ED Coding and Reimbursement Alert

RVUs drop slightly, but overall payments will increase because of the MEI reweighting.

The results of the Medicare final rules for 2014 were worth the wait; the CMS final rule for the 2014 Medicare physician fee schedule is positive for emergency medicine. The OPPS final rule was also mostly good news, but you’ll need to be aware of these concerns that could affect your ED practice’s bottom line in the coming months.

Get Clarity on the RVUs

The relative value units for the ED E/M codes dropped slightly, about two percent across the board because of decreases in the facility practice expense and professional liability insurance values. The work values did not change for 2014. However, the projected impact for Medicare payments to emergency physicians is to increase by two percent. “This seems paradoxical to have a two percent decrease in our E/M codes, the source of at least 80 percent of revenue, yet still be projected for a two percent overall increase in payments,” says Michael A. Granovsky, MD, FACEP, CPC, President of LogixHealth, an ED coding and billing company in Bedford, MA.

Rationale: The reason for this apparent paradox is because of the rescaling of the weights of the three components of the RBRVS equation: work, practice expense and professional liability insurance RVUs, due to the Medicare Economic Index (MEI). In 2014, the weighting results in a final calculation that favors those codes more heavily based on work RVUs. “Because emergency medicine has a very high percentage of work to total RVUs, we benefit from that shift”, Granovsky explains. “So even though our RVUs dropped slightly because of decreases in practice expense and PLI values, our work values stayed the same. And with greater weighting on that component, we will actually see an increase in overall reimbursement instead of a loss.”

SGR Cuts are Still Looming Large

Of course, unless Congress acts to fix or postpone the SGR driven cuts, currently estimated at 20.1 percent, all Medicare physician payments will be cut by that amount in 2014. There is a joint proposal of the House Ways and Means Committee and the Senate Finance Committee that would eliminate the SGR formula, but it would also impose a 10-year freeze on payment updates. Additionally, the proposal reinforces the stated goal of basing payment based on quality and value over fee for service by introducing incentive payments based on participation in alternative payment methodologies. “The details are not yet all clear, but it is a chance to eliminate the SGR problem while the cost of the fix is relatively low at $139 billion over 10 years,” says Granovsky.

Dollars and cents: Without the SGR fix, the 2014 conversion factor will be $27.2006, which reflects a smaller reduction in the conversion factor than the originally announced 24.4 percent reduction. The smaller reduction is due in part to a 4.72 percent adjustment to the conversion factor to offset the decrease in Medicare physician payments that would otherwise have occurred due to the 2014 rescaling of the RVUs.

“This ‘neutrality adjustment’ was required so that the proportions of total payments for the work, PE, and malpractice RVUs match the proportions in the final revised Medicare Economic Index (MEI) for 2014,” Granovsky explains.

The GPCI “Floor” Is About To Fall Through

As required by the Medicare law, CMS periodically adjusts payments under the physician fee schedule to reflect the local cost of operating a medical practice as compared to the national average.

CMS calculates separate geographic practice cost indices (GPCIs) to adjust the work, practice expenses (PE), and malpractice cost components of each payment. The law requires that CMS review the GPCIs every three years and adjust them as appropriate with a two-year phase-in of the new GPCIs.

The scoop: CMS is finalizing new GPCIs using updated data, which will be phased in over 2014 and 2015. As in past years, CMS will continue to apply the statutorily mandated 1.5 work GPCI floor in Alaska and the 1.0 PE GPCI floor for frontier states (Montana, Nevada, North Dakota, South Dakota, and Wyoming) because those have no expiration date. However, the separate statutory 1.0 work GPCI floor for all states that has led to increased reimbursement over the past few years is scheduled to expire under current law on December 31, 2013.

Early warning: “Those states that will no longer receive the benefit of that artificial floor could see some significant payment decreases in 2014 unless an SGR fix also extends that provision,” says Granovsky.