Ann Thorac Surg 2001;71:9-12
© 2001 The Society of Thoracic Surgeons
Original article: cardiovascular
Results of continual devaluation of cardiothoracic surgical codes by the HCFA between 1984 and 1999
James A. Haugen, MBAa,
George E. Miller, Jr, MDa
a Pebble Beach, California, USA
Accepted for publication October 17, 2000.
Address reprint requests to Dr Miller, 23 Spanish Bay Circle, Pebble Beach, CA 93953
e-mail: mvmgem{at}pol.net
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Abstract
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Background. The devaluation of surgical procedural services by Medicare began in 1989 as a result of the federal government’s adoption of the Resource Based Relative Value Scale, a method of redistribution of payments to physicians from surgical to primary care services. This method gave to the Health Care Financing Administration (HCFA) effective and complete control of Medicare payments to physicians for the first time. The resultant decrease in the nominal dollar value is well understood, but the effect of changes in inflation frequently is not calculated into the reported loss.
Methods. A method of determining the true extent of this devaluation using the nominal dollar decrease plus the effect of inflation was presented in 1995.
Results. Since then, repeated devaluation by the HCFA and other third parties plus continual inflation has further eroded the remuneration for cardiothoracic surgical services. Three different sets of data are used to determine the devaluation of five cardiothoracic operations. One set shows the change between 1988 and 1998; one the change between 1988 and 1999; and one the change between 1984 and 1999.
Conclusions. Depending on the geographic location, it appears that the remuneration for pulmonary procedures between 1988 and 1999 decreased 35% to 60%. Similarly, depending on the years reviewed (between 1984 and 1999) and the geographic location, the fee for cardiac procedures decreased 46% to 69%.
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Introduction
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Since 1989, when the federal government adopted the Resource Based Relative Value Scale, a method of redistribution of payments to physicians from surgical to primary care services, a pattern of decreasing payments for cardiothoracic surgical procedures was established—and is continuing—as a result of repeated action by the Health Care Financing Administration (HCFA) and other third-party payers. In an attempt to provide the surgeon with a way to quantify this loss, we devised a simple method and presented it in 1995 [1]. Our method entailed calculating not only the nominal dollar loss for a procedural service but also the additional loss resulting from inflation using the reported change in the consumer price index (CPI) from 1 year to another. Using a hypothetical example, we found that between 1972 and 1992, there was a loss of 55% in purchasing power generated by the work required to perform the same procedure [1]. Put another way, the work that would have generated income to purchase a full constant market basket of goods in 1972 (100%) would purchase only 45% of this same market basket of goods in 1992. As noted, this action of decreasing payments has continued. Here, we attempt to report the probable extent of this loss through 1999 using three sets of data: one set covers the period between 1988 and 1998 (Table 1); one the period between 1988 and 1999 (Table 2); and one the period between 1984 and 1999 (Table 3).
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Table 3. Examples of Changes in Reimbursement for Coronary Artery Bypass Grafting Using Consumer Price Index-Adjusted Dollars, 1984 to 1999a
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Material and methods
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The changes in buying power for cardiothoracic surgical services are figured using a simple three-step process. In this discussion, 1988 is the beginning year and 1998 is the ending year.
Step 1
In step 1, the change in the CPI from the beginning year to the ending year of the period under review is determined. The CPI is compiled by the Bureau of Labor Statistics at the U.S. Department of Labor and tracks the price of a constant market basket of goods. The CPI is a widely accepted measure of inflation in the United States. By law, the CPI is used to adjust Social Security and other governmental retirement benefits. It is also used to adjust the personal exemption, the standard deduction, and the ceiling of personal income brackets. Figure 1 shows the percent change in the cost of a constant market basket of goods for 1984 through 1999. To determine the percent change between 2 years, 1988 and 1998 in this discussion (the range in Table 1), go to 1988 on the vertical axis and follow this line across on the horizontal axis until it intersects 1998 (see Fig 1). The point of intersection of these 2 years, ie, 40%, is the percent change in the CPI from the earlier year to the later year. This means that it cost 40% more in dollars to buy the same constant market basket of goods in 1998 as in 1988.
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Fig 1. Grid used to determine the percent change in the consumer price index (CPI) for any year period from 1984 to 1999. It was created by calculating the percent change in the CPI from 1 year to another. For example, to figure the percent change from 1988 (CPI = 115.7) to 1999 (CPI = 164.4), subtract the CPI for 1988 from the value for 1999 and divide the result by the 1988 value: 164.4 - 115.7 = 48.7, and 48.7/115.7 = 0.42, or 42%, the percent change in the CPI between 1988 and 1999.
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Step 2
In step 2, the hypothetical fee for the ending year (1998 in this case) that would buy the same market basket of goods as in the beginning year of the period (1988) is figured. In Tables 1 through 3, this is shown as the adjusted hypothetical fee (AHF). The 1988 allowed charge is multiplied by the change (increase here) in the CPI (0.40), and the result is added to the 1988 charge. This is the CPI-adjusted value (fee) that in 1998 will purchase the same market basket of goods as in 1988. For example, the reported Medicare allowed charge for a lobectomy CPT (current procedural terminology) 32480 in 1988 was $1,653 (see Table 1). To maintain the same purchasing power in 1998, the allowed charge for the work of performing a lobectomy should be $2,314; $1,653 x 0.40 = $661, and $661 + $1,653 = $2,314. The actual Medicare allowed fee for lobectomy in 1988 was $1,331.
