Class Questions Answer Key

Class Questions Answer Key:

Session 1:

Revenue Impact Question:

If we have two CPT codes, 27130 which is paid @80% of Medicare, including patient co-payment, by the payer, at $1600/service and code 99213 which is paid @90% of Medicare, including patient co-payment, by the payer, at $60/service and 27130 is performed 100 times a year and 99213 is performed 1000 times a year and I can get a 20% increase on one or the other, but not both codes, which code should I accept the increase on to increase my revenue the most?

a)Code 99213

b)Code 27130

This question is here to highlight that it is most important to stay focused on revenue vs. getting too wrapped up and losing focus just in % Medicare and other benchmarks. Benchmarks are useful comparisons to guide you to places where you may be under reimbursed but, in the end, revenue rules and the name of the payer negotiations game is increasing your revenues.

Therefore, in this example, you calculate revenue and then apply the 20% increase. Code 99213 is a volume of 1000*60/service = $60,000 of starting revenue. Code 27130 is a volume of 100*$1600/service = $160,000. Therefore, getting a 20% increase on code 27130 yields more revenue i.e., $32K vs. $12K. The percentages of Medicare, in this example, don’t factor into this calculation or decision since the payer has given you the choice of selecting the code that you want the 20% increase on. If presented with this kind of a choice, choose the code with the most revenue, always.

Session 2:

Average vs. Weighted Average Question

If we have two CPT codes, 52332 which is paid @80% of Medicare, including patient co-payment, by the payer, at $1600/service and code 99213 which is paid @90% of Medicare, including patient co-payment, by the payer, at $60/service and 52332 is performed 100 times a year and 99213 is performed 1000 times a year

a)What is the weighted average reimbursement if these are my only two codes?

Remember, first, the formula for calculating weighted averages, which is the ∑ of the Payer Rate * volume by CPT code / the ∑ of the Medicare Rate * Volume by CPT code. Weighted averages give you a much more accurate picture of your “real” average based on the work flow of services provided by your practice. In this example we are given a Medicare % and not a Medicare rate so to complete the calculation, we need to first determine the Medicare Rates. For code 52332, the Medicare Rate is $2000 (1600/.8) and for code 99213, the Medicare Rate is $66.67 (60/.9). Now we can go to work on the calculation:

(1600*100)+(60*1000)

______

(2000*100)+(66.67*1000)

Answer to part a = $220,000/$266,670= 82.5% of Medicare

b)What is the average reimbursement? This one is much faster, (80+90)/2 = 85% of Medicare.

c)Why is it different and which calculation most accurately reflects the reimbursement to my practice?

Notice that the weighted average came out to 82.5%, 3% lower than the average. Weighted averages reflect your practice’s work flow. The 82.5% is more accurate. Beware of payers that, in broad strokes, talk about your “average percent of increase”.

Merger Question:

Two practices are merged, Practice A and Practice B, into a new practice, named AUAPractice.

Prior to the merger, Practice A had a PPO agreement with Payer 1 that paid, in network, $1,000,000 the 12 months just before the merger. Their overall weighted average rate of reimbursement with Payer 1 is 100% of Medicare.

Prior to the merger, Practice B had an in network PPO agreement with Payer 1 that paid $200,000 the 12 months just before the merger. Their overall weighted average rate of reimbursement with Payer 1 is 120% of Medicare.

AUA Practice, the merged practice, has decided to remain in Payer 1’s network, as long as their total group reimbursement with Payer 1 increases in aggregate. After a long and difficult negotiation with Practice C, Payer 1 made a final offer of 108% of Medicare, down 12% from Practice B’s current reimbursement. Assuming that, in the absence of change, revenues will remain constant, should Tulane Medical Center accept this new and final offer from payer 1?

a)Yes

b)No

While this question is about mergers it is also relevant to practice consolidation into a medical center where more than one fee schedule is being consolidated as a result of a practice joining the medical center or merging into the medical center. This questions points out that when a consolidation of practices happens, the “whole” becomes greater than the sum of the parts. Realistically, while it would be great to increase revenue above the highest reimbursement of entities that merge. Most often, this will not happen. However, you can focus on increasing the combined revenues of the practices.

In this example, an 108% of Medicare overall rate will result in an 8% of Medicare increase for practice A which yields $80,000 while 108% of Medicare will reduce practices B’s rate of reimbursement in the merged entity, practice, C, by 10% i.e., 12% less of Medicare / 120% start rate is a 10% reduction. Therefore, since practice B is the small entity and makes $200,000 a year, this is a $20,000 decrease. The result is you are up $80,000 for practice A but down $20,000 for practice B and, overall, this nets you $60,000 more revenue for practice C. Practice C is indeed better off. However, Practice C needs to have an equitable way to allocate this new found money to keep both practice A and practice B incentivized to accept this new found money.