Commentary Physician Payment Reform: A Survival Manual for Physicians In 1965, Medicare was established with a $5 billion budget in an effort to create a safety net for elderly citizens without adequate health insurance coverage. Rapid growth in Medicare expenditures led to the development of the first cost controls after 10 years. Another decade later, the prospective payment system and diagnosis-related groups (DRGs) were established to constrain the growth in hospital costs to the Medicare program. The continued increase in Medicare costs, especially for physician reimbursement, has produced additional pressure to find ways to limit Medicare outlays. The Congress, intent on achieving further budgetary limits on Medicare spending, authorized a study of a new method of physician reimbursement that would involve a new resource-based formula rather than customary or usual fees. This new method was developed by Hsiao and colleagues! at the Harvard School of Public Health and the Harvard Business School. To eliminate standard fees as the basis for Medicare reimbursement, the Harvard team derived a system of relative values for work, practice expense, and malpractice insurance expense, whether the work was cognitive or procedural. Resource-Based Reimbursement-s-The results of the Harvard work are now being implemented as the basis for physician payment in the Medicare program as the Medicare fee schedule. The Medicare fee schedule is derived from the resource-based relative value scale. Implementation of the Medicare fee schedule and resource-based relative value scale is occurring at the same time as implementation of other budgetary constraints-in particular, elimination of reimbursement for electrocardiographic interpretation-and other programs aimed at increasing Medicare control of services-speciftcally, the referring and ordering physician's mandate. Implementation of the Medicare fee schedule and resource-based relative value scale necessitates the use of new codes to describe services, especially those related to evaluation and management. Accordingly, the Current Procedural Terminology (CPT) manual of the American Medical Association has been revised, and the new evaluation and management codes will be used as the Medicare fee schedule is implemented.
The objective of this report is to familiarize physicians with the new Medicare fee schedule, the appropriate use of the new CPT evaluation and management codes, and the importance of documentation of services. Resource-Based Relative Value Scale.-On Nov. 25, 1991, the Health Care Financing Administration published the Medicare fee schedule,' including the relative value units (RVUs) for work, practice expense, and malpractice insurance expense and the geographic variations for cost of living, practice overhead expenses, and malpractice insurance. The use of a conversion factor (expressed in dollars) with the RVUs and geographic variations (geographic practice cost index or GPCI) allows the calculation of a Medicare fee as follows: Work RVUs X work GPCI
+ Practice expense RVUs X practice expense GPCI + Malpractice insurance expense RVUs X malpractice insurance expense GPCI Sum X conversion factor = Medicare payment (The dollar conversion factor for 1992 is $31.001) The GPCI will vary by locality. In some areas, the locality will be an entire state-for example, Minnesota is one locality. The following GPCI values have been established for Minnesota: Work expense Practice expense Malpractice insurance expense
0.999 0.971 0.748
Without further detailed explanations of the methods used to derive work RVUs, consider the following example with the foregoing GPCIs: Initial consultation, level 5 (highest level) Work RVU 3.03 Practice expense RVU 1.67 Malpractice insurance expense RVU 0.14 Medicare fee = [(0.999 X 3.03) + (0.971 X 1.67) + (0.748 X 0.14)] X $31.001 = 4.75326 X $31.001 = $147.36
Address reprint requests to Dr. D. R. Gracey, Division of Thoracic Diseases, Mayo Clinic, Rochester, MN 55905. Mayo CUn Proc 67:385-388, 1992
Similar calculations can be performed for all CPT codes that have been assigned RVUs. 385
386
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PHYSICIANPAYMENT REFORM
Evaluation and Management Codes.-The CPT manual is used to define the level of service provided by the physician. The fee for the service is derived by applying the formula previously described and replacing the RVUs in the formula with the RVUs for the particular CPT code (or service) selected. Therefore, physicians must understand the importance of the selection of an appropriate level of service, the use of accurate CPTcodes, and the documentation requirements. Definitions.