Navigating a Hazardous Road

Navigating a Hazardous Road

Norman A. Cohen MD


In previous chapters I mentioned a number of ways in which the Medicare program handles anesthesia differently from many other payers. For example, Medicare does not allow for payment of anesthesia modifiers, such as physical status or extremes of age. Medicare insures a substantial percentage of patients for most anesthesia practices, usually between 25% and 50%; therefore, understanding this payer well is essential to good practice management.

In the following discussion, we will look more deeply into Medicare payments for anesthesia care under the Resource-Based Relative Value System (RBRVS), the Correct Coding Initiative edit process, and a number of important Medicare payment policies.


Medicare pays for anesthesia services under the American Medical Association (AMA) Current Procedural Terminology (CPT)* codes 00100 to 01999, using a version of the anesthesia base + time system described previously. Medicare maintains a list of base unit values for each anesthesia service. This list is similar but not identical to the American Society of Anesthesiologists (ASA) listing of base unit values. To determine time units, Medicare uses the actual anesthesia time to the nearest minute divided by 15 minutes per unit. Medicare adds base and the calculated time units together and multiplies the total by the conversion factor to determine the allowed payment amount.

For example, a Medicare beneficiary undergoes a total hip replacement (CPT 01214, 8 base units) lasting 124 minutes. This makes the time units equal to 124/15 = 8.3 and the total units for the case 8 + 8.3 = 16.3. The allowed payment for the service is then $17.77 × 16.3 = $289.65 (in 2006).

Medicare publishes a national conversion factor, but federal law mandates that the agency adjust payments geographically for all Part B services (not just anesthesia) to reflect the regional cost variation for payroll, equipment, supplies, etc. Medicare calculates geographic practice cost indices (GPCI) for work, practice expense, and professional liability
insurance for each defined region. Medicare listed 91 specific geographic regions in 2006, and 93 in 2007. For example, in Oregon, where I practice, Medicare lists two regions—Portland, and the rest of Oregon. So Portland ($17.07/unit) ends up having a different anesthesia conversion factor than the rest of the state ($16.73), because the two areas have different GPCI values. Each year, the ASA posts the GPCI-adjusted conversion factors on the ASA website. For 2006, one can find the posting at


Each year since the inception of the RBRVS, Medicare has updated both the anesthesia and the RBRVS conversion factors. When setting the initial conversion factor, Medicare used some of the Harvard RBRVS research data (see previous chapter) to link the work of anesthesia work to the work of other medical services. The Centers for Medicare and Medicaid Services (CMS) also used historical charge data to set the value of the practice expense and professional liability insurance (PLI) components for anesthesia payments. The ASA has long disagreed with Medicare’s initial method of setting the anesthesia work relationship, and was successful in getting a large update with the first and a very small update in the second Five Year Review of physician work. The ASA is still fighting this battle at the time of this writing.

A number of factors have played a role in influencing the annual updates. We have previously learned about the tools Congress has mandated to rein in growth in the Medicare program. Unless Congress stipulates otherwise, Medicare must apply the sustainable growth rate formula (SGR) as part of the annual update. For the past several years, the SGR update would have reduced the conversion factor by >4% a year; however, Congress has acted several times to delay those cuts. Unfortunately, Congress has not yet acted to replace the SGR with something better.

Other factors that have affected the conversion factor updates are required budget neutrality adjustments and significant changes in the practice expense and professional liability insurance methodologies. With only a few exceptions, whenever a change in payment for services exceeds $20 million, Medicare must apply a budget neutrality adjustment. The Five Year Reviews of physician work and some changes in new and revised codes have exceeded this threshold, resulting in budget neutrality adjustments. After the first Five Year Review, the budget neutrality adjustment led to >5% decrease in the conversion factors. For all intents and purposes, the Part B payment pool is of fixed size, so changes in work, practice expense (PE) and Professional Liability Insurance (PLI) values lead just to a redistribution of the pool, not any overall increase.

Because some updates apply only to a single component of the RBRVS (work, PE, and PLI) and because an anesthesia service handles these components through the conversion factor and not through procedure-specific values, Medicare has applied these sorts of updates to the relevant “share” of the conversion factor. The next section describes this share concept in greater detail.


In the section on RBRVS, we learned that each (nonanesthesia) service in that payment system has values assigned for work, PE, and PLI. The RBRVS codes also may have different values depending on where the physician performs the service.

The Medicare anesthesia payment system does not use fixed procedure-trspecific values; however, the law requires Medicare to consider the values for these three components in physician payments. To address this requirement, Medicare allocates anesthesia work, PE, and PLI through “shares” of the conversion factor. In 2006, the national average Medicare anesthesia conversion factor was $17.77/unit, and work comprised 78%, PE 13%, and PLI 9% of each anesthesia relative value unit. In dollar terms, that means that, in the Medicare program, each anesthesia unit equals $13.86 for work, $2.31 for PE, and $1.60 for PLI.

