The cost of medical services fluctuates from year to year. The leaders in healthcare cost containment, the Secretary of Health and Human Services and the Centers for Medicare & Medicaid Services (CMS) review the payment policies and procedures looking for reasonable and acceptable ways to cut the cost and payment for medical services provided by both providers and facilities. One of the many cost savings efforts that is in effect and has been adjusted over the years is to apply a Multiple Procedure Payment Reduction (MPPR) to services provided by the same provider to the same patient on the same date of service. Once implemented by CMS the reduction is applied to services such as and not limited to, surgeries, behavioral health, therapy and diagnostic services.  In most cases the services are reduced to at least 50% of the current Medicare Fee Schedule allowable for that service. In the case of therapy services the reduction applies to the practice expense component of the relative value unit (RVU) for services provided in both the outpatient and provider office setting. With more and more insurance carriers choosing to follow CMS Reimbursement Rules and Claims Processing Guidelines, providers will start seeing these reductions across the board with all claims payments.

Multiple procedure reductions are a growing standard in medical bill payment and are guided by the regulations dictated by CMS. The multiple procedure reductions regulations have been expanded over the years in many ways, most recognized is due to the Affordable Care Act (aka Obamacare) and American Taxpayer Relief Act. As a result, Section 633 of the American Taxpayer Relief Act of 2012 revised the reduction to 50 percent for all settings.

MPPR was first implemented in 2006 by CMS. A 25% cut was applied to the technical component (TC) of imaging studies performed on the same patient, on the same day.  This policy was revised several times in the following years.

• In 2011, CMS changed the MPPR to include non-contiguous body parts, across different modalities.
• In 2012 CMS used additional regulations to expand the MPPR to include a 25% cut to the professional component (PC) as well.
• In 2013, CMS further expanded the MPPR to include multiple physicians taking care of the same patient, on the same day. The enactment of Medicare Physician Fee Schedule Regulations expanded the scope of the MPPR so it affected certain cardiology and ophthalmology procedures.

A methodology that most providers and payers are familiar with and follow are multiple surgery reductions. When multiple surgeries are performed together, many of the services like the surgical approach and closure and pre- and postoperative care, etc. are already considered in the primary procedure's payment. Therefore, the second, third etc... Surgical procedures performed in the same session will be allowed at 50% of the fee scheduled for that procedure. Leaving the primary procedure (Service with the highest RVU) being paid at 100% of the fee schedule.   

Example

The physician performs multiple shaving of epidermal lesion one lesion at 0.5 CM and another at 0.6 CM; the correct codes are CPT® 11300 and 11301. Code 11300 has an RVU of 2.68 and an allowable of $96.01, code 13001 has an RVU of 3.30 and an allowable of $118.22.  In this case, the payer should reimburse the highest valued code 11301 at its full value and pay code 11300 at 50 percent of the allowable, 100 + [70 x 0.5] = 135.

Diagnostic imaging services have special rules for the technical component (TC) if procedure is billed with another diagnostic imaging procedure in the same family. If the diagnostic service is performed in the same visit on the same day as another procedure with the same family indicator, the payer should pay 100% for the highest priced procedure, and 50% for each subsequent procedure. The professional component (PC) is paid at 100% for all procedures. 

 Below are 2 examples of diagnostic families. If there is only one service from each family then each service would be allowed at 100% of the fee schedule.  

Family 8 MRI and MRA (lower extremities)

MRI lower extremity w/o dye                              73718

MRI lower extremity w/dye                                 73719

MRI lower ext w/ & w/o dye                                73720

MRI joint of lwr extre w/o dye                              73721

MRI joint of lwr extr w/dye                                  73722

MRI joint of lwr extr w/o & w/dye                         73723

MR Angio lower ext w or w/o dye                        73725

Family 9 CT and CTA (lower extremities)

CT lower extremity w/o dye                                73700

CT lower extremity w/dye                                   73701

CT lower extremity w/o & w/dye                          73702

CT Angio lower ext w/o & w/dye                          73706

Endoscopic procedures reductions can be more complex; the calculation requires that reimbursement for the base procedure is subtracted from all endoscopic procedure(s) performed on that date except for the procedure with the highest fee schedule allowed amount.This applies when two or more to services that are performed on the same patient by the same provider in the same session and that fall into the same CPT® Code family. (i.e., another endoscopy that has the same base procedure) If the services are not within the same family then standard multiple surgery reduction applies.

Example

When calculating endoscopic procedures you need the allowables of all codes including the base procedure. CPT® codes 45382 and 45385 both have a base endoscopy code of 45378.

