How Things Happen

The Medicare Summary Notice and Provider Reimbursement

“Curmudge, don’t you think a better title would be How Things Work?”

“Not really, Jaded Julie. Saying that something works implies a favorable judgment regarding the performance of the subject, and I don’t think that we are qualified to do that.”

“But doesn‘t a ‘happening’ suggest a natural occurrence, like a tornado or a snowstorm? Isn’t provider reimbursement completely anthropogenic?”

“It is indeed man-made, Julie, but instead of semantics, let’s tackle our subject.”

“How did you get onto this topic, anyway?”

“A friend asked me to explain some of the numbers on her Medicare Summary Notice, which is sort of like an insurance company’s Explanation of Benefits. If you wonder why we are limiting this discussion to Medicare, it’s because most of my friends are my contemporaries and all of my contemporaries are either on Medicare or deceased.”

“Let’s get with it, Curmudge. I believe we must start by learning some abbreviations.”

“RVUs (Relative Value Units) are used to determine how much medical providers should be paid. Components of RVUs include physician work (time, skill, training), practice expense, and malpractice insurance expense. They are adjusted by a factor that reflects the different costs of practicing medicine across the country and are then multiplied by a dollars-per-RVU conversion factor.”

“I know the next one; that’s the CPT (Current Procedure Terminology) code. There is a CPT code for each medical, surgical, and diagnostic service, and each CPT has an associated RVU. That’s the origin of the ‘Medicare-Approved’ values next to each CPT code on your Medicare Summary Notice. The RVUs have a lot of bearing on provider compensation, Curmudge. Are they handed down on stone tablets?”

“They might as well be. They are determined in meetings of a committee representing all medical specialties. I have read of these meetings described as the proverbial ‘smoke-filled room’ but without smoke.”

“And finally we have ICD (International Classification of Diseases), a system of diagnosis codes. This is a medical classification list for the coding of diseases, signs and symptoms, abnormal findings, complaints, social circumstances and external causes of injury or diseases, as maintained by the World Health Organization (WHO). We are now using Revision 9 (ICD-9), but Revision 10 (ICD-10) must be employed by October 1, 2013. The new code set contains more codes than ICD-9, including many for very specific occurrences.”

“Do you suppose that they have one for getting crushed in a buffalo stampede in Buffalo, New York?”

“It’s interesting, Curmudge, that Medicare will reject a provider’s claim if the procedure code is not appropriate for the diagnosis code. For example, an x-ray of the wrist will be rejected if the patient is diagnosed with glaucoma. It is certainly critical for a provider to have proficient back-office support.”

“So back to the Medicare Summary Notice, the most common one (Part B) showing claims from individual providers. You may note that the ‘Medicare-Approved’ amount may be a lot less than the ‘Amount Charged’ (by the provider). Don’t worry; you’re usually not responsible for the difference. The next column is ‘Medicare Paid Provider’. It is typically 80% of the ‘Medicare-Approved’ amount. The remaining 20%, in the ‘You May Be Billed’ column, is the total that you plus your secondary (medi-gap) insurance are expected to pay. On occasion, my final out-of-pocket cost has been around 1% of the amount charged. Mrs. Curmudgeon’s hospital bill was $4,000, but I ended up paying only $40. Actually, I thought she was worth more than that.”

“Curmudge, despite all of the RVUs, codes, and correction factors, it just sounds as if providers are paid on a piecework basis. Did you ever have a job in which you were paid for piecework?”

“I did that back in the 1940’s when I was a child. It was called berry pickin’. We kids would stand on a designated corner, and a farmer would come by to pick us up and take us to his berry field. I would select a row that appeared to have lots of berries (I think they were strawberries), grab a basket, and fill it as fast as I could. Then another basket and then another. It was hard stoop-labor, and we were paid only a few pennies per basket. To this day, whenever I buy berries my back hurts.”

“Do you see any parallels between your experience and provider compensation?”

“Well, I suppose choosing a medical specialty might relate to selecting a row with lots of berries. (Some day we’ll cogitate a bit on why docs select specialties.) And my filling lots of boxes of berries might correlate with a provider’s racking up a lot of RVUs.”

“Pretty interesting, Curmudge. I hope your friend who inspired this topic wasn’t looking for a short answer.”

Affinity’s Kaizen Curmudgeon