Step 3
In step 3, the actual percent change in value (in this case decrease) for the work of the procedure between the beginning and ending years in terms of the same constant market basket of goods is determined. In Tables 1 through 3, this is shown as the loss in purchasing power (LIPP). The years 1988 and 1998 from Table 1 are again used. The Medicare 1998 allowed charge is subtracted from the CPI-adjusted fee for 1998 (AHF) as calculated in step 2, and the result is divided by the CPI-adjusted fee (AHF) for 1998. This provides the percent LIPP for the work of the procedure between 1988 and 1998. Again using the lobectomy example in Table 1, the 1998 fee adjusted for inflation minus the Medicare 1998 allowed fee shows a decrease of $983 in CPI-adjusted dollars, and this loss divided by the AHF equals 43%, the LIPP of the work of lobectomy: $2,314 - $1,331 = $983, and $983/$2,314 = 0.43, or 43%. The work that in 1988 would have bought a full market basket of goods will purchase only 57% of the same basket in 1998. This is shown in Tables 1 through 3 as the constant market basket of goods (CMBG).
Reliability of data
Payment data have the problem of not being fully reliable. Further, it is often difficult to obtain adequate sampling. Table 1 describes the national average Medicare allowed charges for five procedures. (The allowed charge is the actual fee authorized for a procedure including the payment from Medicare and an additional percentage to be collected from the patient.) These charges were calculated using HCFA data showing the total amount paid to surgeons (including the copayment allowed by the HCFA to be collected from the patient, often not accomplished) for each of the five coded procedures that were then divided by the total number of procedures reported for each code in 1988 and 1998.
There are three major problems with this information. First, it is a national average, and there were wide differences in fees in 1988, at least in part because of the government’s legal concerns regarding the private use of relative value scales or other means by which physicians might agree on guidelines for the establishment of fees. Second, the data do not take into account the fact that some of the procedures reported would have been secondary procedures and thus do not reflect the full remuneration accorded these procedures. Third, these figures imply that the entire copayment was collected from the patient, which is probably not correct. Consequently, the values shown in Table 1 are undoubtedly on the low side. Therefore, although these data are somewhat inadequate, they are used by the HCFA in its calculations.
The same types of data are reported in Table 2. Here they were obtained by sampling several practices and as a result are apparently accurate. They illustrate the changes between 1988 and 1999.
Table 3 provides examples of the changes in reimbursement for coronary artery bypass grafting between 1984 and 1999. The 1984 data are from a report by the Health and Human Services Office of Inspector General [2] and demonstrate the wide geographic variation in prevailing charges for coronary bypass procedures. (The prevailing charge for a service was set at the 90th percentile of the customary charges for all peer physicians in a defined Medicare payment area; the customary charge was defined as the median of an individual physician’s charge for a particular service for a defined period.) These charges are compared with actual Medicare high and low allowable charges for 1999. In 1999 the high charge was for coronary artery bypass grafting x 6 and the low charge was for coronary artery bypass grafting x 1. There is no other description of the 1984 procedures other than the high and low charge per state. The procedures reported for 1999 are seldom done, and even though the procedures representing the high and low for 1984 are not detailed in this way, they must be similar outliers. Thus these data lead to bias.
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Results
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Using several sets of data, we have demonstrated the CPI-adjusted dollar loss and percent loss in valuation for five cardiothoracic procedural services. In Table 1, the average Medicare payment data for 1988 and 1998 showed a loss of 42% and 43% in purchasing power for the work of pneumonectomy and lobectomy, respectively. The loss for cardiac procedures was 47% to 58%. These percentages indicate that the work of performing these procedures would not purchase the same market basket of goods in 1998 as in 1988; rather, it would buy 42% to 58% of this basket. In Table 2, using data reported by surgeons for their practices in 1988 and 1999, the LIPP for the work of performing pneumonectomy and lobectomy decreased by 35% to 60%, and of cardiac procedures, 47% to 66%. Again these percentages demonstrate that the market basket of goods would not be as full in 1999. Using state high and low allowed charge data as determined by the HCFA for 1984 [2] and actual high and low allowed charges for 1999, Table 3 illustrates a decrease of 46% to 69% in the remuneration for all coronary artery bypass grafting procedures. We have pointed out the weakness of these particular data.
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Comment
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Although the variation in the losses described seems quite substantial, in the early years from 1984 through 1988 there was a large divergence in fees that was based on geographic location, differences in practice costs, and loss of the peer-produced relative value guidelines. Our calculations appear accurate for the unit values during the time periods studied, and regardless of how the data shown in the tables are viewed, it is clear that the valuation of cardiothoracic surgical services has decreased from 1988 to 1999 on the order of 35% to 60% for pulmonary procedures (Tables 1, 2) and on the order of 46% to 69% for cardiac procedures performed between 1984 and 1999 (Table 3). We recognize that the actual impact on the individual surgeon’s practice may not have been this severe because of changes in volume, practice patterns, and increased payment for evaluation and management services. However, on the basis of recent estimates by the HCFA, there is every reason to believe that there will be a further 10% to 11% reduction unadjusted for the CPI as a result of the reevaluation of overhead practice expenses and malpractice costs. According to the HCFA, the plan is to phase in the reduction between the years 2000 and 2002.
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References
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Haugen J.A., Miller G.E., Jr Changing surgical CPI valuation relationships: a method of determination (1970–1995). Ann Thorac Surg 1995;60:1094-1096.[Abstract/Free Full Text]
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Coronary artery bypass graft (CABG) surgery. Assuring quality while controlling Medicare costs. Publication no. OAJ-086-00076. Washington, DC: Office of Inspector General, Department of Health and Human Services, August 1987.
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Abstract
Introduction
