The Department of Vermont Health Access (DVHA) has indicated that is ready to work with its partners in other state leadership roles to enhance the funding it pays for professional service rates.
 
On December 16th, it announced it was amending the Medicaid fee schedule for the medical care services provided by physicians and other health care professionals.  At 22.5 percent in 2009, Vermont’s Medicaid program is the second highest in the country as a percentage of a state’s total personal health care spending (Health Spending by State of Residence, 1991–2009; Medicare & Medicaid Research Review 2011: Volume 1, Number 4; Cuckler, G. et al; pages E12-E13)so its fee schedule has a disproportionately large impact on the viability of physician practices in Vermont.  
 
While VMS strongly supports the Department's efforts to improve its fee schedule methodology, the Society opposed the Department's proposed amendments for a number of policy reasons, as well as serious concerns regarding the lack of due process in the amendment adoption process and the fee schedule’s inconsistency with Act 48 – Vermont’s health care reform legislation.  In outlining its specific policy and adoption process concerns, VMS also provided DVHA with recommendations for improving the Department's fee schedule and its amendment process. 
 
DHVA accepted many of VMS’ suggestions, however the final Medicaid fee schedule falls far short of Act 48’s principles for health care reform.  The multiple state officials involved in implementing Vermont health care reform legislation have made it clear that they anticipate major changes in the way physicians and other health care providers are reimbursed in the future. VMS believes it is reasonable to ask state government to lead by example and end the long-standing practice of underpayment by the reimbursement systems they control.
 
VMS requested that the comment period be extended to allow for a comment period of at least 30 days from the date of the original announcement.  In addition, VMS requested that a public hearing be held. However, DVHA finalized its amendments on the Medicaid fee schedule on December 29, with an effective date of Jan. 1, 2012. 
 
Under Act 48, 18 V.S.A. § 9371, fourteen principles are adopted as the framework for reforming health care in Vermont.  Principle 12 states that the system must enable health care professionals to provide, on a solvent basis, effective and efficient health services.  In addition, 18 V.S. A. § 9376 charges the Green Mountain Care Board (GMCB) with setting reasonable rates for health care professionals, and it states “it is also the intent of the general assembly to eliminate the cost shift between the payers of health services.”  
 
Vermont physicians had the nation’s lowest level of spending per capita below Medicare’s sustainable growth rate formula (SGR) target.  This is based on a recent article in the New England Journal of Medicine (The Sources of the SGR “Hole”; Ali Alhassani, M.Sc., Amitabh Chandra, Ph.D., and Michael E. Chernew, Ph.D.; December 21, 2011 - 10.1056/NEJMp1113059) on a scheduled cut in Medicare physician fees of 27.4% for 2012 due to the SGR. Since Medicare uses a single-fee schedule, this measure of comparative efficiency is based on the conservative utilization and low intensity of services provided by Vermont physicians to their patients when compared to their national peers.  
 
According to DHVA’s proposed amendment analysis, the Medicaid fee schedule would reimburse most procedures at approximately 66.5 percent of Medicare, and it would reimburse office visits and maternity visits at approximately 82.7 percent of Medicare -- with an overall reimbursement level of 78.7 percent of Medicare. However, the analysis overstates its reimbursement percentages, since it does not reflect an additional 2-percent cut applied to all codes, except for the evaluation and management (E&M) codes.
 
By way of contrast, DVHA reimburses federally qualified health centers (FQHCs) on a cost basis at 125 percent of Medicare, and VMS estimates that private health insurance companies reimburse professional services at rates in excess of 132 percent of Medicare.  Therefore, DHVA is reimbursing most physician services at half the rate of private insurance companies, and it pays non-FQHC primary care physicians at two-thirds the rate paid for similar primary care services in FQHCs.
 
When DVHA adopted its current Resource Based Relative Value Scale (RBRVS) based system on Jan. 1, 2011, in contrast to Medicare’s single conversion factor, DVHA adopted two conversion factors.  In the proposed amendments, DVHA recommended using three different conversion factors for different ranges of procedure codes.  DHVA’s use of three different conversion factors -- instead of Medicare’s use of a single conversion factor -- fundamentally undermines the rationale of the RBRVS system and destroys the integrity of the RBRVS Payment Methodology as a means to establish appropriate reimbursement amounts.  As a consequence, the multiple conversion factors debase the work and practice experience values for many of the procedure Relative Value Units (RVUs) established by CMS by as much as 23 percent. 
 