-Before we proceed with a description of CPT codes, some terms should be defined. New patient: one who has not received services from the physician within the past 3 years. (For group practices, a new patient is defined as one who has not received services from any physician in the group within the past 3 years) Established patient: one who has received services from the physician within the past 3 years Concurrent care: provision of similar services (for example, hospital visits) to the same patient by more than one physician on the same day Counseling: a discussion with the patient or the patient's family about one or more of the following: Diagnostic results, impressions, or recommended diagnostic studies Prognosis Risks and benefits of treatment options Instructions for management or follow-up Importance of compliance with chosen management options Reduction of risk factors Patient and family education Time: Times expressed in visit code descriptions are average; the actual times may vary. Intraservice times are defined es face-to-face time (office and other outpatient visits and office consultations) and unit or floor time (inpatient hospital care, initial and follow-up hospital consultations, and nursing facility) Presenting problem: a disease, condition, illness, injury, symptom, sign, finding, complaint, or other reason for encounter, with or without establishment of a diagnosis at the time of the encounter. The five types of presenting problems are (1) minimal, (2) self-limited or minor, (3) low severity, (4) moderate severity, and (5) high severity
Components of Services.-Evaluation and management services have seven components, the most important of which are the "key components"-history, examination, and medical decision making. These three components determine the level of service selected. The other four components are considered contributory and do not substantially influence the level of service selected.' Remember that time is a factor only when counseling constitutes more than 50% of the visit. In addition, for the first time, the CPT evaluation and management codes specify the precise components and elements of a particular level of service. For the key components, the descriptions summarized in Tables 1,2, and 3 are important, particularly in light of the documentation required in the medical record to support a specific level of service and to support the billing for the service. Documentation is especially critical in cases of audit (see subsequent information).
Table I.-Pertinent Descriptions for "History" Component of Evaluation and Management Services Type of history Problem-focused Expanded problemfocused Detailed
Comprehensive
Description Chief complaint and brief history of current illness Chief complaint, brief history of current illness, and problem-pertinent system review Chief complaint, extended history of current illness, extended system review, and pertinent past, family, and social history Chief complaint, extended history of current illness, complete system review, and complete past, family, and social history
Table 2.-Pertinent Descriptions for ''Examination'' Component of Evaluation and Management Services Type of examination Problem-focused Expanded problemfocused Detailed
Comprehensive
Description Limited to affected body area or organ system Affected body area or organ system and other symptomatic or related organ systems Extended examination of affected body area and other symptomatic or related organ systems Complete single system specialty examination or complete multisystem examination
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PHYSICIAN PAYMENT REFORM
Table 3.-Pertinent Descriptions for "Medical Decision Making" Component of Evaluation and Management Services Type of decision making
No. of diagnoses or treatments
Amount or complexity of data
Risk of morbidity or mortality
Straightforward
Minimal
Minimal
Minimal
Low complexity
Limited
Limited
Low
Moderate complexity High complexity
Multiple
Moderate Extensive
Moderate High
Extensive
Summary of Specific Codes.-A variety of evaluation and management codes for various types of patient encounters is shown in Table 4. The selection of the appropriate code depends primarily on the key components of history, examination, and medical decision making. As mentioned previously, the contributing factor oftime is important when counseling constitutes more than half the visit. Other codes have been established for emergency department services, critical-care services, and confirmatory consultations. Some uncertainty remains about the interpretation of the Medicare carrier of the definition of confirmatory consultation. Confirmatory consultations are only for providing an opinion and may be mandated by a third-party payer or peer-review organization. Referring and Ordering Physician's Mandate.-The Health Care Financing Administration, concerned about possible fraud and abuse in the Medicare program, established unique provider identification numbers (UPINs) to track physician ordering and referring patterns. The name and UPIN of the physician must be reported when an order is submitted or a patient is referred for any of the following services or tests: laboratory tests, consultation services, pathology, radiology, radiation therapy, nuclear medicine, podiatry, and durable medical equipment. Claimsfiled after Jan. 1, 1992, without UPINs for these services will be denied (regardless ofthe date ofthe service). Documentation.-The medical record is a legal document that must accurately describe the work of the physician, . especially relative to the billing for services rendered. The results of a negative audit would have significant financial impact. Therefore, it is essential to document work legibly and completely by including all elements necessary to justify the level of billing selected. The laws of documentation are simple: if a service is not documented, it was not done; if the note is illegible, the service was not performed. The rules for documentation require that the medical record indicate the following: evidence of chief complaint or presenting problem (not stating
