AMA SPECIALTY SOCIETY RVS UPDATE COMMITTEE February 5, 2000

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AMA SPECIALTY SOCIETYRVS UPDATE
COMMITTEEFebruary 5, 2000

• Professional Liability Insurance Relative Values
• Robert J. Milligan and Bryan S. Bailey
• Gallagher Kennedy
• 2575 East Camelback Road
• Phoenix, Arizona 85016
• [phone]
• rjm_at_gknet.com

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Development of RBMRVU

• Goal Allocate actual malpractice insurance
  premium costs to specific services provided by
  physicians.
• Alternative Methods as of July 22, 1999
• Risk Factor
• Risk of Service (Selected by HCFA)

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Methodology

• 1. Gather national malpractice premium data
• 2. Crosswalk premium data into HCFA specialty
  classifications (20 per HCFA 40 per KPMG)
• 3. Calculate national average premium for each
  HCFA specialty classification

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Methodology

• 4. Determine the Risk Factor for each HCFA
  specialty classification (then crosswalk 34
  additional specialties into the HCFA
  classifications?)
• Specialty Premium
• ------------------------ Specialty RF
• Psychiatry Premium

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Methodology

• 5. Calculate Resource Based Malpractice RVUs for
  Each Service
• a. Identify the specialties that provide the
  service
• b. For each specialty that provides the
  service, determine the number of times the
  service was provided by that specialty in 1997

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Methodology

• 5. Calculate RBMRVUs, cont
• c. Multiply, for each specialty, the number of
  times the specialty provided the service by the
  specialtys Risk Factor
• d. Add the products of the multiplication
  performed in 5.c. for each specialty that
  performs the procedureand

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Methodology

• 5. Calculate RBMRVUs, cont.
• e. Divide the number calculated in Paragraph
  5.d. by the total number of times the service was
  performed by all specialties.
• 6. For the Risk Factor method, the result of the
  above calculation is the RBMRVU

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Methodology

• 7. Risk of Service Adjustment (Accepted
  Approach)
• a. Multiply the RVU (Risk Factor Approach) by
  the work RVU for the service
• b. If there is no work RVU for the service, use
  the historical malpractice RVU.
• 8. Adjust for budget neutrality

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Example 1

• Facts
• 1. The service is provided by physicians in
  three specialties
• 2. Specialty Risk Factor Services
• A 1.0 10 B
  2.0 20 C 3.0 30

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Example 1

• Calculation
• (10x1.0) (20x2.0) (30x3.0)
• ----------------------------------------
  2.33
• 60 (102030)
• Adjust for Risk of Service (Work RVU)

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Example 2

• Facts
• 1. The service is provided by physicians in the
  same three specialties as in Example 1.
• 2. Specialty Risk Factor Service
• A 1.0 30
• B 2.0 20
• C 3.0 10

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Example 2

• Calculation
• (30x1.0) (20x2.0) (10x3.0)
• --------------------------------------- 1.667
• 60
• Adjust for Risk of Service (Work RVU)

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Concerns About the Methodology

• Are premiums (versus claim payment data) the best
  indicator of cost
• Crosswalk from 20 specialties (40 specialties?)
  versus actual premium data for all 90
  specialties
• Crosswalk of 34 specialties in calculating risk
  factor

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Concerns About Methodology

• Surgical/Non-Surgical Distinction (OB/GYN and
  Cardiology)
• Work RVUs may not be the best proxy for
  malpractice risk
• Distribution of specialties for new CPT codes

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Concerns About the Methodolgy

• Weight averaging rewards the lowest risk
  specialties
• RVUs are skewed toward the TC for radiology
  diagnostic tests
• Premium Data
• Old data (1993-1995)
• Risk class data from a single carrier (St. Paul)

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Impact of Changes in Assumptions

• 1. Percentage of RVU attributable to malpractice
  premium.
• 2. Example
• 20 change in work RVU 8-11 change in
  payment
• 20 change in malpractice RVU 0.6 change in
  payment