In the RBRVS, payments often differ depending on where the service takes place. Medicare has the option to assign different PE values for a service performed in the hospital and the office. Unfortunately, in anesthesia care, payments are the same for hospital and office-based anesthesia care, and that value is always at the hospital (facility) rate. Because the anesthesia payment system uses a global expression of practice expense through the PE share of the conversion factor, there is no simple way for Medicare to allocate the expenses of office-based anesthesia care accurately. So Medicare doesn’t! At the time of this writing, ASA has begun to explore methods to fix this problem and hopefully will have a solution in place in the next year or two.


The CMS maintains a comprehensive website that provides a great deal of information about the Medicare program. The CMS also hosts an anesthesia-specific page with links to very useful information: www.cms. This page also includes links to the Medicare Learning Network, a repository of articles explaining many aspects of the program, and to local carrier websites. Medicare also hosts a number of email subscription lists that provide periodic updates documenting program changes.

The Medicare contractors that process Medicare claims for various regions within the United States also host websites to provide carrier-specific information. These are the places to go to learn about Local Carrier Determinations (LCD), which are policies describing coverage requirements. We will talk more about LCDs later.

For physicians who are new to practice, I highly recommend requesting a copy of the Medicare Physician Guide: A Resource for Residents, Practicing Physicians, and Other Health Care Professionals. You can order this from the Medicare site ( in either a printed or CD-ROM form. Medicare does not charge for this document. You should receive a copy within a few weeks after ordering it.


When anesthesiologists perform any covered nonanesthesia service for a Medicare beneficiary, the agency makes most payments using the RBRVS system. The formula requires knowing the national RBRVS conversion factor; your regional work, PE, and PLI GPCIs; and the work, PE, and PLI RVUs for the service. The formula is

CF × (RVUw × GPCIw + RVUpe × GPCIpe + RVUpli × GPCIpli)


CF = national CF

RVUw, RVUpe, RVUpli = work, practice expense, and pli RVUs for the specific service

GPCIw, GPCIpe, GPCIpli = the locale-specific geographic practice cost indices

Medicare publishes these values each year and provides an online tool to look up the relevant information at

Beginning in 2007, the CMS, over the objection of almost all physicians, decided to address the budget neutrality changes from the third Five Year Review through a “budget neutrality adjustor” applied to the work component only, rather than making an adjustment to the RBRVS conversion factor; therefore the formula listed above has changed slightly, to

CF × (RVUw × GPCIw × BNA + RVUpe × GPCIpe + RVUpli × GPCIpli)

where BNA is the budget neutrality adjustor.

For 2007, the BNA will be 0.8994 based on published information available in the 2007 fee schedule final rule (, published in November 2006. I can guarantee that reading Medicare proposed and final rule publications will make you a more rested person, because these publications are terrific soporifics.


Quoting Medicare’s description of the National Correct Coding Initiative (hereafter referred to as CCI), the purpose of the CCI program is to “promote national correct coding methodologies and to control improper coding leading to inappropriate payment in Part B claims.” Furthermore, “the purpose of the CCI edits is to ensure the most comprehensive groups of codes are billed rather than the component parts. Additionally, CCI edits check for mutually exclusive code pairs. These edits were implemented to ensure that only appropriate codes are grouped and priced” (

We have already discussed the concept of the global period for RBRVS services. The global concept implies that a given service may encompass a combination of other services. For example, the full diagnostic trans-esophageal echocardiography (TEE) service code 93312, which we discussed previously, includes the services in code 93313 (probe placement) and code 93314 (image acquisition, interpretation, and report). CCI edits prevent the same physician from reporting code 93312 with either code 93313 or 93314 on the same day.

Medicare considers a number of CPT services to be integral to the anesthesia care. Examples include but are not limited to placement of an intravenous catheter (36000), venipuncture (36410), and intravenous infusion/injection (90760 to 90768, 90774 to 90775). In the rare circumstance that the anesthesiologist performs these services on the same day, but not as part of the anesthetic, he or she can report these services with modifier 59, indicating a “distinct procedural service.” For example, you care for a patient with a history of drug abuse and poor vascular access. After the patient returns to the floor from the PACU, you get a call that the patient’s intravenous (IV) catheter has infiltrated and your expertise is needed to restart the IV. You do so and report the service (36000) with modifier 59. You should document in the medical record the placement of the catheter, with date and time of placement, which will support that the service occurred after the conclusion of the anesthetic.

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Jul 1, 2016 | Posted by in ANESTHESIA | Comments Off on Navigating a Hazardous Road

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