The purposes of this communication are to correct the misperception that the recently enacted Medicare Reform/Prescription Drug legislation (Medicare Bill) has “fixed” the Sustainable Growth Rate (SGR) update formula, and to provide additional information on the Medicare 2004 Relative Value Unit (RVU) changes that have affected the Medicare Physician Fee Schedule.

The legislation only provides a 1.5 percent increase to the 2003 conversion factor for 2004 and another 1.5 percent increase for 2005. The current 2003 conversion factor is 36.7856. Therefore, under the new law, the 2004 conversion factor is 37.3373 (36.7856 + 1.5% = 37.3373).

Some news reports have described the change as a 6 percent increase in fees. Those reports are wrong. When the 2004 Medicare Physician Fee Schedule was published in the Federal Register on November 7, 2003, the conversion factor was 35.1339, which was a 4.5 percent decrease from the previous year. The Federal Register publication of the fee schedule was PRIOR to the Medicare Bill being enacted. The misperception of a 6 percent increase comes from adding the proposed 2004 4.5 percent cut to the 1.5 percent increase.

When the ASCRS, in its leadership role as co-chair of the Alliance of Specialty Medicine’s Medicare Committee, met with high-level Congressional Leadership and White House Staff to discuss provider provisions in the Medicare Bill, the leadership and staff reiterated their desire to fix the SGR update formula, but explained they would not be able to do so now because of budgetary constraints. If the SGR formula is not changed, this interim relief will have to be paid back with interest through significant reductions in physician reimbursements through 2010.

A number of individuals have questioned our support for the Medicare Bill. ASCRS decided to support the legislation, which is independent of the fee schedule, for several reasons. Supporting enactment of the bill gave us a 1.5 percent increase to the conversion factor for two years rather than a 4.5 percent cut. It also gave us the opportunity to avail ourselves of a commitment made by key Congressional Leadership and Administration staff to work with ASCRS and the Alliance to make significant changes to the formula within the 2004 – 2005 time period.

RVU Changes

Each year, the Centers for Medicare and Medicaid Services (CMS) uses the SGR formula to update the Conversion Factor. Congress, not the CMS, created the SGR. CMS also makes changes to the Relative Value Units (RVUs) by updating the work, practice expense, and malpractice RVUs. The 2004 changes in the CPT RVUs are primarily a result of further practice expense (PE) refinements which have caused some codes, such as cataract, complex cataract, YAG, eye exam codes to increase while others, such as the A-scan, to decrease.

Click here to view a table which outlines how some of the PE refinements to some ophthalmic codes have affected reimbursement for 2004. A complete listing of the ophthalmic codes will be available on the ASCRS Web site shortly.