PAYMENT FOR PHYSICIAN SERVICES BY THE VIRGINIA MEDICAID PROGRAM

1
PAYMENT FOR PHYSICIAN SERVICES BY THEVIRGINIA
MEDICAID PROGRAM

• Presentation to
• The Medicaid Physician Advisory Committee

Department of Medical Assistance Services
July 15, 2003
2
Presentation Outline

• History of physician payment by
  government health care programs
• RBRVS
• Virginias Physician Payment System
• Relationship to MCO rates
• Role of Inflation Adjustment in Medicaid Provider
  Rates

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Medicare and Medicaid

• Created in 1965
• Purpose to provide health care to elderly and
  some of the poor
• Contract for services with health care providers
  in the community
• Medicare federal
• Medicaid federal/state funds, state admin.

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Medicare Payment Policy Historical Overview

• Early years Usual and customary or
  prevailing charge
• Enlisted many providers
• Led to cost increases

5
Medicare Overview(continued)

• Middle years Rate of increase limits applied to
  historical prevailing charge
• Reduced rate of increase in cost
• Relative payment by procedure an artifact of
  methodology payment driven by historical
  patterns of provider charges

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Medicare Overview(continued)

• Recent years (since 1992) RBRVS (Resource
  Based Relative Value Scale)
• Did not change overall level of spending
• Did alter distribution of Medicare payments
• Relative value of each service determined by
  Relative Value Units (RVUs)
• RVUs determined scientifically rather than
  based on historical charges

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RBRVS

• Each service (CPT code) is assigned its own RVU
  value
• Weighted average of all RVUs 1.0
• Payment (for a CPT) RVU x CF
• Conversion Factor (CF) converts the relative
  value to dollars
• CF adjusted each year, and subject of extensive
  study and negotiation

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RBRVS(continued)

• Each RVU is made up of 3 components
• Work
• Practice expense
• Malpractice costs
• Each component is adjusted individually for
  geographic area

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Virginia Medicaid RBRVS

• Implemented 1995 w/3-year phase-in
• Uses Medicares RVUs (updated annually)
• No geographic adjustment
• No automatic annual increase in fees
• No overall funding increase since 1992, except
  based on volume

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Virginias Level of Payment

• In 1995, about 80 of national Medicare fee
• Currently 69.7 (73.4 for OB/GYN)
• Private payers 125 to 133 of Medicare
• Other states range from 36 to 127 of Medicare
  VA is not far from the middle

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Physician Fees and MCO Rates

• MCO rates based on FFS-equivalent cost
• Direct link of FFS rates to MCO rates
• Starting 7/1/04 link will be less direct
• Actuarially sound instead of FFS-equivalent
• Encounter data critical
• Exact relationship of FFS rates to MCO rates
  unclear

12
Inflation and Medicaid Rates

• Rates w/Annual Inflation Adjustment
• Hospital
• Nursing Home
• Home Health
• Rehabilitation

• Rates w/o Inflation Adjustment
• Physician
• Dentist
• Waiver providers