Orthopaedists can breathe a collective sigh of relief about a bad situation that would have been much worse without cooperative action by the AAOS and orthopaedic specialty societies.

The big story: Hip and knee

In a dramatic reversal of its original proposal, the Centers for Medicare and Medicaid Services (CMS) decided not to slash, by double-digit percentages, Medicare fees for several top orthopaedic procedures.

The reversal by CMS followed intense lobbying efforts by AAOS officials and leaders of the American Association of Hip and Knee Surgeons (AAHKS). This decision, along with the last-minute Congressional action that stopped another 5 percent fee reduction, eliminated most of the huge payment cuts originally slated for these procedures, as shown in Table 1.

If CMS had cut the fees for these procedures by the percentages listed in the far right column, the result would have been an approximately $131 million decrease in Medicare spending on these procedures annually. Instead, the annual decrease will be about $23 million. Most of the $108 million in annual savings is due to the combined efforts of the AAOS and AAHKS in dealing with CMS.

CMS targeted these procedures for potential payment changes under the Medicare “Five-Year Review,” which ended this past November. During this review, CMS re- examined the values of all services and procedures that it thought may have been “misvalued” under the Medicare Resource-based Relative Values Scale (RBRVS) payment system. CMS also looked at all medical services and procedures that specialty societies, including orthopaedic societies, identified as potentially misvalued.

The American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC), which is the main advisory body to CMS on physician payments, managed the Five-Year Review. The RUC has members from all major medical associations, including the AAOS.

Bernard A. Pfeifer, MD, who is the RUC member from the AAOS, was deeply involved in all Five-Year Review activities. R. Dale Blasier, MD, who is the AAOS’ official “advisor” to the RUC representing orthopaedics, was also involved in the Five-Year Review. Drs. Pfeifer and Blasier worked on the hip and knee procedures with Carlos J. Lavernia, MD, AAHKS Advisor to the RUC, and Brian S. Parsley, MD, Chair of AAHKS’ Health Policy Committee. During critical negotiations with CMS during the summer and fall, they were joined by AAOS President Richard F. Kyle, MD, AAHKS President William J. Hozack, MD and AAOS Council on Advocacy Chair David A. Halsey, MD.

Spine payments

In another Five-Year Review battle, Charles A. Mick, MD, and Christopher P. Kauffman, MD, from the North American Spine Society (NASS), with AAOS support, persuaded CMS not to implement a proposed payment cut for CPT code 63048, Removal Spinal Lamina (Add On). If CMS had followed its original proposal, payments for this procedure would have been cut by almost 12 percent, or a total of $4 million annually. Instead, payments will decrease by about 3.8 percent, or a total of $1.3 million annually.

Payments raised

The Five-Year Review also resulted in payment increases for several procedures that otherwise would have had payment cuts, as shown in Table 2.

These increases were due to the combined efforts of the AAOS and several musculoskeletal specialty societies, including AAHKS, the American Orthopaedic Foot and Ankle Society, American Shoulder and Elbow Surgeons, American Society for Surgery of the Hand and the Orthopaedic Trauma Association.

CMS also agreed to NASS’ proposal to increase the RBRVS work value for Code 22612, Lumbar Spine Fusion, averting a 7.74 percent payment cut. Other factors, however, will mean that payments for this procedure will drop by just under 1 percent.

Without action by the AAOS and specialty societies, CMS would have cut total payments for all these procedures by as much as $6 million per year. Instead, payments for these procedures will increase by about $3 million per year.

Additional payment cuts averted

CMS targeted nine other musculoskeletal procedures for payment changes during the Five-Year Review. These procedures, from a cross-section of orthopaedic subspecialties, represent approximately $437 million in annual payments to orthopaedists.

Again, the combined efforts of the AAOS and musculoskeletal specialty societies convinced CMS to maintain the RBRVS values for these procedures at about the same level. Again, however, other payment factors will result in modest fee cuts (up to 6 percent) for these procedures, as well as for most orthopaedic procedures not in the Five-Year Review.

Payments for E/M services

One of the biggest Five-Year Review stories was CMS’ decision to raise payments for most evaluation and management (E/M) services. Because about 37 percent of Medicare payments to orthopaedists result from E/M services, orthopaedists will benefit from this development. Table 3 shows the E/M services billed by orthopaedists.

As a result of these changes, total Medicare payments to orthopaedists for these services, in general, will increase by about $37 million per year.

Five-Year Review payment reductions

On the down side, CMS decided to cut payments for three spine procedures during the Five-Year Review. These cuts came despite the efforts of NASS and the AAOS to maintain current payment levels for these procedures. Table 4 illustrates the impact of these decisions.

Total Medicare payments for these procedures will decrease by about $7.9 million per year. Because orthopaedists perform only about 30 percent of these services, however, total annual payments to them will decrease by about $2.4 million.

Imaging services

A new Medicare payment policy for 2007—not related to the Five-Year Review—will affect Medicare payments for imaging services. Under this policy, payments to physicians for the technical component of imaging services cannot be higher than the fees paid to facilities that provide these services in the outpatient setting.

Nearly all (98 percent) Medicare payments to orthopaedists for imaging services result from 50 of these services. The fees for the technical component of most of these services, including payments for the most common X-ray services, will not change under this policy. The fees for a number of magnetic resonance imaging (MRI) services that orthopaedists perform, however, will be cut as shown in Table 5.

Effect on other payers

The Medicare payment system does not exist in a vacuum. Other payers that base their payments on a percentage of Medicare fees or use the Medicare RBRVS will follow CMS’ lead.

This means that the payment cuts averted and the dollars saved in the Medicare system will translate into dollars saved in other payment systems. The same thing holds true for payment increases and decreases. A change in Medicare payments by tens of millions of dollars can have a cumulative impact totaling hundreds of millions of dollars or more when all other payment systems are factored in.

As Medicare goes, so goes much of the nation. And this year, thanks to the efforts of the AAOS and orthopaedic specialty societies, where Medicare could have gone and where it finally went turned out relatively well for most orthopaedists.

Robert C. Fine, JD, CAE, is director of health policy and governance initiatives. He staffs AAOS Medicare payment activities and can be reached at fine@aaos.org.