VMS recommended that DHVA adopt a single conversion factor for its proposed RBRVS fee schedule and the conversion factor should be the one used by Medicare.  This recommendation is consistent with the requirements of V.S.A. Title 32, § 307(d)(6) which calls for the governor’s proposed financial plan for the Medicaid budget to include “ recommendations for funding provider reimbursement at levels sufficient to ensure reasonable access to care, and at levels at least equal to Medicare reimbursement.”  
 
Absent the use of a single conversion factor, VMS recommended that DVHA should not further compromise its RBRVS Payment Methodology by moving away from the current two conversion factors to three conversion factors.  One consequence of the proposed amendments new conversion factor was a reduction in payment for E&M codes of $862,804 from CMS’s rebased RVUs.  Since E&M codes are typically used by primary care physicians, VMS recommended that the conversion factor be at a sufficient level to allow for the increased reimbursement appropriate to the increased value of the E&M codes’ RVUs.
 
Federal law, under 42 U.S.C. § 1396a.(30) (A), requires that a state Medicaid program must “assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.”  
 
Under the proposal, DVHA recommended a 21.4-percent reduction in payment for radiological procedure codes in 2012.  Since DVHA had adopted a 25.3-percent reduction in payment for these same procedure codes in 2011, VMS indicated the two-year cumulative 46.7-percent cut in Medicaid reimbursement for radiology procedures was excessive and it could have an adverse impact on Medicaid beneficiaries’ access to radiological services in Vermont. 
 
The Medicaid budget for state fiscal year 2011 (SFY11) included $2 million of anticipated savings to be achieved by requiring prior authorization for selected radiology services.  The savings were based on an anticipated reduction of the utilization of high-tech imaging services for Medicaid beneficiaries of 20 percent. 
 
With respect to Computed Tomography (CT) use in Vermont, the state has one of the lowest rates in the country. The Vermont Department of Banking, Insurance, Securities and Health Care Administration reported the following: “While the rates of CT events increased in Vermont over five years, the state has much lower rates than the nation and the adjoining HRR’s. The national average for CT events was 63.8 events per 100 people while the Vermont state average was just 41.8.” (source).
 
In order to avoid a two-year cumulative 46.7 percent cut in Medicaid reimbursement for radiology procedures, VMS recommended that DHVA retain radiology procedures under its current conversion factor.  If it is necessary to find additional resources to achieve this recommendation and other recommendations, VMS suggested using a part of the $22 million in savings attributable to decreased physician services identified in the DVHA SFY12 budget adjustment document.  Due to the federal government sharing in the cost of the Medicaid program, Vermont would pay approximately 42 percent of any added cost.
 
In response to VMS’ recommendation to utilize one conversion factor, DVHA concurred that it would be optimal to do so in the same manner as implemented by Medicare. However, DVHA indicated it was limited in its ability to pay providers based on the appropriation from the state Legislature and in order to ensure accessibility to high-volume services used by Medicaid beneficiaries, DHVA determine it needed to implement three conversion factors.
 
Upon further consideration, DVHA decided to change its proposed conversion factor for radiology services. For these services, DHVA will use the same conversion factor that will be used for E&M and maternity-related services. This policy is similar to the policy put in place by DVHA effective Jan. 1, 2011.
 
Finally, in response to VMS’ recommendation for DVHA to have an overall strategy related to the reimbursement for professional services under its Medicaid fee schedule, DVHA stated that its goal for setting rates for all professional services should be at or above the prevailing Medicare rate.  And in light of V.S.A. Title  32, § 307(d)(6) and Act 48, DVHA indicated it is ready to work with its partners in other state leadership roles to enhance funding for professional service rates paid by the DVHA.
 
VMS will continue in its efforts to encourage the administration to submit to the General Assembly recommendations for funding physicians’ reimbursement by Medicaid at levels sufficient to ensure reasonable access to care, and at levels at least equal to Medicare reimbursement based on the RBRVS methodology.