It may appear simple but the annual release of the conversion factors by CMS can have a substantial impact on your revenue cycle especially if you are bidding on new business. The differences of locality can be substantial and should be researched prior to making any revenue forecasts.
Background
CMS issues a conversion factor table annually that outlines the rate CMS will reimburse for each anesthesia unit billed. The formula is as follows:
· (Base Units + Time Units) * Conversion Factor = Anesthesia Payment Amount.
The rate is an attempt by CMS to address the actual cost of care in that specific locality.
Impact
To assesses the impact on your practice or a new business opportunity it is important to review the locality table as updated each year. The table can be found at: https://www.cms.gov/Center/Provider-Type/Anesthesiologists-Center under Important Links - Billing/Payment. Carefully review the locality for the business you are considering.
As an example, the conversion factor for Florida is $21.93 but the rate increases to $23.78 for Miami (an increase of $1.85 or 8.4%). What can this mean to a practice? If a practice is fully in-network with a typical payer mix of 50% government payers and 50% commercial payers and annual unit volume of 100,000 the difference in reimbursement will be more than $200k annually.
What do you need to do?
There are several things you need to do:
· Ensure you know the CMS determined locality for the facility location (just saying it is in the Miami area is not sufficient).
· Understand the volume of units produced in that location (units will vary greatly from case volume).
· Be careful of multi-locational operations as each will need to be assessed individually.
· Do not assume that simply being an expensive area to live will have higher reimbursement. Florida outside of Miami pays $21.93, Hawaii only pays $21.79.
Questions
If you have further questions about your anesthesia business opportunities, please reach out to Value-Based RCM. We are always available to assess the opportunity with you.