RFS Journal Club Recap: Econ Speak 101
Proudly brought to you by the ACR RFS Economics Advisory Group (RFS-EAG), I am thrilled to announce that the newest season of the Economics Journal Club has officially kicked off.
This month’s journal club featured an article by Ezequiel Silva III, MD, FACR, chair of the commission on economics, entitled, “Econ Speak 101.” The article systematically explains how revenue is generated in radiology.
Step 1: The Symptom
The first step in turning a report to revenue is identifying the reason for a procedure or examination. With the exception of screening studies, the reason is a symptom. We come across it daily when we complete the indication section in every dictation we create. Every symptom can be translated into a code which is a numeric figure that billing systems can use to process a claim. Every one of these codes, from headache to toe pain, is listed in the International Classification of Disease reference source, hence the name, ‘ICD code.’
Step 2: The Procedure
The second step is identifying the procedure. It is what we describe in the technique section of our dictations. Every procedure can be translated into a numeric code. Every one of these codes is listed in a source called the Current Procedure Terminology, hence the name CPT code.
Step 3: Determining Medical Necessity
This third crucial step is demonstrating medical necessity. Medical necessity is the appropriate relationship between a symptom (step 1) and procedure (step 2) performed. This step is extremely important because every ICD code must match appropriately with a CPT code in order for reimbursement to occur. For example, headache is an appropriate reason to perform a head CT. But a head CT done for stomach pain would not be reimbursed because medical necessity has not been demonstrated. This code match or medical necessity is based on coverage determinations. Coverage determinations are created by Medicare Administrative Contractors and on a more national level, CMS itself.
Step 4: Worth of a Procedure (CPT code)
Next, the worth of a procedure must be determined. How are CPT codes valued? Payment within the Medicare system occurs via the Medicare Physician Fee Schedule. The CPT code value is based on the resource based relative value scale which is a system maintained by the AMA/Specialty Society Relative Value Scale Update Committee (RUC).Every CPT code is assigned a relative position on this scale, which is based on the resources necessary to provide that service. This position is not only influenced by the procedure itself, but also the geographic location in which it is performed.
Currency within the resource-based value scale is the relative value unit (RVU). For example, a single view chest x-ray has an RVU of 0.18, and a chest CT with contrast has an RVU of 1.25. A radiologist would have to read seven chest x-rays to generate the same revenue as one chest CT.
RVUs have three components; the work RVU, practice RVU, and malpractice RVU. The work RVU component, more commonly known as the professional fee represents the physician’s contribution in interpreting an image or performing a procedure. The practice RVU component more commonly known as the technical fee represents the expense incurred by a physician for providing a service including supplies and equipment costs. The professional fee and technical fee together is called the the global payment.
Step 5: Conversion of RVU to Cash
You can’t buy groceries with RVUs, so how do we actually put dollars in our pockets? The next question is how a RVU converts to real cash. This is derived from a formula. The RVU value multiplied by a conversion factor gives you one the true monetary reimbursement value in dollars.
Historically, the conversion factor was calculated yearly and based on an algorithm called the sustainable growth rate (SGR), but was recently repealed after multiple efforts due to inherent flaws in its methodology which theoretically would have led to decreases in reimbursement every year.
Step 6: Billing Correctly?
Once the radiologist does their job our trust is then placed in the hands of a billing entity which will handle the steps needed to create revenue. But this trust should not be blind. The article describes three financial performance indicators that will help a practice gauge if their billing services are doing their job correctly. The first indicator is days charges in accounts receivable, or how many days pass between a procedure and collecting money. This number should not be too long but it should also not be too short. Both extreme warrant investigation.
The second indicator is adjusted collection percentage, which is the percentage of money we collect compared with what we should have collected. Ideally this value should obviously be 100 percent, but Dr. Silva explained that due to the innate challenges of the billing process these values can be as low as 60 percent. One could expect relatively higher values in a outpatient setting.
The third indicator is the collection expense percentage which are the expenses incurred for the billing process. Dr. Silva explained that out of a practice’s total expenses, the amount used for billing should not exceed approximately ten percent. Anything more warrants investigation.
To those of you in training right now it is important to understand that some practices use total RVUs generated per radiologist to gauge individual performance. One might argue against this methodology as education activities, research, economic endeavors, and leadership roles thought extremely valuable do not contribute to ones total amount of RVUs. Nevertheless, do not be surprised to interview at practices that reward and even penalize based on RVUs generated.
By Travis Fuchs, MD, 2nd year resident at SUNY Downstate Medical Center, and Co-Chair of the ACR RFS-Economics Advisory Group