Week 2 Case Study Third party payers have adopted Medicare's resource-based relative value scale (RBRVS). Because of its widespread use, the RBRVS has been suggested as a way to analyze productivity and healthcare financing (Alexandraki et al. 2009; Melzer et al. 2004; Rotarius and Liberman 2001). Alexandraki and colleagues used the RBRVS to analyze and compare the productivity of a resident-staffed teaching service and a hospitalist-based service (Alexandraki et al. 2009, 81). A resident-staffed teaching service uses residents to manage the care of patients. Residents are physicians who have finished medical school and internship and are now receiving advanced training in a specialty such as surgery, internal medicine, dermatology, or pediatrics. A hospitalist-based service uses hospitalists to manage the care of patients. A hospitalist is a physician who specializes in managing the care of hospital inpatients. According to the studies that Alexandraki and colleagues reviewed, the two services are Similar in terms of quality of care, such as mortality rates, nosocomial infection rates, and unscheduled readmissions to the hospital Different in terms of administrative measures with hospitalist-based services showing reduced lengths of stay and total hospital expenses (Alexandraki et al. 2009, 81). However, Alexandraki and her colleagues noted that there was the lack of research on the comparative clinical productivity of the two services (Alexandraki et al. 2009, 81). To begin to address this deficit, the researchers studied the services' clinical productivity using the relative value unit (RVU) of the RBRVS as the indicator of productivity. Key data in their investigation were RVUs for relevant CPT codes Charges from practice billing records Total RVUs generated per unit of encounter (initial and subsequent hospital visits) Total RVUs generated per clinical full-time equivalent (FTE) (resident or hospitalist) Length of stay Case-mix index Data were collected on 5, 943 patients discharged during the period of the study (November 1, 2006 through April 30, 2007). Patients admitted to intensive care units or coronary care units were excluded from the study because of the extreme variability in the intensity of services provided to these patients. The researchers found that the average RVUs and charges generated per provider were significantly higher for the resident-staffed teaching service than for the hospitalist-based service. The researchers concluded that the difference could be related to the lower time commitments of faculty attending physicians than hospitalists (Alexandraki et al. 2009, 84). Finally, the researchers observe that the RBRVS is a standardized tool. It can be used to measure clinical productivity in different environments, in terms of healthcare organization, geographic region, or types of providers (Alexandraki et al. 2009, 84). Researchers also examined whether the RBRVS payment method sufficiently covered the expenses of a multidisciplinary team treating pediatric ambulatory diabetes patients in a pediatric endocrinology and diabetes clinic (Melzer et al. 2004). The researchers explained that ambulatory pediatric care for diabetes mellitus has evolved to a multidisciplinary team approach. The team comprises pediatric endocrinologists, certified diabetes mellitus nurse educators, nurse practitioners, dieticians, social workers, and psychologists. The clinic receives one payment based on the RBRVS for these complex services. To study the adequacy of the reimbursement for multidisciplinary care, billing data and financial income and expense reports for the period July 1, 2003 through June 30, 2004 were reviewed. The researchers found that 30 percent (1,420) of the patient visits were for care of diabetes mellitus. The clinic followed the recommendations of the American Diabetes Association for optimal case management. These recommendations include patient and family education; managing daily insulin injections, diet, and exercise; and long-term monitoring. The researchers noted that the telephone management of glycemic control was particularly expensive, although an important component of care. The researchers calculated revenue using the RBRVS method. They found that revenues generated under the RBRVS method were sufficient for the physicians' expenses in the team approach. However, the researchers found that the revenues generated under the RBRVS method only covered 16 percent of the actual nonphysician practice expenses in the multidisciplinary model. Thus, the reimbursement does not adequately reimburse the clinic for the nonphysician and facility practice expenses. The researchers concluded that the multidisciplinary care model may not be financially viable. Rotarius and Liberman concluded that analysis using the RBRVS provides valuable information. The types of information include: Fulfillment of contractual payment rates by healthcare insurance plans Profitability of specific procedures Optimal mix of physician specialties Projections for contract negotiations Therefore, analysis using the RBRVS is a means of productivity assessment, financial management, and strategic planning. A student in a health services management (HSM) academic program was serving as an intern in a physician practice. The student had read the previous articles about the potential for insufficient reimbursements under the RBRVS payment method. The HSM intern decided to analyze the financial viability of the practice. The intern compiled the following spreadsheet: ANY YEAR: Projected Revenue by CPT Visit Code* Work RVU NonFac PE RVU MP RVU Tot RVU (Col B + Col C + Col D) 99202-Office Visit, New, Straightforward Medical Decision Making 0.88 0.79 0.05 99203-Office Visit, New, Low Complexity Medical Decision Making 1.34 1.13 99204-Office Visit, New, Moderate Complexity Medical Decision Making 2.00 99205-Office Visit, New, High Complexity Medical Decision Making Conversio n Factor Number Annuall y Projected Revenue (Col E * Col F * Col G) 1.72 45 $2,800.10 0.09 2.56 50 $4,630.66 1.50 0.12 3.62 120 $15,715.29 2.67 1.78 0.15 4.60 360 $59,909.11 99211-Office Visit, Est., May Not Require Presence of Physician 0.17 0.39 0.01 0.57 100 $2,062.09 99212-Office Visit, Est., Straightforward Medical Decision Making 0.45 0.54 0.03 1.02 500 $18,450.27 99213-Office Visit, Est., Low Complexity Medical Decision Making 0.67 0.69 0.03 1.39 600 $30,171.62 99214-Office Visit, Est., Moderate Complexity Medical Decision Making 1.10 1.03 0.05 2.18 4600 $362,782.96 99215-Office Visit, Est., High Complexity Medical Decision Making 1.77 1.32 0.08 3.17 2000 $229,362.18 8375 $725,884.27 Item $36.177 All Physicians' Current Procedural Terminology (CPT) five-digit numeric codes, descriptions, numeric modifiers, instructions, guidelines, and other materials are copyrighted by the American Medical Association. *Values are representative only; readers are cautioned to check current Federal Register and CPT Questions: 1. What factors other than financial performance can leaders of healthcare organizations consider as they evaluate organizational programs? 2. What reasons could account for the gap between the reimbursement for multidisciplinary care and the expenses of delivery of multidisciplinary care? 3. In evaluating the RBRVS reimbursements for the physician practice, what other data should the intern consider? The intern notes that code 99205 has the highest RVU. Explain whether the intern should advise the practice to recruit more very sick new patients (office visit, new patient, high complexity). References: Alexandraki, I., C. Palacio, J. House, C. Catalano, and A.D. Mooradian. 2009 (January-March). Resourcebased relative value scale analysis between teaching and nonteaching hospitalist services. Health Care Manager 28(1):81-85. Melzer, S.M., G.E. Richards, and M.L. Covington. 2004. Reimbursement and costs of pediatric ambulatory diabetes care by using the resource-based relative value scale: Is multidisciplinary care financially viable? Pediatric Diabetes 5(3):133-142. Rotarius, T. and A. Liberman. 2001. An RBRVS approach to financial analysis in health care organizations. Health Care Manager 19(3):17-23