Washington state to adopt RBRVS formula - resource based relative value scale - State Report

Business & Health, June, 1992 by Eric Zicklin

In Washington state, three state agencies are uniting in an unprecedented effort to create a new physician payment schedule modeled on the Resource Based Relative Value Scale.

The RBRVS was developed by researchers at the Harvard School of Public Health and has served as the physician payment program for Medicare since January. The state hopes the new fee schedule will stem the 36% rate of growth in health expenditures experienced in fiscal year 1991.

The new payment schedule will be implemented for the state's 500,000 eligible Medicaid recipients; its workers' compensation program, which has approximately 65,000 open claims each month; and the self-insured Uniform Medical Plan, which covers 110,000 state employees, retirees, and their dependents.

The rest of the state's 240,000 covered lives are enrolled in one of eight managed care organizations. The changes for Medicaid and workers' compensation will be budget neutral.

By comparing surgical and medical procedures on such elements as their respective difficulty, utility, and required training, the RBRVS determines the reimbursement value of each procedure. The actual reimbursement level can be adjusted by altering the conversion factor by which all procedures are multiplied.

Washington's plan calls for different conversion factors for each of the three state programs. The conversion factors have yet to be determined as the project is in its infancy. The three state agencies acting for Medicaid, the self-insured, and workers' compensation programs will collaborate to determine the conversion factors and to calculate a fee schedule over the next six months or so.

Washington's Health care Authority, in Olympia, administers the state's employee medical plan and is the architect of the state's planned reforms. It hopes that combining the three state programs under one fee schedule will reduce physicians' paperwork and cut administrative costs in the process. RBRVS will also generate data on physicians with high bills and those who work more efficiently. Linda Melton, manager of physician reimbursement for HCA says of the state's self-insured uniform medical plan for state employees, "The RBRVS should allow us to reduce payments for procedures which have been perceived to be overpaid and overutilized."

By redistributing expenses away from expensive specialists and toward less expensive primary care providers, Melton says she hopes to achieve long-term savings.

The payment schedule for the state's self-insured plan is currently based on usual and customary fees.

Standing between the state and its Jan 1, 1993 target deadline are maternity and pediatric charges, two areas that never required researchers' attention for the Medicare population.

Once the new payment schedule is set the HCA will contract with preferred providers who agree to accept the new pricing. Joy Wilson, health committee director at the National Conference of State Legislators, in Washington, says that "by fusing their various powers into one strong voice, the state will wield tremendous buying leverage over providers."

As the largest purchaser of health care in Washington, the state Medicaid program spent $667.7 million of the state's $1.34 billion in health care expenditures in fiscal year 1991.

Washington employers are aware of, if somewhat daunted by, the state's purchasing power. "The Health Care Authority is behaving like any other strapped entity should, by pooling its resources and finding creative methods of health care management," says Andrea Castell, executive director of the Health Care Purchasers Association of Puget Sound, a business coalition in Seattle.

If this fee schedule is successful and the state begins paying something like 80 cents on the dollar for health care, we know Washington doctors will make up that difference somewhere," she says.

"Employers in Washington will have to create fee schedules of their own, or bear the burnt of cost shifting beyond recognition," she predicts.

Eric Zicklin is a former associate editor of B&H.