Trends of Medicare Reimbursement Rates for Common Plastic Surgery Procedures

Charalampos Siotos, M.D.; Michael A. Cheah, M.D.; George Damoulakis, M.S.; Jonathan Kelly, M.B.B.S., B.Ch.D.; Kalliopi Siotou, D.D.S.; Loren S. Schechter, M.D.; Deana S. Shenaq, M.D.; Gordon H. Derman, M.D.; Amir H. Dorafshar, M.D.

Disclosures

Plast Reconstr Surg. 2021;147(5):1220-1225. 

In This Article

Discussion

This study analyzed trends in Medicare reimbursement for common procedures in plastic surgery between 2010 and 2020. During this 10-year period, we observed an average increase of 2.05 percent in Medicare reimbursement. The increase in reimbursement lagged behind the increase of inflation, which was approximately 19 percent for the same period.

Interestingly, rates of physician work relative value units decreased by 0.95 percent over the same time frame. Meanwhile, facility relative value units and malpractice relative value units increased, 3.87 percent and 23.44 percent, respectively. As defined by the National Health Policy Forum, physician work relative value units account for a physician's time, effort, technical skill, and stress of providing high-quality care.[13] Meanwhile, facility relative value units reflect the nonphysician, nonclinical costs of a practice or facility, including building space, office supplies, and equipment. Malpractice relative value units reflect the cost of malpractice insurance premiums. The rise in facility and malpractice relative value units over physician relative value units suggests that the 2.05 percent increase in Medicare reimbursement may be the result of disproportionate growth in practice expenses and malpractice insurance over that of physician-associated value. Considering that physician work and practice expenses make up 52 percent and 44 percent of total Medicare expenditures, respectively, the observed increase in reimbursement likely reflects growing practice expenses.[14] Between 2001 and 2014, physician practice expenses were estimated to have increased over 60 percent.[15]

The average consumer price index is an estimate of overall economic inflation.[12] Between 2010 and 2020, there was an increase in the average consumer price index of 19.12 percent. During the same period, when adjusted for the rate of inflation, Medicare reimbursement rates decreased by 14.31 percent. This corresponded to an annual average decrease of 1.55 percent. Simply stated, Medicare reimbursement for plastic surgery procedures does not keep pace with the general cost of inflation. The Medicare fee schedule is worth 14 percent less in today's society than it was almost 15 years ago. Notably, Medicare has established a committee to examine and correct possible misvalued services.

The findings reported in this study are consistent with previously published literature regarding general surgery, orthopedic surgery, and neurosurgery procedures. In 2008, Hoballah et al. published similar findings in general surgery over the period 1906 to 2006.[16] Their in-depth analysis of more modern data—specifically, 1991 to 2006—demonstrated decreases in physician reimbursement with concomitant increases in per-capita health care expenses. This suggests that health care expenditure growth is directed away from physician reimbursement. A caveat to this would be if the trend toward lower physician reimbursement was designed as a corrective measure for previously inflated compensation. Further investigation would be necessary to evaluate this notion.

This study has limitations. First, use of Medicare reimbursement data may not be as representative of plastic surgery reimbursement compared with other surgical disciplines. Many plastic surgeons perform cosmetic surgery. These procedures are reimbursed at a market rate that is outside of the Medicare reimbursement schedule. Also, the Centers for Medicare and Medicaid Services data do not include reimbursement data from private insurers. However, many commercial insurance companies set rates based on a percentage of Medicare. Reimbursement may vary significantly depending on the location (e.g., office versus hospital) where the procedure was performed. For consistency, we extrapolated information for reimbursement rates in an office setting, which yields higher reimbursement rates for most of the procedures. Our decision may overestimate the reimbursement. Lastly, the reimbursement data are averaged across the country. Conclusions drawn from this study are based on a national average of monetary Medicare reimbursement and may not reflect geographic variations. Even so, nationally averaged data allow for broader analysis of overall trends and may provide a more effective means of assessing longitudinal change in markets.

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