387
Table 4.-Evaluation and Management Codes for Various Types of Patient Encounters Code
History and examination
New patient or outpatient Problem-focused 99201 99202 Expanded problemfocused 99203 Detailed 99204 Comprehensive 99205 Comprehensive Established patient or outpatient 99211 Physician supervision 99212 Problem-focused 99213 Expanded problemfocused 99214 Detailed 99215 Comprehensive
Decision making
Time (min)
Straightforward Straightforward
10 20
Low complexity Moderate complexity High complexity
30 45 60 5
Straightforward Low complexity
10 15
Moderate complexity High complexity
25 40
Initial hospital care-new or established patient 99221 Comprehensive Straightforward or low Moderate complexity 99222 Comprehensive High complexity 99223 Comprehensive
70
Subsequent hospital care 99231 Problem-focused
15
99232 99233 99234
Expanded problemfocused Detailed Hospital dismissal services
30 50
Straightforward or low Moderate complexity
25
High complexity
35
Outpatient consultation-new or established patient 99241 Problem-focused Straightforward 99242 Expanded problemStraightforward focused 99243 Detailed Low complexity Moderate complexity 99244 Comprehensive High complexity 99245 Comprehensive Initial inpatient consultation-new or established patient 99251 Problem-focused Straightforward 99252 Expanded problemStraightforward focused Low complexity 99253 Detailed Moderate complexity 99254 Comprehensive High complexity 99255 Comprehensive Follow-up inpatient consultation-established patient 99261 Problem-focused Straightforward or low Moderate complexity 99262 Expanded problemfocused High complexity 99263 Detailed
15 30 40 60 80 20 40 55 80 110 10
20 30
388
PHYSICIAN PAYMENT REFORM
"general examination," "annual examination," "rule out," "screen for," and so forth); evidence of type of history recorded; evidence of extent of examination of affected body area or organ system; evidence of type of medical decision making, including the number of diagnostic and therapeutic options, the amount and complexity of data to be reviewed, and the risk of complications or mortality; the extent of counseling performed (when appropriate); the amount of time spent with the patient (especially for counseling); for consultation, evidence of a report to the referring physician; and the name of the physician who performed the service. Summary.-The implementation of the Medicare fee schedule and the resource-based relative value scale as well as the use of new CPT codes for evaluation and management will create problems for physicians. It is paramount that physicians understand CPT codes and the requirements for documentation, and it is critical that physicians use the appropriate codes for services performed in order to receive the
Mayo Clin Proc, April 1992, Vol 67
maximal reimbursement to which they are reasonably entitled. The appropriate use of CPT codes will help all of us survive the process called "physician payment reform." Douglas R. Gracey, M.D. Division of Thoracic Diseases and Internal Medicine Douglas L. Wood, M.D. Division of Cardiovascular Diseases and Internal Medicine REFERENCES 1. Hsiao we, Braun P, Becker E, et al: A National Study ofResource-Based Relative Value Scales for Physician Services: Final Report. Boston, Harvard School of Public Health, September 1988 2. Medicare Fee Schedule for Physician Services: Final Rule. Federal Register 56 (No. 227):59502-59611, Nov 25,1991
The objective of this report is to familiarize physicians with the new Medicare fee schedule, the appropriate use of the new CPT evaluation and management codes, and the importance of documentation of services. Resource-Based Relative Value Scale.-On Nov. 25, 1991, the Health Care Financing Administration published the Medicare fee schedule,' including the relative value units (RVUs) for work, practice expense, and malpractice insurance expense and the geographic variations for cost of living, practice overhead expenses, and malpractice insurance. The use of a conversion factor (expressed in dollars) with the RVUs and geographic variations (geographic practice cost index or GPCI) allows the calculation of a Medicare fee as follows: Work RVUs X work GPCI
+ Practice expense RVUs X practice expense GPCI + Malpractice insurance expense RVUs X malpractice insurance expense GPCI Sum X conversion factor = Medicare payment (The dollar conversion factor for 1992 is $31.001) The GPCI will vary by locality. In some areas, the locality will be an entire state-for example, Minnesota is one locality. The following GPCI values have been established for Minnesota: Work expense Practice expense Malpractice insurance expense
0.999 0.971 0.748
Without further detailed explanations of the methods used to derive work RVUs, consider the following example with the foregoing GPCIs: Initial consultation, level 5 (highest level) Work RVU 3.03 Practice expense RVU 1.67 Malpractice insurance expense RVU 0.14 Medicare fee = [(0.999 X 3.03) + (0.971 X 1.67) + (0.748 X 0.14)] X $31.001 = 4.75326 X $31.001 = $147.36
