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Understanding Cost Drivers

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

Currently, there are more than 10,000 physician services designated by the Current Procedural Terminology® (CPT) or Healthcare Common Procedure Coding System® (HCPCS) codes. 

Types of Cost Drivers 

Each reflects the three major cost drivers of a particular procedure:

1) Physician work: or the Relative Value Unit (RVUw) of medical providers’ work efforts, pre-service, intra-service and post-service time. 

Patients may exhibit anxiety when examined orduring procedures resulting in the need for additional timeand effort by the physician to respond to and prepare for the examination or procedure. This uniformly adds moretime and stress to the pre-service and intra-service period as doctors respond to constantly changing behavior, questionsand level of cooperation in varying specialties. 

Follow-up communicationwith employers, family, friends and concerned others requires increased post-service times. 

2) Practice expenses (RVUpe): including non-physician costs but excluding medical malpractice coverage premiums.  

The practice expense component of the RBRVS includes clinicalstaff time, medical supplies and medical equipment. Often, the costsof supplies and equipment are not proportional to practicesize.

Major factorsaffecting practice expense are the volume of telephone, cell or internet management services, and the casemanagement and administrative work required.

For example,high patient turnover requires more examination rooms to maintain physician efficiency.

High volume requires moreclerical staff to deal with larger patient-flow volume and resulting phone calls, difficultiesdressing and undressing patients, and is marked by increasedcomplexity and time in collecting laboratory specimens. 

Thesefactors must be accounted for in any resource-based practiceexpense study and in the resulting practice expense calculationsfor medical services; and 

3) Malpractice (RVUm): representing the cost of liability insurance.

The RBRVS system assigns RVUs to cover the malpractice expensesincurred by physicians.  

These malpractice RVUs, originally calculatedfor office-based physicians, may systematically undervaluethe practice liability costs for some specialties.The prolonged statutes of limitation on some legalactions may result in increased malpracticerisk exposure for physicians providing such services [i.e., pediatricians]. 

Assessment 

The differences in exposure may not be calculated in theRBRVS system, and were not included in initial studies. Specialty specific survey data for malpractice expenseshould be used for this component when assigning final RVU valuations. 

Of course, without specialty specific CPT® codes, however, there is no wayto do this objectively. 

Conclusion

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Filed under: Practice Management | Tagged: Health Economics | 2 Comments »