What’s all the RUCkus? Why do Medicare payments go up and down?

Many of you may be wondering why payment for skin testing (CPT Code 95004) is slated to be cut by 21% next year while other allergy codes stay the same (or even go up a little) and why the Advocacy Council couldn’t prevent this from happening. The short answer is that without the hard work of the Advocacy Council and other allergy specialty organizations over several years, these cuts could have been much deeper.   

The Centers for Medicare and Medicaid Services (CMS) is required, by law, to review and, if appropriate, cut payment for “potentially misvalued codes.”  Every year CMS publishes a list of codes it believes should be reviewed using a number of screens including high volume or sharp increases in utilization. In recent years, both allergen immunotherapy (95165) and percutaneous (prick) skin testing (95004) have been on the list because of their high volume. We dealt with 95165 in 2016, and our efforts resulted in no loss of value for allergen immunotherapy – in fact we got a small increase. We also secured a delay in addressing 95004 for one year – otherwise these cuts might have taken effect in 2017.  

When the percutaneous (prick) skin testing code was last looked at by CMS in 2002, an assumption was made that each test involved the use of 1 ml of mite antigen at a cost of $4.10 and reimbursement reflected this. We knew this would be scrutinized, and we confirmed that allergists do not use 1 ml of antigen per skin test. We recommended 0.25 ml of antigen. At the same time, we also thought the use of mite antigen as a proxy was incorrect because skin tests involve a wide variety of different antigens. Based on cost information received from allergists, we recommended an average cost of $8.44 per ml based on the entire spectrum of antigens used in skin testing. CMS proposes to accept this recommendation for 2018. So, while the cost of the antigen more than doubled, the quantity went down resulting in a net decrease.  To further mitigate payment reductions, we were able to include the cost of positive and negative controls. These had not been counted before.

You may have also noticed that beginning in 2017, reimbursement for venom immunotherapy (CPT Codes 95145-95149) increased substantially. This is because, after hearing from many members about the spike in venom costs, we went to CMS with proof and asked them to increase reimbursement for these services. Reimbursement went up by between 6 percent and 31%.

Keep reading if you are interested in more details on the process.

How does Medicare Determine Physician Payments? CMS determines how much to pay physicians based on a relative value unit (RVU) fee schedule.  Each code is assigned a certain number of RVUs which are multiplied by a conversion factor dollar amount and a geographic index to determine how much an individual physician is paid. CMS uses a complicated formula to calculate RVUs that involves the time and intensity of physician work as well as practice overhead. Practice overhead includes direct costs (clinical staff time; clinical equipment; and supplies) and an allocation for indirect overhead. If the direct cost amounts CMS uses in its formula increase then reimbursement goes up; if those costs go down, reimbursement decreases.  

What is the revaluation process? CMS does not do its own revaluation work. Rather it delegates this work to the AMA’s Relative Value Update Committee (RUC) but retains authority to accept or reject the RUC’s work.

What is the RUC? The RUC consists of 31 members, 21 of whom are appointed by national medical specialty societies. This year, for the first time in many years, an allergist/immunologist is on the RUC. In addition, all the national specialty societies have advisors to the RUC. They don’t sit on the committee, but they represent their specialty when issues come before the RUC.

What role do the College and Advocacy Council have in the revaluation? When a code is referred to the RUC, the first thing that happens is that specialties are required to indicate whether they have an interest in the code’s revaluation. Those specialties that indicate an interest must work together to develop recommendations to send to the RUC. This often requires a survey to evaluate the time and intensity of physician work as well as what equipment, supplies, and clinical staff time is involved. After recommendations are submitted to the RUC, the specialty representatives must present and defend the recommendations in-person at the RUC meeting.

In 2015 the College, through its Advocacy Council, worked jointly with the AAAAI and the American Academy of Otolaryngic Allergy to develop recommendations for 95165. These recommendations were accepted by the RUC and ultimately by CMS and resulted in a slight increase (2%) in the valuation of allergy immunotherapy in 2017. An increase in valuation is considered unusual since CMS’ goal in this process is to reduce payments.

Why does the fee schedule change from year to year? Sometimes reimbursement seems to vary from one year to the next with no apparent reason. This is partly due to budget neutrality which requires that when some services go up, others must go down. Ultimately the system is supposed to balance out but this can cause unexplained dips or upticks in reimbursement from year to year. Budget neutrality is primarily maintained through adjustments to the conversion factor.  

Phase-in of reductions: To protect physicians from payment reductions, Congress mandates that if, as a result of revaluation, payment decreases by more than 20%, then the reductions must be phased in over two years. This should mean that the 21% payment cut will not have to be absorbed entirely in 2018.

Billing, Coding & Payments