Unraveling the mystery behind CPT codes, reviews

By Nancy Groves; Reviewed by Jeffrey Edelstein, MD

In 1992, the American Medical Association (AMA) was tasked to help Medicare determine appropriate CPT code relative values for physician work, liability, and direct practice expenses when Congress transferred payments from the market based usual, customary and reasonable (UCR) fee schedule to a resourced-based relative value scale (RBRVS).

The AMA-RBRVS Update Committee, casually known as the “RUC,” includes representatives from all of the American Board of Medical Specialties (ABMS), who debate physician survey data that ultimately provides CPT code values recommended to the Center for Medicare and Medicaid Services (CMS). Those values, multiplied by a “conversion factor” determined annually by Congress, become the payments made to physicians.

When Congress initiated RBRVS, they mandated a process to maintain accurate values for CPT codes. The process that evolved includes widespread code reviews every five years, as well as targeted reviews based on screens for utilization, common code pairings, new technology, spikes in utilization, and new concepts such as medical home models and chronic care management.

These reviews, developed from a very specific and lengthy process, may have substantial impacts on direct reimbursement from Medicare and commercial insurance by adaptation.

Jeffrey Edelstein, MD, currently serves as the Associate Secretary for Health Policy and an advisor to the AMA-RUC representing the American Academy of Ophthalmology (AAO).

Dr. Edelstein recently chaired a symposium on physician payment policy at the 2017 meeting of the American Academy of Ophthalmology, where he commented that the typical CPT code valuation through the RUC process can take a up to one year or longer before a value is finally introduced to the marketplace.

This contrasts with the free market, where values are negotiated between buyer and seller with an immediate result. A truly free market is fair when the buyer has true price transparency and the seller must know the cost to provide the goods and services.

The free market is the most efficient way to value goods and services, but may have negative results to both the buyer and seller when price discovery is distorted by a lack of accurate information.

Prior to RBRVS, cataract surgery paid more than $2,000, and by law, private insurers had to pay more than Medicare.

“The RBRVS, as written by Professor William Hsaio at Harvard University was unfinished when adopted by Congress in 1992,” according to Dr. Edelstein.

The major purpose for the RUC was to fine-tune the process over time. In RBRVS, payment is based on relative value units (RVUs) from three primary components: physician work (wRVUs), practice expense (peRVUs), and professional liability insurance cost (pliRVUs). Payments are derived from the total value of these three components multiplied by a conversion factor set annually by Congress ($35.9996 in 2018).

“While few people are happy with the process, the ongoing mantra is ‘at least it’s a physician-driven system,’” Dr. Edelstein said, adding that many groups have tried and failed to replace the RUC. “It remains the single most-effective and least-expensive alternative for code valuation.”

The RUC represents the entire medical profession, with most involved direct patient care accounting for a high percentage of Medicare expenditures. The 31 voting positions are comprised of 21 ABMS members, with the remaining seats devoted to primary care, internal medicine sub-specialties, osteopathic, and AMA representatives. A two-thirds majority is needed to recommend a value.

The process to determine a code’s value begins with a survey completed by physicians of all involved specialties. The survey data is evaluated by RUC with final recommendations submitted to CMS, which publishes proposed and final rules annually. Historically the CMS has accepted about 90% of the RUC’s recommended values.

But things don’t always run smoothly, according to Dr. Edelstein.

“In 2016 we saw an atypical CMS overreach, creating cuts well beyond what the RUC already lowered. This was due in part to CMS’ misinterpretations and misperceptions about new technology, drugs, over-utilization, and excess post-op visits,” he said.

The AAO passionately and aggressively opposed these cuts, which would have resulted in decreases of 16% to 33% in the five affected codes through an appeals process known as “refinement.” Fortunately, CMS accepted the rebuttal, reversed the cuts and restored the proposed RUC values.

The work RVUs represent about 51% of a CPT code’s value, which is based on time and intensity. The RUC process includes comparing survey data to recently valued codes within and outside of the affected specialty to provide “relativity.”

Dr. Edelstein urged physicians to respond to RUC surveys, which provide the information the committee needs for its deliberations. In doing so, clinicians should be specific and remember that valuation is based on a “typical” case, not the easiest or most difficult.

The practice expense RVUs are based on clinical staff time, equipment costs, time used, and supplies. When the committee meets to discuss peRVUs, debates can come down to such minutiae as arguments over how many cotton swabs are needed for an exam. In this component of the valuation process, eye care practitioners have somewhat of an advantage, Dr. Edelstein said.

“Ophthalmology fares well because of the greater cost of office equipment (ophthalmology lane) needed for an eye exam compared to what an internist would need for a physical (exam table),” he said.

The third leg of the valuation formula, professional liability expense, constitutes a surprisingly small component of the calculation. pliRVUs account for about 4.3% of the total value, compared to 51% for work value and about 45% for practice expenses.

Effect on specialties

The current trend in the CMS-driven, budget-neutral valuation system is a push to support primary care, forcing cuts to other specialties.

“Ophthalmology has done well because our work was fairly valued and we have great leadership that understands and works within the process,” Dr. Edelstein said.

Radiology and cardiology, in contrast, were hit harder because their code values were too high and that, in Dr. Edelstein’s opinion, they unwisely decided to fight the process.

A cardiology lawsuit against CMS “did not end well,” he said, which seems to imply that “playing nice” is a sound strategy in this situation.

“Remember, a RUC win is sometimes a smaller loss than initially expected,” he concluded.

Jeffrey Edelstein, MD

p: 480/962-9121

This article is based on Dr. Edelstein’s presentation at the 2017 meeting of the American Academy of Ophthalmology. Dr. Edelstein has no financial interests or relationships
to disclose.