $8 $19 $20 $11 $29

a

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References and Notes

1 Centers for Medicare and Medicaid Services (CMS) and Medicare Payment Advisory Commission (MedPac) publications. Section 601 of the Medicare Prescription Drug, Improvement and Modernization Act (MPDIMA) of 2003, Public Law 108-173, specified that the annual update of conversion factors for 2004 and 2005 would not be less than 1.5 percent.

2 ‘Medicaid Reimbursement Survey’ – (2001), American Academy of Pediatrics, http://www.aap.org/research/medreimintro.htm

3 South Atlantic Region consists of: Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, and West Virginia.

4 Modern Healthcare, September 20, 2004, Volume 34, Issue 38.

5 2002 Survey of Physicians about the Medicare Program, Medicare Payment Advisory Commission, http://www.medpac.gov

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Appendix 1

Medicare Resource Based Relative Value Scale

Medicare payments for physician services are made according to a fee schedule. For about 10,000 physician services, Medicare RBRVS assigns the associated relative value units and various payment policy indicators needed for payment adjustment. Medicare fees are adjusted depending upon the place of service that each procedure is performed. Medicare fees for some procedures are lower if they are performed in hospitals or skilled nursing facilities than if they are performed in offices or other places. Implementation of RBRVS resulted in increased payments to office-based procedures, and reduced payments to procedures that are provided in the hospital settings.

The Resource Based Relative Value Scale determines relative weights (relative value units) for all procedures. These weights reflect resource requirements of each procedure performed by the physicians. The Medicare physician fees are adjusted to reflect the variations in practice costs from area to area. A geographic practice cost index (GPCI) has been established for every Medicare payment locality for each of the three components of a procedure’s relative value unit (i.e., the RVUs for work, practice expense, and malpractice expense). The GPCIs are applied in the calculation of a fee schedule payment amount by multiplying the RVU for each component by the GPCI for that component.

The resulting weights are multiplied by a conversion factor to determine the payment for each procedure. The Centers for Medicare and Medicaid Services (CMS), annually updates the

conversion factor based on the Sustainable Growth Rate system, which ties the updates to growth in the national economy, as a measure of change in funds available for payments to physicians. The Sustainable Growth Rate system is based on formulas designed to control overall spending while accounting for factors that affect the costs of providing care.

Calculating the update to the conversion factor is a two step process. First, CMS estimates the Sustainable Growth Rate (SGR), which is the target rate of growth in total Medicare spending for physician services. SGR is a function of the percentage changes in:

a) Input prices for physician services,

b) Traditional (fee-for-service) Medicare enrollment, c) Real Gross Domestic Product per capita, and

d) Spending attributable to changes in law and regulations.

The second step in the process is to calculate the update to conversion factor. This update is a function of:

a) Change in Medicare Economic Index (MEI) which measures the change in input prices for producing physician services.

b) An adjustment factor that increases or decreases the update as needed to align actual spending with the SGR target, and

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Currently, there are efforts underway in the US Congress to change the Medicare physicians payments system to include “pay for performance” and quality improvement incentives instead of relying on the Sustainable Growth Rate (SGR) formula for updating the physicians’

reimbursement rates.

The conversion factor for year 2000 was $36.6137. The conversion factor for 2001 was $38.2581, which represents a 4.5 percent increase over the year 2000 conversion factor. The conversion factor for 2002 decreased by 5.4 percent from its 2001 value to $36.1992. The conversion factor for 2003 increased by 1.6 percent from its 2002 value to $36.7856. The conversion factor for 2004 increased by 1.5 percent from its 2003 value to $37.3374. The conversion factor for 2005 also increased by 1.5 percent from its 2004 value to $37.8975.

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Appendix 2

Summary of Methodology to Determine Maryland Medicaid Physicians Fees

The methodology determines the new Medicaid fees for targeted procedures as a percentage of Medicare fees. First, we compare the existing Medicaid fee for each procedure with the

corresponding Medicare fees. If the current Medicaid fee is higher than the Medicare fee (as it was the case for a few obstetric procedures), then the Medicaid fee remains unchanged. The fees for the remaining procedures are set as a percentage of the corresponding Medicare fees. This percentage of Medicare fees is the same for all procedures that their fees increase.

The percentage of Medicare fees is the dependent variable in the process of determining the fees. The independent variable is the total amounts of funds that are available for the fee increase. In the 2005 fee increase, the total state and federal matching funds available for the physicians fee increase were $30 million. For the 2005 fee increase, the percentage of Medicare fees was adjusted to 99.6 percent of Medicare fees so that the projected total cost of fee increase would be equal to the $30 million available funds. The projected cost of the fee increase incorporates projected enrollment and utilization increases between the base year and the implementation year.

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Appendix 3

Rate of Non-Federal Physicians per 100,000 Civilian Population, 2001

Rank

Nonfederal Physicians per

100,000 Population

Average United States 268

1 District of Columbia 680 2 Massachusetts 426 3 New York 395 4 Maryland 382 5 Connecticut 364 6 Rhode Island 352 7 Vermont 343 8 Pennsylvania 332 9 New Jersey 331 10 Hawaii 283 11 Maine 282 12 Michigan 278 13 Illinois 277 14 Ohio 270 15 Minnesota 268 16 Delaware 265 17 Missouri 262 18 Louisiana 256 19 California 255 19 New Hampshire 255 21 Virginia 254 21 Washington 254 23 Florida 253 24 Colorado 251 25 Tennessee 250 26 West Virginia 249 27 Oregon 247 28 Wisconsin 245 29 North Carolina 239 30 Nebraska 231 31 North Dakota 229 32 Kansas 227 33 New Mexico 223 34 South Carolina 222

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35 Kentucky 219 35 Montana 219 37 Arizona 217 38 Texas 214 39 Indiana 213 40 Georgia 212 41 Iowa 209 42 Alabama 207 43 South Dakota 205 43 Utah 205 45 Oklahoma 200 46 Alaska 199 47 Arkansas 197 48 Nevada 189 49 Wyoming 183 50 Mississippi 176 51 Idaho 166 Puerto Rico 248 Guam 143 Virgin Islands 128

Notes: Nonfederal physicians are members of the US physician population that are employed in the private sector. They represent 98 percent of total physicians. The US total excludes

nonfederal physicians in the U.S. Territories.

Sources: Calculation based on American Medical Association, Physicians Professional Data as of 2001, copyright 2002; 2001 civilian population data: Annual Population Estimates by State, July 1, 2001 Population, U.S. Census Bureau