Address reprint requests to Dr. D. R. Gracey, Division of Thoracic Diseases, Mayo Clinic, Rochester, MN 55905. Mayo CUn Proc 67:385-388, 1992
Similar calculations can be performed for all CPT codes that have been assigned RVUs. 385
386
Mayo Clio Proc, April 1992, Vol 67
PHYSICIANPAYMENT REFORM
Evaluation and Management Codes.-The CPT manual is used to define the level of service provided by the physician. The fee for the service is derived by applying the formula previously described and replacing the RVUs in the formula with the RVUs for the particular CPT code (or service) selected. Therefore, physicians must understand the importance of the selection of an appropriate level of service, the use of accurate CPTcodes, and the documentation requirements. Definitions.-Before we proceed with a description of CPT codes, some terms should be defined. New patient: one who has not received services from the physician within the past 3 years. (For group practices, a new patient is defined as one who has not received services from any physician in the group within the past 3 years) Established patient: one who has received services from the physician within the past 3 years Concurrent care: provision of similar services (for example, hospital visits) to the same patient by more than one physician on the same day Counseling: a discussion with the patient or the patient's family about one or more of the following: Diagnostic results, impressions, or recommended diagnostic studies Prognosis Risks and benefits of treatment options Instructions for management or follow-up Importance of compliance with chosen management options Reduction of risk factors Patient and family education Time: Times expressed in visit code descriptions are average; the actual times may vary. Intraservice times are defined es face-to-face time (office and other outpatient visits and office consultations) and unit or floor time (inpatient hospital care, initial and follow-up hospital consultations, and nursing facility) Presenting problem: a disease, condition, illness, injury, symptom, sign, finding, complaint, or other reason for encounter, with or without establishment of a diagnosis at the time of the encounter. The five types of presenting problems are (1) minimal, (2) self-limited or minor, (3) low severity, (4) moderate severity, and (5) high severity
Components of Services.-Evaluation and management services have seven components, the most important of which are the "key components"-history, examination, and medical decision making. These three components determine the level of service selected. The other four components are considered contributory and do not substantially influence the level of service selected.' Remember that time is a factor only when counseling constitutes more than 50% of the visit. In addition, for the first time, the CPT evaluation and management codes specify the precise components and elements of a particular level of service. For the key components, the descriptions summarized in Tables 1,2, and 3 are important, particularly in light of the documentation required in the medical record to support a specific level of service and to support the billing for the service. Documentation is especially critical in cases of audit (see subsequent information).
Table I.-Pertinent Descriptions for "History" Component of Evaluation and Management Services Type of history Problem-focused Expanded problemfocused Detailed
Comprehensive
Description Chief complaint and brief history of current illness Chief complaint, brief history of current illness, and problem-pertinent system review Chief complaint, extended history of current illness, extended system review, and pertinent past, family, and social history Chief complaint, extended history of current illness, complete system review, and complete past, family, and social history
Table 2.-Pertinent Descriptions for ''Examination'' Component of Evaluation and Management Services Type of examination Problem-focused Expanded problemfocused Detailed
Comprehensive
Description Limited to affected body area or organ system Affected body area or organ system and other symptomatic or related organ systems Extended examination of affected body area and other symptomatic or related organ systems Complete single system specialty examination or complete multisystem examination
Mayo Clin Proc, April 1992,Vol 67
PHYSICIAN PAYMENT REFORM
Table 3.-Pertinent Descriptions for "Medical Decision Making" Component of Evaluation and Management Services Type of decision making
No. of diagnoses or treatments
Amount or complexity of data
Risk of morbidity or mortality
Straightforward
Minimal
Minimal
Minimal
Low complexity
Limited
Limited
Low
Moderate complexity High complexity
Multiple
Moderate Extensive
Moderate High
Extensive
