Beginning this month, Medicare payments to physicians will be based on a single payment rate, or conversion factor. The change, along with updates to procedure charges, means most primary-care physicians will see an increase in Medicare payments, but many specialists will see a decrease.
Currently, Medicare assigns a numerical value to each medical procedure known as the resource-based relative value scale, and then multiplies that by one of three dollar amounts: one for primary-care services, one for surgical services and one for all other services. The move to a single rate is designed to reduce fees for overvalued procedures and narrow the gap between primary-care and specialists' reimbursements (See related story, p. 34).
The single conversion factor, enacted in the Balanced Budget Act of 1997, is based on the primary-care conversion factor and is $36.69. Medicare payments for primary-care services will increase 2.6%, and nonsurgical service payments will increase by 8%, but surgical service payments will drop 10.4%. Without the single conversion factor, annual updates would have resulted in a 7.5% increase in the primary-care conversion rate, a 2.5% increase in the surgical rate and a 1.9% increase in the rate for all other services.
The RBRVS formula is designed to control Medicare expenditures on physician services, which are estimated at $32.5 billion for fiscal 1997.
Another change this year provides that if future changes to the RBRVS cause physician expenditures to increase or decrease by more than $20 million a year, a new budget neutrality adjustment will be worked into the conversion factor to rein in expenditures.
The most significant relative-value changes this year affect hospital-based services. About $330 million will be redistributed from hospital-based to office-based codes.