The Triple Threat of Bundling Codes

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Ezequiel Silva III, MDRadiology’s existing coding structure is undergoing a dramatic transformation, which is the product of numerous code screens being used by CMS and the RVS Update Committee to identify potentially misvalued services. The application of these code screens often results in the conversion of old codes to new codes. The conversion to new codes has significant implications for radiology services because the new codes are subject to a complete revaluing.¹

Revaluing triggers a cascade of effects resulting in what I call the triple threat of bundling. The triple threat has two layers. It causes immediate reductions in professional-component, technical-component, and hospital payments. In addition, the triple threat (on a more general level) has three consequences: payment reductions in all three service components, lack of a transition period for upcoming technical-component reductions, and a relatively short time between notification and implementation.

Payment Reductions

One of the screens used to identify potentially misvalued services is that of procedures frequently reported together. This screen provides an illustration of the effects that these screens can have on payment. The usual course of action for codes that are frequently reported together is to bundle the codes, based on the assumption that efficiencies occur when these services are performed together.

Accordingly, the new bundled codes often cause reductions in their professional-component and technical-component RVUs, compared with the values for the old individual codes. For example, when CT exams of the abdomen and pelvis were bundled, the outcome was a sharp reductions in value. These reductions are not limited to Medicare, since private-payor contracts can be linked to the Medicare Physician Fee Schedule. Moreover, private payors might request completely renegotiated payment rates for these revised codes.

Hospitals are paid under the Outpatient Prospective Payment System (OPPS) and also experience reductions when codes are revised. A service’s Ambulatory Payment Classification (APC) determines payment in the OPPS schedule. In the case of CT exams, when more than one is performed at the same time, those combined services are assigned to higher-paying composite APCs.

When CT exams of the abdomen and pelvis were bundled, CMS ignored the fact that the bundled codes actually represent more than one service; it placed the bundled codes into the same APC as the individual abdominal and pelvic CT exam codes. Consequently, payment to hospitals for the same services is decreased.

CMS recently began using updated data from the Physician Practice Information Survey (PPIS) in the formula that it uses to determine technical-component payment. Because the PPIS data resulted in significant technical-component reductions for radiology, CMS agreed to phase in the reductions over four years (2010–2013).

CMS refused, however, to phase in the cuts to the revised codes, ignoring the fact that these bundled codes actually represent existing services. As such, the revised codes suffered larger immediate reductions than existing codes. For that reason, the global payments for the individual codes for an abdominal CT exam and a pelvic CT exam (transitioned over four years) are essentially the same as the payment for the new bundled codes (not transitioned).

Limited Notification

Revised codes and their reduced RVUs are not made available until October of the year preceding implementation. In other words, radiology groups will have less than three months to plan for the reductions that will follow publication of the new codes. This presents challenges in planning an organization’s budget and capital expenditures for the next year.

From the professional-component side, radiology groups could be forced to adjust their revenue and salary estimates, based on the lower rates of payment. Further, business managers must decide how services reported the year before (using old codes) will be reported during the next year (using new codes).

For CT exams of the abdomen and pelvis, for example, how many times were these exams performed together under the old system, and how does this translate to reporting these services using the new bundled codes? What effect will this bundling of services have on revenue from these services and on overall revenue?

From the technical-component side, revenue projections for new-equipment purchases were probably derived from the previous