Summary of Specific Codes.-A variety of evaluation and management codes for various types of patient encounters is shown in Table 4. The selection of the appropriate code depends primarily on the key components of history, examination, and medical decision making. As mentioned previously, the contributing factor oftime is important when counseling constitutes more than half the visit. Other codes have been established for emergency department services, critical-care services, and confirmatory consultations. Some uncertainty remains about the interpretation of the Medicare carrier of the definition of confirmatory consultation. Confirmatory consultations are only for providing an opinion and may be mandated by a third-party payer or peer-review organization. Referring and Ordering Physician's Mandate.-The Health Care Financing Administration, concerned about possible fraud and abuse in the Medicare program, established unique provider identification numbers (UPINs) to track physician ordering and referring patterns. The name and UPIN of the physician must be reported when an order is submitted or a patient is referred for any of the following services or tests: laboratory tests, consultation services, pathology, radiology, radiation therapy, nuclear medicine, podiatry, and durable medical equipment. Claimsfiled after Jan. 1, 1992, without UPINs for these services will be denied (regardless ofthe date ofthe service). Documentation.-The medical record is a legal document that must accurately describe the work of the physician, . especially relative to the billing for services rendered. The results of a negative audit would have significant financial impact. Therefore, it is essential to document work legibly and completely by including all elements necessary to justify the level of billing selected. The laws of documentation are simple: if a service is not documented, it was not done; if the note is illegible, the service was not performed. The rules for documentation require that the medical record indicate the following: evidence of chief complaint or presenting problem (not stating
387
Table 4.-Evaluation and Management Codes for Various Types of Patient Encounters Code
History and examination
New patient or outpatient Problem-focused 99201 99202 Expanded problemfocused 99203 Detailed 99204 Comprehensive 99205 Comprehensive Established patient or outpatient 99211 Physician supervision 99212 Problem-focused 99213 Expanded problemfocused 99214 Detailed 99215 Comprehensive
Decision making
Time (min)
Straightforward Straightforward
10 20
Low complexity Moderate complexity High complexity
30 45 60 5
Straightforward Low complexity
10 15
Moderate complexity High complexity
25 40
Initial hospital care-new or established patient 99221 Comprehensive Straightforward or low Moderate complexity 99222 Comprehensive High complexity 99223 Comprehensive
70
Subsequent hospital care 99231 Problem-focused
15
99232 99233 99234
Expanded problemfocused Detailed Hospital dismissal services
30 50
Straightforward or low Moderate complexity
25
High complexity
35
Outpatient consultation-new or established patient 99241 Problem-focused Straightforward 99242 Expanded problemStraightforward focused 99243 Detailed Low complexity Moderate complexity 99244 Comprehensive High complexity 99245 Comprehensive Initial inpatient consultation-new or established patient 99251 Problem-focused Straightforward 99252 Expanded problemStraightforward focused Low complexity 99253 Detailed Moderate complexity 99254 Comprehensive High complexity 99255 Comprehensive Follow-up inpatient consultation-established patient 99261 Problem-focused Straightforward or low Moderate complexity 99262 Expanded problemfocused High complexity 99263 Detailed
15 30 40 60 80 20 40 55 80 110 10
20 30
388
PHYSICIAN PAYMENT REFORM
"general examination," "annual examination," "rule out," "screen for," and so forth); evidence of type of history recorded; evidence of extent of examination of affected body area or organ system; evidence of type of medical decision making, including the number of diagnostic and therapeutic options, the amount and complexity of data to be reviewed, and the risk of complications or mortality; the extent of counseling performed (when appropriate); the amount of time spent with the patient (especially for counseling); for consultation, evidence of a report to the referring physician; and the name of the physician who performed the service. Summary.-The implementation of the Medicare fee schedule and the resource-based relative value scale as well as the use of new CPT codes for evaluation and management will create problems for physicians. It is paramount that physicians understand CPT codes and the requirements for documentation, and it is critical that physicians use the appropriate codes for services performed in order to receive the
Mayo Clin Proc, April 1992, Vol 67
maximal reimbursement to which they are reasonably entitled. The appropriate use of CPT codes will help all of us survive the process called "physician payment reform." Douglas R. Gracey, M.D. Division of Thoracic Diseases and Internal Medicine Douglas L. Wood, M.D. Division of Cardiovascular Diseases and Internal Medicine REFERENCES 1. Hsiao we, Braun P, Becker E, et al: A National Study ofResource-Based Relative Value Scales for Physician Services: Final Report. Boston, Harvard School of Public Health, September 1988 2. Medicare Fee Schedule for Physician Services: Final Rule. Federal Register 56 (No. 227):59502-59611, Nov 25,1991
