Surgeons will see their payments from Medicare for knee and hip procedures drop by 10% and 4%, respectively, in 2014. It’s been a tough year for physicians, as Medicare payments to providers were cut by 2%—$11 billion—in mandatory federal spending cuts under the sequester that started March 1, 2013.
Will this latest hit in addition to the threat of a 24% SGR (sustainable growth rate) cut in January finally drive surgeons from accepting new Medicare patients?
More on that later.
For months, industry and Wall Street analysts warned of significant Medicare cuts based on the American Medical Association’s (AMA) secret recommendations to the agency. On the day before Thanksgiving, CMS (Centers for Medicare and Medicaid Services) dropped this turkey on surgeons with a 1,369-page final rule for Medicare’s physician fee schedule.
“Misvalued” Codes
In its news release, CMS noted that it has been engaged in a vigorous effort to review potentially “misvalued” codes, including services for hip and knee replacements. In 2012, CMS asked the Relative Value Update Committee (RUC) of the AMA, which manages the CPT (current procedural terminology) coding set used by Medicare and private insurers for medical services/procedures, to review hip (CPT 27130) and knee (CPT 27447) replacement payment rates.
Jefferies analyst Raj Denhoy reported that the RUC committee suggested that the work RVU component for hips be cut by 10% and knees by 16%. CMS revised these down to 5% for hips and 11% for knees. The final payment rates, which are a factor of the work RVU and other inputs, were then cut by 4% and 10%.
For hips, payment in 2014 will go to $1,393.78 from $1,454.48; for knees the rates are reduced to $1,393.06 from $1,552.81. These rates assume that congress enacts its annual “doc fix” and that the rates are not subject to the 24% SGR reduction.
The Dropouts
Denhoy says the cuts could force some surgeons to abandon treating Medicare patients. “We don’t believe the cuts will have any immediate or significant impact on procedure volumes; it simply isn’t clear how most surgeons can stop treating Medicare patients as they represent over half of all large joint candidates,” wrote Denhoy.
The 9,539 physicians who opted out of Medicare last year is a small proportion of the 685,000 physicians who participated in Medicare last year. But that was nearly triple from three years earlier, according to the CMS, which has never released annual opt-out figures before.
Where are the dropouts coming from?
Joe Baker, president of the Medicare Rights Center, reportedly said his patient-advocacy group has had an increase in calls from seniors who can’t find doctors willing to treat them—mainly from affluent urban and suburban areas where many patients can pay out of pocket if their doctor doesn’t accept Medicare. “In most places, doctors can’t pick and choose because Medicare is the biggest game in town, or the only game in town,” he said.
Surgeon Medicare Options
Surgeons have three Medicare options.
First, those who participate bill Medicare directly and must agree to accept its reimbursement rates for all covered services.
Second, the so-called nonparticipating physicians still file Medicare reimbursement claims but can charge as much as 10% over Medicare’s rates for some services, and they must bill patients for the difference.
Third, those who drop out can charge patients whatever they want, but they must forgo filing Medicare claims for two years, and their Medicare-eligible patients must pay out of pocket to see them.
Implant Pricing Risk
The big risk isn’t from the dropouts, says Denhoy, but is likely the longer term impact physician rate cuts could have on pricing for orthopedic implants. “Cuts in reimbursement could prompt more clinicians to become employees of hospitals. As incentives between clinicians and hospitals become better aligned, increased price pressure could occur.”
He adds that cuts to physician rates can have implications on bundled payment arrangements, which also could lead to more focus on implant pricing.
In terms of potential exposure for the device companies, Denhoy says U.S. hips and knees account for 18% of total sales for Stryker Corporation, while for Zimmer Holdings, Inc., the exposure is a much higher 37%.
Slicing the Pie
Gunnar Anderson, M.D., Ph.D.
The 2014 payment rates increase payments for many medical specialties with some of the greatest increases going to providers of mental health services including psychiatry, clinical psychologists and clinical social workers.
