At A Glance:
- In Medicare’s current resource-based relative value scale system, payments for services are determined by the resource costs required to provide those services.
- Relative value for a service is determined by a formula using three cost components: physician work, practice expense, and practice liability insurance.
- The relative value scale system is criticized for incentivizing volume over value. In response to this criticism, Medicare and other major payers have created systems to measure value defined as quality over cost.
In 1992, Medicare transitioned from the historic chargebased payment system to the resource-based relative value scale (RBRVS). In the RBRVS system, payments for services are determined by the resource costs required to provide the respective service. These costs are allocated into three components: physician work, practice expense, and practice liability insurance.
Payments are calculated by multiplying combined costs, which are measured by relative value units (RVUs), by an annually updated conversion factor that is currently $35.9996. Payments are adjusted for geographic differences in resource cost. A fundamental tenet of the RBRVS is to be able to rank procedures in relation to other procedures using the concept of relativity. In other words, how do the resource-based costs of retinal services compare with services performed by other ophthalmologists and other physicians?
Breaking Down Relative Value
Relative value for a service is determined by a formula using the three previously mentioned cost components (physician work, practice expense, and practice liability insurance). These three components are not weighed equally.
The physician work component constitutes an average of 50.9% of the total relative value for each service. The factors used to determine physician work include the time it takes to perform the service, the technical skill and physical effort of a given procedure, the required mental effort and judgment needed for a particular service, and stress due to the potential risk to the patient. Many of these factors are subjective.
The American Medical Association/Specialty Society RVS Update Committee (RUC) uses a standardized survey system to assess these factors. The survey asks physicians to rank a service in relation to other services with established values, times, and intensity. A valid survey requires 30 to 100 respondents, depending on the volume of the service. Although the survey process is time-consuming, it is critical to generating accurate data for valuation. Retina specialists who receive a survey request are strongly encouraged to participate.
Practice Expense and Practice Liability Insurance
The practice expense component varies significantly between procedures, but on average accounts for 44.8% of the total relative value for each service. The practice liability insurance component varies among specialties but on average accounts for 4.3% of the total relative value for each service. The current system measuring physician work, practice expense, and practice liability insurance has been operative since 2002 and is called the relative value scale (RVS).
In the law establishing the RVS, Congress recognized the dynamic and evolving nature of medical practice and required that the Centers for Medicare and Medicaid Services (CMS) establish a process for updating values. The majority of this updating process occurs through a committee of the American Medical Association and national specialty societies known as the RUC. The RUC represents the entire medical profession, with 21 of its 31 members appointed by major national medical specialty societies. The American Academy of Ophthalmology is a permanent voting member of the RUC.
Initially, Congress required that the RVS be updated every 5 years. Since 2012, the RUC has updated the RVS on an annual basis. Codes can be updated through multiple mechanisms. The primary mechanism is through the relativity assessment workgroup of the RUC. This subcommittee screens all of the nearly 10,000 CPT codes to identify which ones should be reviewed. Some of the common indicators that a CPT code should be reviewed include rapid growth in volume, services commonly performed together on the same day, high expenditure codes not recently reviewed, and codes with more than six postoperative visits in a global period. Also, CMS may request that the RUC review any code. Any new category 1 CPT code must also be reviewed by the RUC.
When CPT codes are reviewed by the RUC, it is done within the context of the CPT family of similar codes. For example, if one retinal detachment code is identified for review, the other associated retinal detachment codes are also reviewed. If a new CPT code for a vitrectomy procedure is developed, it will be valued within the vitrectomy code family, requiring all the codes of the family to be reviewed.
What typically happens when a CPT code is reviewed by the RUC?
Since 2006, the RUC has reviewed nearly 2,100 CPT codes of potentially misvalued services. Of those, 41% had their reimbursement decreased, 28% underwent no change to reimbursement, 9% had their reimbursement increased, and 17% were deleted. Recent experience with retina codes associated with laser, vitrectomy, and ocular imaging has not followed the above ratio; all of their codes have been reduced.
Why have retina codes been cut?
The primary reason for retina codes being cut pertains to a decrease in the time of retina services. As noted above, physician work is measured primarily by time and intensity. The RUC measures intensity by a metric known as intraservice work per unit time (IWPUT), which provides a ratio of RVUs per minute. There are only 25 CPT codes in all of medicine with an IWPUT of greater than 0.20; of these, eight are in ophthalmology and four are in retina. Intravitreal injection (CPT code 67028) has the highest IWPUT of all codes performed, with a volume of more than 300,000 procedures. The primary factor for high IWPUT is the continuing decrease in procedure time as measured by surveys. As expected with the advent of minimally invasive procedures such as sutureless vitrectomy, time spent per procedure has lessened. Because IWPUT is a ratio of value over time, if time decreases and value does not, the IWPUT increases. Because many retina procedures already have a relatively high IWPUT, the RUC uses this as an argument for decreasing value of certain procedures. More and more, time is the primary driver of valuation and intensity is a diminishing factor. In such a system, the reward for increased efficiency (decreased time) is decreased payment.
The RVS and the RUC have come under increased criticism over the past decade. A common complaint is that the RUC process favors specialists at the expense of primary care providers. A more fundamental critique is that the entire RVS system incentivizes volume over value.
As a result of such criticisms, Medicare and other major payers have created systems to measure value defined as quality over cost. The Quality Payment Program found in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is the first, but certainly not the last, step in this process. Within MACRA, the Quality Payment Program established the merit-based payment system (MIPS) and alternative payment models.
For most retina specialists, MIPS is the preferred pathway. MIPS measures and compares physicians in a new type of relativity across four categories: quality, advancing clinical information, practice improvement, and cost. High performers are eligible for a bonus and low performers face penalties. The process is designed to be revenue-neutral, so that (for the most part) the bonuses come from the penalties. In other words, if there are no losers (penalties), there are no winners (bonuses).
Unfortunately MIPS, as currently constructed, is unlikely to improve value for a host of reasons, including byzantine complexity, poor risk adjustment, and flawed patient attribution. I will discuss both MIPS and alternative payment models in greater detail in a future installment of Pennsylvania Avenue Updates.