What Will You Do About Medicare 2002?
By Jennifer Bever, MS 

Unless you've been vacationing on a tropical island with no outside contact, you are by now aware that Medicare reimbursement is set to drop 5.4% in 2002. This is due to the static nature of Medicare's budget - if expenditures go up one year they must be brought in line the next. As a result, Medicare will pay you $36.20 per RVU this year.

Orthopaedic surgeons are in for a double whammy; some RVU values have decreased due to the final phase-in of the resource-based practice expense. While many specialty societies question the data used to create these practice expense units, the project was implemented and no reversal is expected at this time. Estimates call for a net 1% decrease in payment from the altered RVU values.

All this in the same year practice expense could explode due to malpractice premium hikes, a continuing trend of employee health insurance increases, and the ever-present need to retain talented employees with competitive salaries. Administrator Mike Pulaski from Peachtree Orthopaedic Clinic in Atlanta, GA, is facing a 34% increase in malpractice premiums as well as a 23% rise in employee health insurance costs.

• Which commonly provided services are affected most?
• What is the expected impact on revenue?
• Can we absorb the decrease by tightly managing expenses?

While the changes in injections are disconcerting, note that evaluation and management (E&M) RVUs continue to increase. So despite the conversion factor decrease in 2002, reimbursement for office visits remains steady. This means accurate E&M coding will become more important than ever this year. Don't let poor documentation and undercoding further decrease legitimate reimbursement. Be sure physicians attend an American Academy of Orthopaedic Surgeons (AAOS) Coding and Reimbursement Workshop to brush up on E&M coding.

Reimbursement for many common procedures is headed south. What can you do? Start with these steps:

1. Run a payer mix report to determine how much of your business is Medicare-based.
   
2. Next, take an inventory of your commercial managed care contracts. How many are based on Medicare's payment methodology?
   
3. Call those commercial carriers and ask if they will be switching to the new 2002 RVUs and conversion factor, and if so, when? We're hearing reports that not all carriers are adopting the new rates. Blue Cross/Blue Shield is one example. Representatives from some states say they will wait and evaluate the new rates before making any changes.
   
4. Apply the expected 6.4% reduction to 2001 revenues from Medicare and those commercial carriers adopting the new payment rates. Add in expected revenue from other payer sources to calculate total 2002 projected revenues.
   
5. Now review expenses from 2001. Can you absorb the decrease in revenues by tightening down expenditures in 2002? Develop a task force to brainstorm ways to cut costs. You'll be surprised by what you can find.

Facility-based procedures