CPT® Code                        Allowable

45382                                 $335.46

45385                                 $312.14

45378 (Base)                      $219.80

The calculation is as follows:

Code 45382 has the highest fee schedule amount; the full fee schedule amount is used to determine reimbursement.

Base procedure: CPT® code 45378 = $219.80 ($312.14 - $219.80 = $92.34)

Per Medicare Guidelines if an endoscopic procedure is reported with only its base procedure, do not pay separately for the base procedure. Payment for the base procedure is included in the payment for the other endoscopy.

On another note: diagnostic scopes are always included in surgical scope even if the diagnos­tic scope is not a part of the same code family as the surgical scope

Therapy services are reduced at a "per unit of service" provided at the Practice Expense (PE) portion of the RVU for select therapy services. Effective for claims with dates of service April 1, 2013, and after, Section 633 of the American Taxpayer Relief Act of 2012 revised the reduction to 50 percent for all settings. This reduction applies to a specific list of Physical Therapy (PT), Occupational Therapy (OT), or Speech-Language Pathology (SLP) codes. Professional claims have a value of "5" on the Medicare Fee Schedule Database (MFSDB). Institutional claims have a value of "5" on the therapy abstract file. Note that these services are paid with a non-facility PE. The current and revised payments are shown in the example in the following table provided on the CMS Website:

Due to the complexity of the reduction determination of the PE Allowable, most carriers have a set rate reduction to apply to these services, (at payor discretion) anywhere from 80/20 or 100/50 for the primary and secondary services.   The calculation reduction from Medicare can range anywhere from 18.5% to 50% of the allowable. 

Diagnostic Cardiovascular and Ophthalmology Procedures have multiple procedure payment reduction applied on the Technical Component (TC).

Cardiovascular services, full payment is made for the TC service with the highest payment, then at 75% for subsequent TC services furnished by the same physician (or by multiple physicians in the same group practice, i.e., same Group National Provider Identifier (NPI)) to the same patient on the same day.

Ophthalmology services, full payment is made for the TC service with the highest payment then at 80 percent for subsequent TC services furnished by the same physician (or by multiple physicians in the same group practice, i.e., same Group NPI) to the same patient on the same day.

The MPPRs do not apply to professional component (PC) services.

The complete lists of codes subject to the MPPRs on diagnostic cardiovascular and ophthalmology procedures are in Attachments 1 and 2 of CR7848 respectively.CR7848 is available at http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R1149OTN.pdf on the Centers for Medicare & Medicaid Services (CMS) website.

 CMS also designed the Correct Coding Initiative (CCI) to promote national correct coding methodologies and to control improper coding. The CCI lists thousands of code combinations that you should not, report together during the same patient encounter. The CCI edits should be applied to all services on the same date of service by the same provider, before applying the MPPR guidelines.

Providers should never receive reduced payment for separately identifiable evaluation and management services provided on the same day as other procedures/services, procedures designated by CPT® as add-on codes and procedure designated by CPT® as Modifier 51 exempt. The RVU's for these codes already consider them as separate. 

 In Conclusion, there have been many changes to the MPPR methodology in recent years.  It is anticipated that changes will continue.   Providers, who may have billed in the past and are not familiar with the current regulations, may perceive applied reductions as "incorrect payments" as many payors both federal and non-federal are adopting and following Medicare guidelines.    

 References: http://www.cms.gov 

 About the Authors

Cynthia Freese is the Director of Claim Audits for United Claim Solutions (UCS).  She has over 10 years audit experience in the Medicare, Medicaid and Commercial markets.  UCS is a Claims Flow Management and Medical Cost Reduction company located in Phoenix, AZ.  Cynthia can be reached at cfreese@unitedclaim.com.

Linda Myrick is the Claims Editing and Special Projects Manager for United Claim Solutions.  She has over 15 years' experience in medical coding principles and guidelines, including the ability to read and interpret notes and charts and assign appropriate diagnostic and procedural codes. Linda can be reached at lmyrick@untedclaim.com

By Scott Haas and Regi Schindler

Health plans, (self-funded employers) are beginning to make headway in efforts to improve economic efficiencies for planned medical procedures.   A mixed bag of new terminology is emerging with terms such as 'bundling' used to describe a process whereby all of the medical services related to one specific episode of care are combined into one payment.    A number of emerging companies are focused on delivering these bundles.   While progress has been made, many challenges remain, not the least of which is the element of risk and the role it plays in creating bundles.

Historically, medical professionals have communicated risks associated with surgery in terms of frequency.  For example, 'mortality', or the risk of a patient dying as a result of the surgical procedure, is expressed as a percentage of the total cases performed.   A reasonably low percentage implying the procedure is relatively 'safe' vs another type of procedure with a higher percentage.    'Morbidity', or the risk of complication from the event, is expressed using the same percentages.  Measures of quality rely on efforts to compare one individual or program expressed as their percentages relative to the norm for respective Mortality and Morbidity risk by type of surgical procedure.

