URGENT ALERT TO STS MEMBERS

Dear STS Member:

Over the last several months, you have heard from different medical organizations, as well as your own medical institution, warning of current and future reductions in Medicare reimbursement for physicians and hospitals. The Balanced Budget Act of 1997 made a number of changes that have had a negative impact on the health care provider community. Reductions in Medicare payments for Graduate Medical Education have led to serious concerns on the part of teaching hospitals about their ability to continue to provide training for residents and high-quality health care for their patients. The Society of Thoracic Surgeons supports the Association of American Medical Colleges and its member institutions in efforts to seek relief from these cuts through congressional action.

For surgeons and other medical specialties, the most pressing Medicare reimbursement issue continues to be HCFA's implementation of the practice expense reform of the physician fee schedule. On top of other cuts thoracic surgeons have experienced over the last decade (see enclosed chart), the transition from a payment system based on historical charges to one that is resource-based has had the general effect of shifting resources from specialists to primary care. Recognizing the severity of these shifts for thoracic surgeons and other specialties as well as the methodological errors in HCFA's original practice expense proposal, Congress directed HCFA in the Balanced Budget Act of 1997 to redo its work. Congress also provided for a four-year phase-in of the new practice expense values, allowing HCFA time to refine its methodology and to address several issues identified by STS and other medical specialty organizations. As a result of that action, practice expense reductions for our specialty were to be limited to about 16 % over four years-substantially less than the 36-40% reduction that was originally proposed by HCFA.

Last month, HCFA published its proposed Year 2000 fee schedule. In response to HCFA's failure to initiate a refinement process, STS is working in conjunction with the American College of Surgeons, the American College of Cardiology, and other medical specialty organizations in urging Congress for a one-year delay in transitioning to the new practice expense RVUs to allow time for HCFA to address outstanding issues. STS and these groups are also advocating that Congress place limits on the magnitude of change in Medicare reimbursement for any individual service.

WHAT IS AT STAKE FOR THORACIC SURGERY?

Although thoracic surgeons will be adversely affected by changes in payments to hospitals and also share in the general reductions under HCFA's practice expense proposal with other specialty providers, our specialty is faced with a unique and serious set of problems with HCFA's new practice expense proposal. Left unresolved, these problems will result in a total reduction of about 25% in Medicare reimbursement for thoracic procedures during the period of 1998-2002. This represents an additional 8 to 10% reduction over HCFA's previous "interim" projection, issued last year.

Major problems with HCFA's new practice expense proposal:

  1. HCFA excludes costs of staff employed by physicians who assist in hospitals in its calculation of practice expenses

    HCFA now proposes to cut from its allocation formula all costs incurred by surgeons for their staff who assist them in hospitals, asserting that Medicare already pays for services provided by such staff in the hospital setting.

    The impact of this change to the thoracic specialty is severe. By HCFA's own calculations, payment for cardiac surgery procedures will be reduced an additional 8% as a result of this change - on top of the 16% already proposed by HCFA in the earlier interim proposal.

  2. HCFA refuses to use the most complete data set to assess thoracic surgeons' practice costs

    The AMA data set now being used by HCFA to calculate practice expenses contains responses only from 34 cardiac and thoracic surgical practices over the three-year survey period of practice expenses in 1994, 1995 and 1996. This data set clearly is inadequate statistically to serve as a basis for establishing reimbursement for thoracic surgical procedures.

    To provide additional data on practice expenses of cardiac and thoracic surgeons, the Society of Thoracic Surgeons in early 1998 asked the AMA to carry out an expanded survey. Responses from 104 thoracic surgical practices were obtained -- a sample size comparable to that used by HCFA for other specialties. Despite STS' expectations, HCFA has not used the expanded AMA data set in its current practice expense calculations and has been unwilling to provide any indication that it will do so during the transition period.

    If HCFA were to use the more reliable data on cardiac and thoracic surgery practice costs, the proposed reductions in reimbursement for thoracic surgery procedures would be substantially reduced.

  3. HCFA has not yet begun the refinement process mandated by Congress

    In the Balanced Budget Act, Congress specifically instructed HCFA to refine the interim practice expense relative values annually during the four-year transition period. HCFA only recently has issued a contract to an outside consulting firm to advise the agency how to accomplish refinement. No recommendations are expected until mid-2000, far too late for the Year 2000 fee schedule. HCFA's lack of activity in this area leaves the STS and other specialty organizations without a formal process in place for providing critique and input.

    Congressional Committees responsible for Medicare should hold oversight hearings on HCFA's interpretation of the practice expense provisions of the Balanced Budget Act and its delays in implementing the refinement called for by Congress.

STS and AATS representatives have met with HCFA officials in an attempt to deal with the Agency's refusal to use AMA's expanded sample of thoracic surgery and to accept the cost to our practices of staff used in the hospital. Toby Cosgrove, M.D., President of AATS, John Mayer, M.D., Chair of the Health Policy Development Committee and I, Timothy Gardner, M.D., along with STS Staff members, a representative from the Cleveland Clinic, and several AMA staff members, met with HCFA representatives in Baltimore to urge the Agency to use data from the expanded survey and to reconsider its current position on practice staff used in the hospital setting. The STS also will submit to HCFA a detailed statement addressing these same issues.

In addition to petitioning HCFA directly to resolve these problems, the STS will appeal to Congress, both on its own and with specialty society members of the Practice Expense Coalition, to hold oversight hearings on HCFA's handling of these practice expense problems.

YOUR HELP IS URGENTLY NEEDED

The outcome of the issues described above will determine the extent to which thoracic surgeons sustain additional reductions in Medicare payments. If thoracic surgeons can engage Congress to resolve these inequitable decisions and convince HCFA to allow the cost of physician-employed staff in hospitals and adopt the new AMA data on thoracic surgery, fee reductions for thoracic surgical procedures will be substantially reduced from the currently projected level of about 25%.

We need all STS Members to contact their Members of Congress immediately. Attached is a sample letter you can use when writing or calling your Senators and Representative. Also attached is a chart outlining the total cuts thoracic surgeons have experienced over the last decade, which illustrate the continued damage to the ability of thoracic surgeons to deliver high-quality medical care to our patients. Include this chart in your letter to Congress, if you wish, to emphasize the continued undermining of our specialty by HCFA's biased payment policies and the threat it poses to the care we provide for our Medicare patients.

We are finalizing plans for visits to Washington later this month by STS members who are constituents of key congressional leaders. Please contact Robert Wilbur or Corinne Colgan in the STS Washington DC office at 202-857-1194 if you are interested in joining this lobbying effort. Also, call the DC office with any questions or suggestions about our activities. You can also check the STS web site's "Washington Report" for a more in-depth fact sheet on the practice expense issue (http://www.sts.org).

Direct contact with our congressional representatives by letter, e-mail, phone or in-person by all STS members is required. Please do it now.

Many thanks,

Timothy J. Gardner, MD
Chair, Professional Affairs Committee, STS/AATS

Nicholos Kouchoukos, M.D.
President, STS