General Surgery Coding Alert

On Feb. 28, Medicare published an update to its final rule for the 2003 Physician Fee Schedule in the Federal Register. Although surgeons will breathe a sigh of relief to learn that Medicare payments will rise (rather than, as expected, decrease) for 2003, the final rule will likely complicate billing for procedures provided during the first two months of the year.

As announced in the Dec. 31, 2002, Federal Register, the conversion factor that determines payment for Medicare services (relative value units as assigned by the Physician Fee Schedule X conversion factor = payment in dollars: payments are subject to regional cost adjustments) was expected to fall from $36.1992 for 2002 to $34.5920 for 2003, a reduction of about 4.4 percent. The formula by which the conversion factor is determined is set by law and cannot be changed except by congressional action (see General Surgery Coding Alert, February 2003).

Fortunately, Congress acted on Feb. 13 to approve the Consolidated Appropriations Resolution 2003, which President Bush signed into law a week later. The Resolution allowed an increase in the conversion factor for 2003, which CMS has now set at $36.7856 ($0.5864 or 1.6 percent higher than the 2002 figure). The new conversion factor became effective March 1 and applies to all services provided on or after March 1.

The delayed implementation of the 2003 Physician Fee Schedule has created some logistical problems for Medicare payers and providers. For example, based on the Dec. 31 final rule and as further explained by CMS Program Memorandum AB-02-181 (Change Request 2468, Dec. 23, 1992), CMS will reimburse all services provided during January and February 2003 at the 2002 rate ($36.1992). And, payers had to delay all claims containing new-for-2003 codes billed prior to implementation of the 2003 fee until March 1 because, under the 2002 fee schedule, there was no way to pay them. For instance, if the physician reported 34833 (Open iliac artery exposure with creation of conduit for delivery of infrarenal aortic or iliac endovascular prosthesis, by abdominal or retroperitoneal incision, unilateral), a new-in-2003 code, prior to March 1, the payer could not process the claim because it had no fee schedule available to establish appropriate reimbursement. As of March 1, payers should reimburse such claims without delay at the 2003 rate.

Because of processing delays, not all services provided in January and February will have been settled prior to March 1. For example, the surgeon might perform a laparoscopic fundoplasty (43280) on Feb. 28 but does not submit the claim until March 3, which the payer does not settle until several weeks later. The service was provided prior to March 1 and is therefore eligible for payment at the 2002 rate. But because the payer received the claim for the service after March 1, it will reimburse at the 2003 rate.

As of March 1, CMS has not officially announced a method for dealing with this problem. Based on the wording of memo AB-02-181 and other information, however, Medicare carriers will likely expect to recoup their "overpayment" of services provided prior to March 1 but paid at the 2003 rate.

For instance, consider the above example of the laparoscopic fundoplasty provided on Feb. 28. Under the 2002 schedule (at which the procedure is due), the procedure would pay about $993, while under the 2003 schedule (at which the procedure will likely be paid because it is processed after March 1) the procedure would pay about $1,004 a difference of $11. Because the carrier overpaid, it will eventually expect to recoup the $11. A best estimate places July 1, 2003, as the date on which carriers will expect such refunds, but CMS has not yet confirmed this.