Chiropractic Gets Practice Expense Increase in 1998

Medicare Reimbursement Rates to Increase Again?

By Editorial Staff
The Health Care Financing Administration (HCFA) released new resource-based practice expense figures for Medicare Relative Value Units (RVUs). According to the June 18, 1997 Federal Register, the chiropractic profession gained a significant increase in the practice expense portion of the RVUs used to compute medicare payment.

The 1997 CPT codes (please see "CPT Includes Chiropractic" in the November 18, 1996 issue) include four new codes for "Chiropractic Manipulative Treatment" (CMT):

98940 - spinal manipulation, one to two regions
98941 - spinal manipulation, three to four regions
98942 - spinal manipulation, five regions
98943 - extraspinal, one or more regions
These codes are given relative value units that act as multipliers for the HCFA conversion factors published each year.

The formula for the RVUs is:

Physician Work RVU + Practice Expense RVU + Malpractice RVU = Total RVU

The current practice expense portion is .29 for all four CMT codes, but this figure fails to recognize the cost of operating a chiropractic practice. The new practice expense figures are much higher:

98940 - .40
98941 - .46
98942 - .50
98943 - .39
This increases the total relative value units for the chiropractic codes as follows:

Physician Work + Practice Expense 1977 + Malpractice = Total RVU

98940 .45 + .40 + .01 = .86
98941 .65 + .46 + .01 = 1.12
98942 .87 + .50 + .01 = 1.38
98943 .40 + .39 + .01 = .80


Previous Increase Percentage
.75 .11 14.7%
.95 .17 17.9%
1.17 .21 17.9%
.70 .10 14.3%

To arrive at the medicare reimbursement rate, these RVUs are multiplied by the HCFA conversion factor. The current conversion system recognized four different factors:

Conversion Factor 1997 Value
Surgery $40.96
Primary Care $35.77
Other Services $33.85
Anesthesiology $16.68

The higher CMT reimbursement figures are unfortunately being somewhat offset by efforts to balance the federal budget. Over the past year, HCFA has reduced all four conversion factors. The "Other Services" conversion factor (which applies to chiropractic) was reduced from $34.63 (1996 value) to the present $33.85. Even with this reduction, DCs would still receive $2.84-$6.19 more per visit using the lower 1997 conversion factors.

The changes in the patient expense component is presently scheduled to occur on January 1, 1998. But the surgeon-dominated American Medical Association (AMA) is not happy. Congress has already begun to respond to the AMA's pressure and may ultimately delay implementation until 1999 with a three-year phase-in period. According to the Federal Register, the new practice expense figures will affect each specialty differently:

M.D./D.O. Physicians

Specialty Practice Expense Increase/Decrease
Dermatology +18
Rheumatology +15
Family Practice +12
Hematology Oncology +11
Radiation Oncology +10
General Practice +9
Otolaryngology +7
Anesthesiology +4
Other Physician* +4
Obstetrics/Gynecology +4
Psychiatry +3
Internal Medicine +3
Urology +1
Pathology +1
Emergency Medicine -2
Neurology -3
Clinics -3
Plastic Surgery -3
Pulmonary -6
General Surgery -9
Radiology -9
Orthopedic Surgery -11
Ophthalmology -11
Nephrology -13
Vascular Surgery -17
Cardiology -17
Gastroenterology -20
Neurosurgery -21
Thoracic Surgery -28
Cardiac Surgery -32


Podiatry +24
Optometry +15
Chiropractic +14
Suppliers +14

Those specialties that are office-oriented, like chiropractic, are seeing increases to their practice expense RVUs. Those that are hospital based (e.g., surgeons) are experiencing sharp declines. In a letter to U.S. House Speaker Newt Gingrich, AMA Executive Vice President P. John Seward, MD, expressed concern:

"The cuts HCFA projected in January are so extreme that would nearly eliminate practice cost reimbursement for some procedures and specialties. Many inpatient surgical procedures and two specialties could suffer cuts of more than 80% in their practice expense values, and at least 40% in their total payments. Under HCFA's projections, payments for many surgical procedures would fall below Medicaid levels. This, there is good reason to fear that if Medicare makes deep cuts in its payments for complex procedures, doctors performing these services may find that they can no longer afford to accept Medicare patients."
On June 19, 1997, the Senate Subcommittee on Labor, Health and Human Services, and Education held a hearing on the proposed new practice expense changes. While the AMA vigorously requested a delay in their implementation, ACA Vice President of Research Christine Goertz, DC, spoke in favor of the new rates: "Under the new system proposed by the Health Care Financing Administration, practice expense will be more fairly allocated to those who primarily provide office-based services and, therefore, are financially responsible for overhead expenses."

To obtain information on physician practice expenses, HCFA commissioned a survey of 3,000 physicians. But the response rate was poor, apparently because of the complexity of the survey instrument. The AMA has suggested that HCFA did not obtain sufficient information to generate the revised practice expense RVUs for MDs, and is requesting a one year delay before the starting date of the new figures. HCFA on the other hand believes that their Clinical Practice Expense Panel (CPEP) had more than ample data to establish the practice expense figures. Chiropractic's first representative on CPEP is Dr. Donald D. Ross of Huntsville Alabama, who as appointed just two years ago.

Another issue at hand is the Clinton Administration's 1998 budget proposal for a single Medicare conversion factor. The current average of the first three conversion factors (not including anesthesiology which would probably still remain a separate factor) is $36.86. Should the proposed single conversion factor be implemented at the 1997 average, chiropractic and "other services" would be experience a $3.01 factor increase (8.9%).

The Relative Value Update Committee (RVUC) will be reviewing the single factor proposal and making recommendations to HCFA. Chiropractic is represented by Dr. Jerilynn Kaibel, the first DC ever to serve on the committee.

All of this may be academic to most DCs because they receive (on average) only 8% of their income from Medicare patients. But with all of the other changes that health care reform is bringing, these new medicare reimbursement rates may become increasingly attractive.

Even if some chiropractors continue to see few Medicare patients, Medicare values affect reimbursement in a number of states.

Hawaii, for example, reimburses workers' compensation, personal injury and private insurance at a rate of 110% of Medicare reimbursement. Many private plans use Medicare fees as a guide for their fee schedule.

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