Practices offering ancillary services, larger groups appear to fare better
A number of urology offices have remarked that this year has been very rough from a financial perspective. The general feeling is that urologists are working harder and making less. By analyzing work relative value units (RVUs) in a number of urology groups, we have verified that they have had an approximate 10% decrease in income while generating the same number of work RVUs.
The analysis sheds light on key market trends, including the effect of ancillary services on RVU production and the ability of high-volume versus low-volume groups to generate more RVUs under similar market conditions.
We decided to analyze productivity first. We looked back at production for several groups comparing number of CPT codes billed and number of RVUs generated (table). The numbers, as you may have guessed, are not uplifting.
For this analysis, we examined a limited set of practices and broke them into two groups. The first included those practices with ancillary services such as pathology, imaging, or intensity-modulated radiation therapy as part of the practice.
The second set included those practices that do not bill directly for computed tomography, magnetic resonance imaging, or IMRT.
For purposes of this analysis, we are not adjusting for the number of providers as we are simply looking at general trends that will affect reimbursement in the current period and likely will affect future collections. We used our data cube (part of the Urology Data Initiative, our Web-based data portal), which includes offices for which we provide outsourced billing services as well as other groups that do their billing in-house or outsource to other billing services.
We have elected in this analysis to eliminate any adjustment for payer type; however, the RVUs are adjusted for payment rules as dictated by Medicare multiple procedure reduction and modifier adjustment related to global billing such as intraoperative payment only. The RVUs were not adjusted for geographic location in these sets of reports to allow for an apples-to-apples comparison.
Two factors contributing to the lower RVU per CPT in 2010 for the groups without ancillaries were:
Medicare’s decision not to pay for consultation codes change in codes and the associated values for urodynamics codes.
Although these changes would have also affected groups with ancillary services, the results indicate that the practices that have added ancillaries are generating more RVUs per visit. It is important to note that we are not currently capturing billing data from imaging centers outside of urology offices, so it is not known whether the RVUs billed for the patient’s care are similar in both types of practices.
The number of RVUs per CPT code is not dependent upon the number of patients seen by a practice. However, the number of patients seen and the CPT codes or RVUs per patient are also interesting to review as a different way to analyze production in the practice. With 80% of the market using an RVU-based compensation formula, a lower number of RVUs per CPT code will generally translate to lower income per CPT code. Thus, barring an increase in the number of CPT codes billed, a practice would likely have received a lower overall practice income in 2010 than in 2009.
We have not adjusted yet for the number of CPT codes per RVU for 2011 as the data set is still young. The number of CPT codes submitted in 2010 was generally lower versus 2009; however, initial data points to a rebound in number of CPT codes reported in 2011 year to date.
Market trends confirmed –
In general, this confirmed what many of us knew by looking at market trends:
First, RVU production in groups that do not have the patient volume to add ancillary services such as advanced imaging (CT and MRI) and IMRT has dropped per CPT service and will continue to decrease in the next 2 years due to scheduled changes in the resource-based relative value scale. Based on current market trends and barring a shift in payment methodology in the market or an increase in number of services rendered, practice incomes in this group have likely decreased and will continue to decrease.
We have found it common practice that changes in Medicare RVU and payment structure are copied by roughly 85% of the market within 13 months of the change implementation by Medicare. As such, the impact of the RVU shift is distributed over the period of change and will vary by payer mix for the practice.
Second, large groups have been able to generate more RVUs under similar market pressures and therefore remain an attractive model for smaller urology groups. This projection would indicate that we have not yet seen the last merger or acquisition involving small groups. This trend is not lost on Medicare or those advising Medicare and other payers. However, we have seen a number of signs that Medicare will not, from a federal level, seek to restrict multispecialty group mergers, nor block specialties from adding ancillary services to large groups. That does not mean that Medicare or other payers will not pursue other methods to block profit for ancillary services through service payment reductions. Nor does it mean that we will not see state-level activity that will attempt to restrict ownership in ancillary services of all types.
Consider other factors –
The information gathered for this analysis was focused solely on production and its potential impact on revenue. Any practice carefully examining the current marketplace would also need to look at associated costs and profit to identify potential areas to be increased or decreased in order to function as a successful business.
Patient and payer mix are other areas to analyze, as a different RVU base will certainly change the number of RVUs that can be generated for each service. Finally, this analysis is just one of many factors your office should consider to determine what action, if any, to take in shaping the short-term or long-term direction of your practice or group.
