Robert A. Guyton, MD
Emory University School of Medicine, Atlanta, George.
The cost of health care became an increasing concern for economists, businesses and government in the 1980's. During this period there was a 15% annual growth in physician payments in Medicare. This related to increasing reimbursement per encounter. By 1995 health care expenditures had reached 13% of the gross national product and was projected to be 15% by the year 2000. Continued double digit growth of health care expenditures while other public expenditures are growing at 3% or 4% would lead to health care expenditures equaling 25% of the gross national product by year 2050. On might argue much of this growth in health care expenditure is technology driven. That is, as we are able to do more for an individual patient, make more accurate diagnoses, intervene more aggressively and offer more sophisticated techniques (for example bone marrow transplantation, gene therapy for cancer, etc.), the cost per patient is driven upward.
Medicare Part A and Part B
Part A of Medicare is utilized to pay hospitals and Part B is used to pay individual providers (70% of Part B goes to physician billings). The hospital payments are funded by payroll tax revenues which are placed into the Medicare Trust Fund which currently has a balance of approximately 150 billion. Based upon estimates of hospital outlays, however, the hospital trust fund is expected to be depleted by the year 2000 as hospital outlays are outstripping payroll tax revenues. It is very important for physicians to understand that Part A of Medicare is not part of the general revenues and expenditures budgeted by congress (it is not part of the annual budget). It is separate, funded through a separate mechanism (the Medicare Trust Fund).
Part B of Medicare, on the other hand, is funded from the general revenues. It represents approximately 18% of the budgeted monies, approximately equal to national defense spending and slightly less than social security. Another 15% of the federal budget is targeted to pay interest on the national debt and 14% are entitlement programs related to unemployment compensation, retirement and disability insurance for federal employees. If one seeks to cut the federal budget, social security and national defense are not politically viable target for cutting. One is left then with Part B of Medicare as the single large target for cuts in the federal budget. This problem is compounded by the fact that the "baby boomers" are rapidly approaching Medicare age which will lead to a crisis for both Medicare and for Social Security.
Resource Based Relative Value System
In the mid 1980's the government reached the probably appropriate conclusion that continuing to reimburse physicians at the usual and customary fee for various health care encounters was leading to an escalation of fees that was extremely difficult to control. Furthermore, there was considerable feeling that this was leading to an imbalance between procedure driven fees and fees related to non-procedural administration of health care. This leads to the resource based revenue value system. The intention was that the relative value of a physician's service would be equal to the total work of the physician (TW), the practice cost including professional liability insurance (PC) and the amortized value of the opportunity cost of post-graduate specialty training. The later component was intended to reimburse specialists for extended time in education and training, understanding that during his extended time they were unable to earn significant income. As the RBRVS system was implemented, the opportunity costs were eliminated. In this regard it should be noted that the opportunity cost for most medical specialists amounted to less than 3% of the total relative value that was calculated. For some specialists, for cardiac surgeons in particular, the opportunity costs of post-graduate specialty training was calculated to amount to approximately 9% of the relative value of their health care efforts.
Relatively complex systems were utilized to determine the amount of time spent in specific activities by different physician's and by different specialists. A second factor, the intensity of that work, was used to modify the total work value. The work intensity, however, is a much more subjective matter. Practice costs, on the other hand, in the original RBRVS system were calculated based upon historic charges. In many instances practice costs were used to help balance reductions in reimbursement that would otherwise have been excessive by the total work calculations. Specialists (surgeons and cardiothoracic surgeons in particular) accepted this system which somewhat exaggerated practice costs in a manner to compensate for the relatively lower work units (in particular for intensity factors) in cardiothoracic surgical procedures. Compromise in the late 1980's has come back now to haunt the specialty.
In addition to attempting to establish total work and practice cost values for various health care activities, cross specialty linkages were made. The linkages were made utilizing procedures or practices which were common to various specialties. For example, a tracheostomy might be performed by a general surgeon, by a thoracic surgeon or by an otolaryngologist. The value of the tracheostomy was then used relatively to determine the value of a bronchoscopy in thoracic surgery, of a node dissection in general surgery or of a polyp removal in otolaryngology. These linkages were utilized to assure that various specialties were paid relatively for the same amount of effort.