When medical professionals use these terms to address questions of surgical risk, they are doing so from a deep foundation of knowledge and experience.  As a result they are highly qualified to help guide their patients in making decisions in advance of undertaking a surgical procedure.    In fact, our expectation is so high in this regard that our tort liability system has recognized that a failure to inform patients of the 'known' risks of the surgical procedure in advance is considered to be a professional omission of the highest order or 'malpractice'.

Despite lacking perhaps even a modicum of the same level of understanding of surgical risk and the meaning behind the advanced medical terminology, the lay - non medical professional- marketplace has adopted this same methodology.  Virtually every type of effort to measure, rate, analyze, evaluate and codify quality in surgery, in modern times refers to the percentages associated with various clinical events known to arise from the surgical procedure.

Questions of reliability and accuracy of data, used in quantifying their respective percentages, plague every health care provider.  Chief among their antagonists are typically their colleagues in the surgical field who are all well versed in the compromises which must inherently be a part of any effort to standardize and normalize a dataset in order to prepare it for public dissemination.   For example in virtually any published medical journal, on the topic of surgery and risk, it is not uncommon to find two conclusions diametrically opposed.     

In the course of medicine, and among a learned group of experienced medical professionals, this type of discourse has been historically important as surgical societies strive to find new and improved techniques for better patient outcomes.  For the less informed, and perhaps more pragmatic public, this type of discourse serves to further cloud the waters.   Perhaps nothing illustrates this more than the example of the 'Centers of Excellence', or COE designation's which have proliferated in recent times.

Observing the various COE's develop reminds one of that old story about the young lawyer who set up shop as the only lawyer in town expecting to do quite well only to find no clients.   That is until another lawyer came to town and set up shop across the street.   Soon both were indeed doing quite well!   In the same way, where one COE is created, another is sure to follow.    Why?   While the reasons are many and diverse, one reason almost certainly has to be the perceived reliability of their data by their COE counterpart(s).    If one accepted another organizations effort to qualify a particular provider as 'high quality' wouldn't others normally accept their stamp of approval as sufficient?    Instead, COE programs seem to sprout out of every payor and provider environment with their own respective stamp of quality.   Coincidently these same COE competitive programs are not actually using any 'means testing' or surgical outcomes, to validate their COE participation.  To the author's knowledge, no existing COE program uses the surgical percentages of mortality and morbidity to determine which provider gets in and whether or not they stay in the COE.

Therein lays the challenge as we move toward a true 'outcomes' based surgical market.   In surgery today, providers and payers are trying to create one, bundled price for each respective surgical procedure.    After all, what could reflect outcomes based payment model more than simply paying one price for surgery?   On its surface, this doesn't seem like to difficult a task.    We simply combine the fees paid to the surgeon, anesthesiologist and hospital facility, along with any ancillaries, add in the 'risk' component and viola, we now have our bundle.  In reality however very few bundled payments exist for surgery.  Those that do typically do not include any real risk protection beyond perhaps the initial stay and only within very tight restrictions.    Why has this proven so difficult?     Many factors come into play, in the contemporary healthcare environment, which impact this effort.   Not the least of which that, following decades of cost shifting driven by a DRG based payment model, providers struggle to accurately identify the true costs of services.

In order to properly understand and measure the cost of surgical outcomes, we need to examine not just the frequency at which known events occur, but also the cost of care associated with those events.  In risk parlance, cost becomes the 'severity' half of the equation.    In other words, the true 'cost of risk' associated with a complication event from a surgical procedure can be quantified by calculating the frequency at which the complication event occurs multiplied by the cost of care when it does.

Using this formula, a model can be developed which create a 'price' or rather an 'insurance premium' that can be then added to the provider services in order to create a true bundled price for surgery.   While this does not solve the question of how the provider quantifies their cost for the expected services that go along with the surgical procedure, having the risk component accurately quantified does help the provider close in on what the correct price should be for their bundle. 

Once the proper price for each procedure is set using these methodologies, the premium per case can be further adjusted for each surgeon based on their own experience.  After a sufficient amount of case data has been developed for the surgeon under this model, the premium can be further adjusted up or down.   This amplifies the impact of their experience by further modifying their results based on an adjustment comparing their results to all other surgeons.  This model creates an incentive based approach for the provider to continue to improve outcomes since the resulting good experience, lowers their per-case premium which then increases their margin for the case.   Providers can win under this type of scenario.  How about the health plan?