Gunnar Anderson, M.D., Ph.D, president of ISASS (International Society for the Advancement of Spine Surgery), told OTW, “For those who followed the healthcare debate in recent years the CMS physician payment rates for 2014 offers no surprises. While the total payment remains fairly constant, the pie is sliced in favor of the primary care physicians and this year also in favor of mental health services.”
Anderson said PQRI (Physician Quality Reporting Initiative) and payment adjustments based on quality are other cornerstones of the new healthcare model. “The population benefits of these efforts are yet to be determined. Some PQRI efforts are unlikely to have major health benefits.”
“For the musculoskeletal surgeon the rates are lower as usual. This will likely drive additional surgeons to no longer see Medicare patients.”
Collaborating in the Own Execution
At the request of CMS, AAOS (American Academy of Orthopaedic Surgeons) and AAHKS (American Association of Hip and Knee Surgeons) collaborated with the agency by surveying their members about the procedures. The results, according to an article in the December issue of AAOS Now, reflected current trends to reduce hospital length of stay and to accelerate rehabilitation. Procedure times also differed from previous estimates.
Every year, CMS makes changes to the RVUs for procedures, including orthopedic procedures, within the fee schedule. This year, the following four high-volume lower extremity orthopedic procedures were reviewed and the RVUs either revised or left at their current value:
27130—Arthroplasty, acetabular and proximal femoral prosthetic replacement (total hip arthroplasty [THA]), with or without autograft or allograft. The work RVU has been changed from 21.79 to 20.72, a decrease of 5%.
27236—Open treatment of femoral fracture, proximal end, neck, internal fixation or prosthetic replacement. The work RVU remains the same at 17.60.
27446—Arthroplasty, knee, condyle and plateau; medial OR lateral compartment. The work RVU has been changed from 16.38 to 17.48, an increase of 6.7%.
27447—Arthroplasty, knee, condyle and plateau; medial AND lateral compartments with or without patella resurfacing (total knee arthroplasty [TKA]). The work RVU has been changed from 23.25 to 20.72, a decrease of 11%.
Although the AAOS and AAHKS survey results indicated a difference in procedure time, the Academy pointed out that this was a function of the survey methodology, not a change in the actual work involved in performing the surgery.
No Good Deed Goes Unpunished
Joshua Jacobs, M.D.
Joshua Jacobs, M.D., president of AAOS said, “Although we are disappointed with the devaluation of procedures that we know provide tremendous value to the individual patient and to society and that CMS did not use the values recommended by AAOS and AAHKS, we are pleased that CMS responded to our extensive regulatory and legislative advocacy efforts to alter the RUC’s recommendation of far deeper cuts.”
Leaders of the Academy are particularly concerned that CMS did not publish the new values in the July 2013 Physician Fee Schedule Proposed Rule, but waited until publication of the Final Rule to release the values.
“AAOS and AAHKS believe that CMS has an obligation, as a public agency, to solicit and consider stakeholder and public feedback prior to implementing major policy changes such as these. However, CMS choose to ignore requests by AAOS and AAHKS to publish the values earlier, which would have allowed for public comment and input,” stated the article in AAOS Now.
Lobbying Congress
The societies are continuing to push to get the proposed payments changed by telling lawmakers that if cuts to reimbursement rates continue, many surgeons will just stop fixing Medicare patients.
“Patients now face the potential of having less access to these highly valuable and successful surgeries. Implementation of the CMS values will be a significant setback for the collective health of Medicare beneficiaries. In addition, they might have unintended consequences for society, based on recent studies showing the cost-effectiveness of TKA. (See “What Is the Societal Value of TKA?” AAOS Now, September 2013.), “continued the AAOS statement.
The societies are urging their members and patients to take the open comment period to provide written comments to CMS between now and December 31, 2013. AAOS members are also urged to contact their congressional representatives and urge them to force CMS to accept the AAOS and AAHKS recommended values.
The Academy said it will submit extensive comments to CMS on this final rule.
Is this the straw that will break the camel’s back and cause more physicians to join their 9,500 colleagues who have already voted with their feet and dropped out of Medicare, or will they continue to try and make it up on volume? The answer may be that it depends on who the surgeon works for.
Tell us what you think. Email walter@ryortho.com and we’ll share the results.