Practice Expense "Reform"
In 1994 Congress sent a mandate of HCFA to make practice expense reimbursement "resource based" with the understanding that HCFA would attempt to define relative values based upon relative actual costs. Congress insisted that the system would be budget neutral and that the system would be implemented in 1998. HCFA embarked upon a large scale survey of practice costs which was conducted in late 1995 and 1996. A very low response rate to this survey led to the collection of meaningless data and HCFA has conceded that appropriate data on practice expense was not gathered. In attempting to assign practice expense, HCFA has resorted to a number of pilot studies which used very small numbers of physicians and even smaller numbers of specialists to attempt to estimate practice expenses. In an additional, very important decision, HCFA decided that all practice expenses which occur in the hospital were the responsibility of Part A (the hospital component of Medicare) and that these practices expenses should not be reimbursed under Part B. This means that a nurse or a physician assistant who is employed by a cardiothoracic surgeon to help with preoperative care, operative work or post-operative care is not considered a practice expense if the activities of that assistant occur primarily in the hospital.
This system of guess and estimating practice expenses led to a proposal that would have led to a 90% decrease in practice expense for many hospital based, procedure based specialists. Cardiac surgeons, thoracic surgeons, neurosurgeons and cathing cardiologists were the primary targets of this initiative of this proposal. The proposed changes would have led to approximately a 40% reduction in 1998 in reimbursement for a coronary bypass operation from Medicare.
Connection Between Medicare and Private Payers
The drastic reductions proposed in Medicare are amplified by the connections that currently exist between Medicare and private payoffs. Many managed care contracts, in order to simplify these fee scheme, are based upon "Medicare plus 10%" or even "Medicare" fee levels. This would mean that a 40% reduction in Medicare reimbursement would in many cases lead to a 40% in private payer reimbursement.
Working with the Political Process
Physicians, cardiothoracic surgeons in particular, have been woefully disconnected from the political process. Only 1% or 2% of the Congress have any health care background. Medicare decisions are based upon what is politically viable. The least politically viable stance that one can take in Washington is that reimbursement should not be decreased because the incomes for physicians might suffer otherwise. The appropriate connection must be made between Medicare policy changes and the general welfare of society in order for a political initiative to be viable.
For example, it is clear to many of us that, if total reimbursement for coronary bypass is pegged at $25,000 for both physician and hospital payments and outlayers are disallowed, the impact upon the availability or coronary bypass will be profound. We can predict, with computer modeling, the approximate cost of coronary bypass for various patients. A 75 year old patient with left main stenosis peripheral vascular disease and a prior stroke who has a 25% ejection fraction and moderate congestive failure could benefit from operation. But this patient could only be operated upon, in general, at a loss. If a hospital persisted in operating upon such patients, the hospital would shortly be out of business. This presents a situation in which there is no alternative but fiscal rationing. This means that the procedure would be unavailable to patients with multiple co-morbid factors. Unfortunately, it is also intuitively clear that this method will reduce the overall costs of Medicare: simply to withhold medical care from patients for whom medical care is like to be expensive.
There appears to be three mechanisms by which the political process may be legitimately influenced. The first, lobbyists, are very useful in obtaining the ear of legislative assistants and legislators if one has a convincing, reasonable message to deliver. The Society of Thoracic Surgeons, both individually and through the Practice Expense Coalition has utilized lobbyists effectively in 1997 to get the appropriate message to legislators about the dangerous effects of the practice expense proposal initially brought forward by HCFA.
The second mechanism by which one may legitimately influence the political process is by connection at a local level with individual legislators. This is accomplished primarily by supporting those legislators in their efforts for election or reelection. Nothing allows one better access to legislator's ear than involvement in that legislator's career success. Once again, however, the message delivered to that ear must be well thought out and must be interpreted in terms of what is best for society. We should expect that to be the legislator's primary interest.
A third mechanism by which the political process may be legitimately influenced is by attempting to modify the public image of our specialty. This represents a public relations effort which begins with every patient encounter and continues through the non-professional activities of every member of our specialty. It is likely that we could benefit from public relations consultants in helping us explain to the public our position as advocates or patients.
Probable Reductions in 1998 and the Future
The budget reconciliation act of 1997 is likely to lead to a 10-12% reduction in overall reimbursement of cardiac surgical procedures. This is a major change from the 40% reduction which was originally proposed. In addition, it is likely that Congress will ask HCFA to restudy the practice expense issue. To this end, data is being gathered by The Society of Thoracic Surgeons and by other entities in an effort to accurately relay to Congress practice expenses for our specialty. Even though the 1998 reduction may be on 10-12%, HCFA persists in claiming that a 40% reduction is appropriate and, unless appropriate action is taken, this 40% reduction is what we face over the next three years.
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