Potential Impact to Plan Sponsors

Health plan sponsors are attempting to evolve payment methodologies to establish fixed and predicable cost within their health plans.  Consideration of the continuum of such methods from PPO discounts to risk based bundles must be carefully evaluated in order to avoid unintended consequences. 

For example, it is recognized that carrier based networks typically provide a "discount" advantage over most commercial PPO networks.  The relative variance between these network options varies greatly and has no real relationship to the true market value of the services provided to patients.    Unfortunately, this really doesn't matter as the true cost is what is paid, not the discount received. 

The bottom line is health carriers and plan sponsors pay far too much with little to no guarantee of quality or outcome of the services provided being reasonable or acceptable.  The days of value being defined as "my network is better than your network" has gone the way of the dinosaur.  Yet, brokers and plan sponsors still fall into this trap and continue to miss chances to change the rules of engagement with healthcare providers.

Key to the evolution of risk based bundles is the member and plan sponsor are held harmless from the adverse fiscal exposure of complications that are defined as CPT's or DRG's incurred outside of the CPT's or DRG's incurred within the bundle.  Thus, the inclusion of risk as a component of the bundle itself provides the following key attributes to covered members:

• The ability to establish a true consumer based reference based upon the outcome metrics of surgeons through reliable, credible and verifiable means.
  • o   Surgeons with the highest quality, (best outcomes/loss ratio) will have the lowest cost of risk and therefore be the most competitive from a price standpoint.       
• Contractual hold harmless from balance billing
• Protection from out of pocket exposure and/or payment outside the defined bundle due to complication
  • o   The internal risk component becomes responsible for the adverse risk of complications

The inclusion of risk as a component of the bundle itself provides the following key attributes to plan sponsors:

• The ability to predict cost based upon the known risk exposure within their covered population for any given surgical occurrence for which a surgical bundle can be implemented
• Establish bundled payment strategies in support of specific anomalies that improve the health and wellbeing of their workforce - for example, bariatric bundles in support of obesity management programs
• Limit the risk exposure of providing such programs by mitigating the risk exposure of complications
  • o   Reduce the cost of the overall health plan reinsurance by removing the risk of complications covered by the risk based bundles
  • o   Reduce the overall cost of health plan expenditures through the reduction in the cost basis of the bundles themselves
    • For example, in a fee for service environment where a 45% discount from billed charges equals $50,000, a bundle may be all inclusive including the risk component for $30,000 
• Enhance their standing as a plan fiduciary by making risk based bundles available and a standard of practice within their health plan
• Incentive to plan participants to actually practice consumer like behavior as they enter the healthcare system for surgical care

Properly defining, identifying and quantifying risk is essential to the long term viability of a properly constructed bundled payment methodology.  Ultimately, in a true outcomes based reimbursement environment, the cost of risk will be built into every surgical procedure.    At that point those surgeons with the highest quality, (best outcomes/loss ratio) will have the lowest cost of risk and therefore be the most competitive from a price standpoint.  These providers will be in the best position to deliver maximum value to the health plan.

About the Authors:

Scott Haas is Vice President of Integrated Healthcare Metrics at Wells Fargo Insurance Services. He has over 32 years of employee benefits experience and extensive background in the development and management of medical and disease management, prescription drug programs as well as provider network evaluation, valuation and underwriting. Haas started and operationalized a Third Party-Administrator (TPA) and a Prescription Benefit Management (PBM) platform from scratch.  Scott has worked in the arena of alternative funding for the majority of his career. Haas is a graduate of the University of Nebraska at Kearney with Bachelor of Science degrees in Business Administration and Economics.  He earned the Chartered Life Underwriter (CLU) and Registered Health Underwriter (RHU) designations in 1985 and 1986 respectively.  Haas has held officer level positions within commercial health insurers as well as Blues plans and a Third-Party-Administrator's as Vice President of Sales and Marketing, Vice President of Underwriting and President. Haas has also served as a Trustee of both defined benefit and 401(k) plans for both union and non-union employees.

Regi Schindler is President and CEO of BLIS, Inc.  He has over 28 years of healthcare, insurance and risk financing experience and extensive work in designing new types of insurance products.  After graduating Magna Cum Laude from Buena Vista University in Storm Lake, Iowa, Regi Schindler began his career in the insurance industry with Federated Mutual Insurance and then moved into healthcare where he worked for several years with the prestigious Mayo Clinic.  He came to Portland as the Director of Risk Management at Oregon Health & Science University.  Beginning in 1999 he worked as an independent consultant on a variety of insurance and healthcare projects which he did up until co-founding BLIS in November of 2005.  Since then he has served as President and CEO of BLIS, leading its development of a brand new type of insurance for surgeons which covers the financial cost of healthcare related to surgical complications.