Our Medical Director, Dr. Robert Kottman, who serves on the Texas Medicaid Physician Payment Advisory Committee, provided the following update from the TMA on the PPAC Recommendations for the use of the funds designated by the Legislature to settle the FREW lawsuit.

Subject: PPAC Recommendations

Today, the Medicaid Physician Payment Advisory Committee held its second meeting to fine tune the proposal it adopted in May.  Below is a summary of the PPAC recommendations.

A public hearing will be held on July 10 to take testimony.  TMA anticipates providing written comments at that time based on your (PPAC) input and input from the council and specialty societies.

New rates will be effective Sept. 1, 2007.

Background:

For adult services, the legislature allocated $101.5 million (GR) to increase the funding pool by 10 percent.

For children's services (patients under age 21), under the Frew settlement, the state allocated $203 million (general revenue) to increase the funding pool for physician services by 25 percent; another $50 million (GR) was allocated to increase payments for pediatric-related specialty services (both medical and dental).  PPAC recommended at its May meeting combining the two funding streams to allow the state to:

1. update all the Medicaid RVUs, which has not happened since 1992;
2. increase E&M codes;  
3. increase rates for preventive care codes; and 
4. increase payment for anesthesia services, which have a distinct payment methodology.

PPAC favored this approach because it achieve the following goals:  conforms with the existing Medicaid rate methodology, which is based on RVUs; straightforward to implement; transparent to physicians, achieves a measurable increase for all physician specialties, can be implemented by the Sept 1, 2007 deadline, and perhaps most importantly, appears to satisfy the plaintiff attorneys who will present the proposal to Judge Justice in July.

PPAC recommendations for children's services:

1. apply an across-the-board 2.5 percent update to restore cuts enacted in 2003 plus the following:
2. increase all E&M codes by 27.5 percent
3. increase Texas Health Steps/EPSDT codes preventive care codes.  Per the recommendation of the TMA Select Committee on Medicaid, there will be differential payments to distinguish between new and established patients and older versus younger children.
      -for established EPSDT patients, payment will increase to 92% of Medicare levels;         
      -for new EPSDT patients, payments will increase to 100% of Medicare (the state will use the Medicare conversion factor for these codes)
4. update the RVUs for all Medicaid fees to the 2007 Medicare level.  Codes that would have declined as a result of the update were held harmless and will be increased another 5% (in addition to the 2.5% rate restoration so a total of 7.5%).
5. increase payments for immunization administration by 30 percent
6. increase the anesthesia base use units to Medicare levels and update the anesthesia conversion factor by 27.5.

After all the above increases, there is still $50 million left to spend.  PPAC recommended that HHSC allocate the money as follows:

• use 20% of the dollars to further update the immunization administration fees to bring them closer to Medicare levels of $17.18 per administration
• find a way to increase payments for the professional component of pathology services billed by independent labs 
• allot any remaining dollars to further increasing those codes that received the minimum (5%) increase as a result of the RVU update.

For adult Medicaid services, PPAC recommended that these monies by used to restore the 2.5 percent cut enacted in 2003 and then to update the RVUs to the 2007 level (or get as close as possible within the available funding).  PPAC recommended that all adult services also be held harmless so that no code goes down as a result of the RVU udpate.  HHSC staff are still running the numbers and will report back to us in a couple weeks the results of their analysis.

For physicians participating in Medicaid HMOs, the HMOs will be required to pass the dollars directly to physicians.  For those HMOs that use the Medicaid fee-for-service payment methodology, they will be required to implement the increase just as outlined above.  

For HMOs that use a different payment methodology, they will have to attest to HHSC that the money has been passed through with no withholds. (for example, some plans pay some specialties 110% or more of Medicaid FFS.  They will thus have to pay 135% to assure a 25% total increase).