Health Care: Impact of New Medicare Reimbursement Regs on Physicians and Lenders

By Grayson, Donna P. | Journal of Commercial Lending, March 1993 | Go to article overview

Health Care: Impact of New Medicare Reimbursement Regs on Physicians and Lenders


Grayson, Donna P., Journal of Commercial Lending


Effective March 1, 1992, new regulations radically affected the way physicians are reimbursed under Medicare Part B. Known as the RBRVS, the Resource-Based Relative Value Scale represents the greatest change to the Medicare system since it was established 26 years ago. No longer will services provided to Medicare beneficiaries be based on customary and reasonable rates but on a fee schedule in which relative values are assigned to more than 7,000 medical procedures.

Nearly every doctor in the U.S. will be affected by the new payment rules and coding system. According to the Health Care Financing Administration, the main thrust of the new physician payment reform was to rein in soaring physician costs and to make the payment system fairer for those physicians engaged in evaluation and management specialties.

Fee Schedule Background

Under development since 1985, the RBRVS was intended to change the anomalies that compensated surgical procedures at a much higher rate than primary care procedures. The new fee schedule, using the RBRVS, redirects governmental, and eventually third-party payers, away from invasive, procedure-oriented care, traditionally the most expensive to provide, toward primary care procedures.

The new schedule accounts for the time, training, skill, and risk (that is, "work") required to perform a service. As a result of the reform, payments to surgeons and high-tech specialists are expected to be reduced.

The rules should also help close the gap between payments to rural and urban physicians. Furthermore, third-party payers are expected to use the new fee schedule as a guide in the adoption of their own values scales. As a result, the RBRVS has become the most significant health care reform issue in decades.

Extensive analysis by experts suggests that the new value scale will have a revolutionary impact on the health service industry as a whole in the 1990s. The RBRVS will be phased in between 1992 and 1996, with payments before 1996 a blend of the RBRVS and historical payments.

Determination of New Value Scale

Until the enactment of the new payment schedule, fee reimbursement for the approximately 31 million Medicare beneficiaries was based on customary, prevailing, and reasonable (CPR) charges. Those physicians who "participated" accepted the CPR charges as payment in full, while "nonparticipating" physicians could "balance-bill" patients for a remaining portion of the fee up to the maximum allowable actual charges limit.

New Fee Schedule

The CPR charges have been replaced with a new Medicare Fee Schedule (MFS) in which fees were set according to a specific formula, developed and refined by a research team at the Harvard School of Public Health. The final RBRVS formula was the composite of three factors:

1. Relative value scale for services.

2. Geographic adjustment factor for a fee schedule area.

3. National conversion factor.

The development of the Harvard RBRVS model to determine relative values is beyond the scope of this article. However, the findings of the study showed that the new payment system would dramatically affect the Medicare income and practice of most physicians.

The Harvard study was designed to compensate physicians based on the resource-input costs to deliver medical and surgical services. These costs were measured by a model that defined resource input as:

* Work expended by a physician on a particular procedure or service (in terms of time and intensity).

* Practice costs to supply the service.

* Opportunity cost of training.

In the final model, opportunity costs were deleted and practice costs were subdivided into overhead costs and malpractice costs. As a result of the study, resource value units were defined for more than 7,000 coded services in Medicare's payment system.

Uneven Fee Income

The empirical results of the study revealed that evaluation and management services (primarily visits and consultations), those provided by primary care physicians, were compensated at a much lower rate than invasive procedures, imaging, and laboratory testing. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Health Care: Impact of New Medicare Reimbursement Regs on Physicians and Lenders
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.