The Medicare system will be tightening the reins on surgery next year.
Under the 1997 Medicare payment rule published last week by HCFA, surgeons as a group must reduce utilization by 3.7% next year or face a reduction in their inflation adjustments in 1999.
The number and complexity of other nonsurgical services also must shrink slightly, by 0.5%, or HCFA will reduce 1999 fee adjustments, or "updates," for doctors performing such procedures. But primary-care utilization in 1997 can increase by 4.5% before HCFA will pare 1999 fee updates.
While the Medicare payment system last year also mandated a reduction in the number and complexity of surgical services, the so-called "volume performance standard" for surgery in 1997 is the steepest such drop in the history of the physician fee schedule. That drop also is twice as big as HCFA originally called for in a proposed rule in August. The volume performance standard is a yearly target for utilization growth.
In issuing the fee schedule regulation for 1997, HCFA is complying with a default formula contained in the 1989 law that created the physician fee schedule.
That formula uses utilization and inflation factors to set fee updates in those years in which Congress does not pass a law to set Medicare physician fees.
That system also uses enrollment growth, past utilization patterns and other factors to set the volume performance standard.
When physicians keep the number and complexity in any of three categories-surgery, primary care and other nonsurgical-below the volume performance standard, the payment system rewards that category by increasing its fee update two years later. When they exceed the standard, the system punishes them with lower fees.
In 1992 and 1993, surgeons reduced the number and complexity of their services by 4.8% and 4.4%, respectively, yielding huge fee increases of 10% in 1994 and 12.2% in 1995.
Many experts have contended that surgeons were able to hold down utilization in those years to a 7% reduction in the number of cataract lens replacement surgeries-representing 3.7% of all 1993 Medicare expenditures and 18.9% of Medicare surgical spending-because the pool of beneficiaries needing such a procedure shrank.
But because future performance standards are based on utilization growth in the previous five years, the reduction in the number and complexity of surgeries in 1992 and 1993 led to the tough 1997 standard.
The final rule also sets the 1997 physician payment base known as the "conversion factor." The surgical conversion factor will rise to $40.96 from $40.80, the primary-care conversion factor will rise to $35.77 from $35.42 and the other nonsurgical conversion factor will drop to $33.85 from $34.63.
The conversion factor is multiplied by a numerical value assigned to each service performed for a Medicare beneficiary based on that service's complexity.
Because of an additional comprehensive revision of those numerical values that takes effect Jan. 1, HCFA said the average fee for primary-care services will rise 5% in 1997, while the average fees for surgery will decrease 1.6% and fees for other nonsurgical services will decrease 1.8%.