Medicare’s revaluation of gastrointestinal endoscopic procedures: Implications for academic and community-based practices

Since 2008, CMS has used a nearly identical mechanism to pay for facility services provided in ASCs. Services are classified using the same APCs and same relative weights as the OPPS. The difference is that the ASC CF is less than the OPPS CF (the 2016 ASC CF is 58% of the OPPS CF), translating into lower dollar payments for ASC services.⁵ Of note, in 2008 ASC rates were cut significantly when CMS adopted this methodology for determining ASC facility fees (previously, ASC rates were approximately 85% of HOPD rates).

CMS reviews the APCs and their relative weights annually, and may adjust how specific services are classified and how APCs are weighed. Since 2006, HOPD rates for the 10 common procedures listed in Table 1 have increased by 26%-93% real (i.e., Consumer Price Index–adjusted) dollars. Meanwhile, given the steep 2008 ASC fee cuts the 2016 ASC fees are still significantly lower than they were 1 decade ago, especially when accounting for inflation. In fact, ASC fees for the most common procedures have decreased by 20% in real dollars (Supplementary Tables 1 and 2 at https://dx.doi.org/10.1016/j.cgh.2016.03.032).

Putting these changes in context

It is important to consider these changes within a broader context. First, the full economic impact of these changes on an individual gastroenterology practice depends on where it performs its services and whether it collects associated facility fees, and fees for anesthesia and pathology services. Second, the Medicare population is growing by more than 10,000 people each day.⁶ Third, beyond Medicare, most commercial insurers peg their reimbursement rates to a percentage of the Medicare Fee Schedule. Although the details of specific contracts vary, gastroenterologists should expect to see commercial rates move in a similar direction within the next 1–2 years. Fourth, in the 2016 Fee Schedule CMS described its future intention to remove the value of moderate sedation from all GI procedures valued with moderate sedation inherent to the procedure. The more that moderate sedation is ultimately valued, the less that endoscopic procedures will be valued. Consequently, gastroenterologists who rely on anesthesiology professionals to sedate their patients will receive less revenue per procedure. Finally, the 2015 Medicare Access and Children’s Health Insurance Program Reauthorization Act (MACRA) links a higher proportion of these dwindling fee-for-service payments to performance. Starting in 2018, physicians who elect to remain on a fee-for-service tract will receive a composite Merit-Based Incentive Payment System (MIPS) score that will translate into either performance bonuses or penalties (as much as 4% in 2019 and going up to 9% in 2022). Alternatively, providers who “sufficiently” participate in “two-sided” (i.e., risk-bearing) alternative payment models (e.g., bundled payments and accountable care organizations) instead of fee-for-service payments will receive 5% across-the-board bonuses. In sum, it is possible that fee-for-service payments may eventually become so unattractive that many gastroenterologists decide (or hope) to move to alternative payment models that combine both professional and facility fees, such as the CMS now-mandatory Comprehensive Care for Joint Replacement (CJR) program.⁷

Impact on academic practices

For most academic gastroenterology practices, clinical revenue far exceeds all other sources of funding, including research grants, teaching support, philanthropy, and partnerships with industry. Although a select few academic GI divisions have managed to build their own ASCs to share facility fees, for most academic practices, clinical revenue comes solely from the professional fees for endoscopic procedures and, less so, from office and hospital-based consultations and management of established patients.⁸ Thus, steep cuts to professional fees for endoscopic procedures, the leading source of overall revenue, will severely strain most academic gastroenterology practices.

In one of our practices (SDD), the 10 common procedures listed in Table 1 accounted for 27% of total direct clinical revenue over the past year. Roughly one-fourth of our patients are Medicare beneficiaries. Assuming no change in volume, the 2016 fee schedule cuts will amount to a 0.9% drop in direct clinical revenue. If all other payers follow with identical cuts, then direct clinical revenue will drop by 3.7%. Although our practice is fortunate to have other well-developed clinical and nonclinical revenue streams, these cuts are not insignificant.

How can academic practices continue to provide accessible clinical care in the face of these fee cuts? It can help to first consider how revenue is distributed for a Medicare beneficiary who undergoes a diagnostic colonoscopy with biopsy to evaluate unexplained diarrhea in an academic medical center’s hospital-based facility. The academic gastroenterologist receives $212 (CPT 45380). From this $212, the academic gastroenterology practice must pay assessments to various entities (sometimes including the school of medicine, department of medicine, and faculty practice plan) that may amount to more than 30% of total revenue. The roughly $150 that remains is used to pay faculty member salaries (the median salary for an academic gastroenterologist is $300,009) and benefits (estimated at $74,000/year); MP insurance (estimated at $2,275/year, higher in certain parts of the United States); and overhead for support staff, supplies, and other expenses (estimated at $50,550/year). Thus, a purely clinical academic gastroenterologist who is paid at the Medical Group Management Association (MGMA) median must generate $610,179 in preassessment revenue. If this hypothetical academic gastroenterologist solely treated Medicare beneficiaries, at $35.82 per RVU he or she would need to generate a staggering 17,035 RVUs per year, an amount that far exceeds the MGMA median (6,445) and 90th percentile (10,991) for academic gastroenterologists. Of course, real-world academic gastroenterologists also treat commercially insured patients and many spend time on nonclinical activities (although clinical income typically supports time devoted to research and teaching, not vice versa). Still, this example highlights a clear fact: Academic gastroenterology practices take a major financial loss delivering services to Medicare beneficiaries. Meanwhile, the HOPD charges more than $2,200 for the procedure. Although it receives $752 facility fee from Medicare (Disproportionate Share Hospitals and NCI Cancer Centers receive more), with a cost-to-charge ratio of roughly 0.2, revenue still clearly exceeds expenses. Finally, the anesthesia professional (if any) receives roughly $198 (CPT 00810) and the pathologist $74 (CPT 88305).