By Mike Dennison

HELENA, Mar. 23, 2008 (McClatchy-Tribune Regional News delivered by Newstex) --
Medicare's payment system for physicians also is the foundation for payments made by many private insurers.

Here's how it works: Every medical procedure is identified by a code known as CPT (current procedural terminology). Every procedure also has a "relative value unit," which is a multiplier that reflects how much work and cost goes into the procedure.

This latter number, known by its acronym RVU, is multiplied times a "conversion factor," which is a dollar amount determined by the federal government each year. The product of those two numbers also may be adjusted by a numerical "modifier," such as the geographical location of the physician or hospital submitting the claim.

For example, a routine 15-minute office visit, coded as CPT 99213, has an RVU in Montana of 1.66. The Medicare conversion factor is $38.09, so multiplying times the RVU becomes about $63.

After applying the modifiers, which reduce the amount because Montana supposedly has a lower cost of living than much of the nation, and you come up with the current Medicare allowable payment to the doctor: $55.26. Medicare pays 80 percent of that amount; the patient pays the remainder.

Private insurers use the same system but have a higher conversion factor. Montana Blue Cross/Blue Shield's current conversion factor, for example, is $57.70, which is multiplied times the RVU, without any modifier. The end result is a payment to the doctor for the same office visit of $95.78.

There are approximately 7,000 coded procedures, each of which has an RVU that is used to determine what Medicare and private insurers will pay for the procedure.



Newstex ID: KRTB-0030-23983104