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AAOS Now

Published 5/1/2016
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Douglas W. Lundy, MD, MBA; Thomas C. Barber, MD

Acronyms 101: Sifting through Alphabet Soup

Part 2: Federal laws
In this second article of our series we define some of the most prominent acronyms/abbreviations associated with healthcare legislation. Our piece in the March issue described the terms associated with the executive branch of the federal government. Now that we have defined the players in the system, we will list the acronyms associated with the major pieces of legislation that played a role in orthopaedic surgery.

PPACA, or ACA: The Patient Protection and Affordable Care Act (Affordable Care Act).
The ACA was the controversial and groundbreaking legislation that began the era of healthcare reform. President Obama signed the bill into law on March 23, 2010. Since then, the ACA, also known as Obamacare, has affected the practice of medicine on many levels. The ACA has survived many challenges despite overwhelming opposition from many groups. The act has many components. It initiated expansion of Medicaid, the creation of insurance exchanges, and the "individual mandate" that required everyone to have health insurance. The age under which adult children could be covered under their parents' insurance was increased, and coverage exclusion for preexisting conditions was eliminated.

Republicans have vowed to "repeal and replace" the law, but it has survived to date. Like it or not, it is one of the major laws that affect the delivery of health care.

RVUs: Relative Value Units
RVUs quantify the value of physician services. Each Current Procedural Terminology (CPT) code and evaluation and management (E&M) code is awarded a certain number of RVUs. There are different types of RVUs, including Work RVUs (that represent the actual work the physician performs), Practice Expense RVUs (that account for the practice expenses associated with the physician's work) and malpractice RVUs (that account for the physician's medical liability insurance expense). The determination of how many RVUs a particular service is awarded is determined by the Relative Value Scale Update Committee (RUC).

RUC: Relative Value Scale Update Committee
The RUC is a committee of the American Medical Association comprising 31 physicians. The RUC determines the number of RVUs associated with physician work, whether CPT code or E&M code. The RUC makes recommendations to the Centers for Medicare & Medicaid Services (CMS), and CMS can accept or reject these recommendations. The RUC is obviously an important committee that wields a significant amount of influence. The AAOS has a representative on the RUC to advocate for the codes used by orthopaedic surgeons.

PFS: Physician Fee Schedule
The PFS is the monetary scale that CMS establishes for physician services. The actual amount that a physician is paid for a certain CPT or E&M code varies according to geographic location in which the procedure is performed. The PFS is determined through a formula that combines the RVUs for the work with a Conversion Factor (CF) and the Geographic Practice Cost Indices. The PFS is updated annually and can be accessed online.

CF: Conversion Factor
The CF is a factor multiplied by the base rate for a procedure or office visit that determines the final payment from Medicare to a physician. The CF used to be driven by the sustainable growth rate (SGR), but it is now a determined rate according to the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

SGR: Sustainable Growth Rate
The SGR was the prime driver of adjustments to the PFS. Elimination and full repeal of the SGR methodology was one of the primary advocacy points of the AAOS for more than a decade. The SGR influenced the CF for the following year's PFS. The SGR was calculated based on medical inflation, the projected growth of the economy, the projected growth in the number of Medicare recipients, and the laws enacted to abate the effect of the reductions in payment to physicians.

The SGR was based on the Medicare Economic Index and by definition had to restrain Medicare beneficiary costs within the overall growth of the Gross Domestic Product (GDP). If the annual "doc fix" (legislation) was not enacted, the SGR calculation would have resulted in decreased payments to physicians the following year.

GDP: Gross Domestic Product
Although the GDP is not healthcare legislation, this acronym will come up in discussions of healthcare economics and definitely affects legislation. The GDP is the annual value of all of the goods and services produced within the country, and is an indicator of the nation's economic activity.

MACRA: Medicare Access and CHIP Reauthorization Act of 2015
MACRA permanently repealed the SGR and replaced the update to the PFS with a new method. MACRA supporters and CMS say that MACRA accomplished the following three things:

It eliminated the SGR formula for determining Medicare payments for healthcare providers' services.

It created a new framework for rewarding healthcare providers for giving better care, not just more care.

It combined several existing quality reporting programs into one new system.

MACRA includes two major programs that determine physician compensation: the Merit-based Incentive Payment System (MIPS) and the Alternative Payment Model (APM). Physicians may choose which pathway they wish to use to qualify for payment. MACRA also enabled Health and Human Services (HHS) Secretary Sylvia Burwell's goals for reforming payment to be more readily accomplished. Secretary Burwell stated that 30 percent of traditional Medicare payments would be tied to APMs by 2016, and this number would increase to 50 percent by the end of 2018.

CHIP or SCHIP: State Children's Health Insurance Program
Many physicians confuse CHIP with Medicaid. CHIP is administered by HHS as a program that provides matching funds to states to help care for children whose families do not qualify for Medicaid. The states have a certain degree of autonomy as to how they decide who will be eligible for CHIP funds.

Ironically, the authorization of the CHIP program is found in the Social Security Act of 1934, but the program was not enacted until 1997. States may use the funds to expand Medicaid or establish an entirely different program just for children.

MIPS: Merit-based Incentive Payment System
MIPS combines many of the preexisting programs under CMS and houses them all under a single program. MIPS combined the Physician Quality Reporting System, the Value Based Modifiers, and the Medicare Electronic Health Record (EHR) programs into a completely new product. Physicians working under the MIPS program will be judged according to their quality measures, appropriate use of resources, improvement within clinical practice, and their ability to use the EHR is a meaningful way. These individual programs will be discussed in a subsequent article.

APM: Alternative Payment Model
The phrase "alternative payment model" is a generic description that relates to a program that compensates physicians other than by Fee-for-Service (FFS). Under the MACRA legislation, APM refers to programs such as Accountable Care Organizations, bundled payments, and Medical Homes. Advocates for APMs tend to espouse them as alternatives to the current FFS model. Many view the FFS model as an impediment to reducing cost and reforming healthcare delivery. Although APMs are easier to conceptualize in other medical specialties, FFS tends to be the mainstay in orthopaedic surgery, which is largely defined by episodic care.

FFS: Fee for Service
FFS is the dominant system for compensating physicians in the United States. FFS implies that the services are to some degree unbundled, and physicians are paid according to the services they provide. Critics state that this system incentivizes physicians to overutilize services since they have a financial inducement to do so.

IME: Indirect Medical Education
IME is the amount of increase in a hospital's payment that is meant to cover indirect costs of medical education, such as higher costs in diagnostic testing or longer lengths of stay.

DME: Direct Medical Education
DME is the amount paid by Medicare to the hospital for each resident. There has been an overall cap on the number of residency slots paid for by Medicare, although some of the health reform legislation has included language to increase residency slots in primary care.

Douglas W. Lundy, MD, MBA, is a member of the AAOS Council on Advocacy and of the editorial board of AAOS Now. He is co-president of Resurgens Orthopaedics in Atlanta. Thomas C. Barber, MD, is the chair of the AAOS Council on Advocacy and a total joint surgeon in Oakland, Calif.