Medicare 101: Examine 2009 update for effect on practice

January 1, 2009

"In July 2008, we were elated to learn that Congress had reversed the 10.6 percent cut in the Medicare conversion factor scheduled for the second half of that year. Even better, Congress added a 1.1 percent increase - in lieu of the mandated 15.1 percent cut - for 2009 in the Medicare Improvement for Patients and Providers Act of 2008 (MIPPA). "

Keypoints:

Although MIPPA provided us with some knowledge about the coming year, the 2009 Medicare rates were announced on Oct. 31, 2008. As usual, it's not as simple as assuming that your revenue from Medicare will be up by 1.1 percent next year.

Budget neutrality

At the urging of the American Medical Association (AMA)/Specialty Society RVS Update Committee (RUC), the AMA and nearly all medical specialties, CMS will retain the integrity of the work RVU and apply any adjustments to the conversion factor instead.

For dermatology practices that use RVUs for income distribution plans or productivity measures, this is a welcome change. However, the reason that the budget neutrality adjustment was applied in the first place still remains - budget neutrality is a necessity.

So, even though there is a scheduled 1.1 percent increase, the conversion factor was lowered to maintain budget neutrality.

Conversion factor

In 2009, the conversion factor will fall by 5.3 percent, from $38.09 to $36.07. (Anesthesia's separate conversion factor will be $20.91).

Here's the math:

Payment formula

The payment formula for 2009 is: [(RVU work x GPCI work) + (RVU practice expense x GPCI practice expense) + (RVU malpractice x GPCI malpractice)] x CF. [RVU = relative value unit; GPCI = geographic practice cost index; CF = conversion factor]

After all is said and done, dermatologists will see a 1 percent increase, according to CMS projections using claims history. However, the impact may be different on your practice, because there are geographical differences in payment as defined by the geographic practice cost index (GPCI).

Credentialing rules

Perhaps the most significant change for this year will be in credentialing. CMS ruled that the effective date of billing privileges for physicians and nonphysician providers (NPP) is the later of:

1. the filing date of the Medicare enrollment application that was subsequently approved by a fee-for-service (FFS) contractor; or

2. the date that the physician, NPP organization or individual practitioner first furnished services at a new practice location.