Handling Fair Market Value for Unlisted Procedures

Physician compensation continues to have new areas to tackle, from payments for quality to excess call to shared savings. In addition, VMG Health has recently seen an increase in unlisted procedures and inquiries from organizations on how to appropriately compensate physicians for their services. It is important to note that while unlisted procedures may still be reimbursable by a payor(s), they do not yet have a corresponding work relative value unit (WRVU) assigned by CMS and the American Medical Association (AMA).

This raises the question from health systems: what is an appropriate methodology to account for unlisted services when determining physician compensation if the physician is paid based on a WRVU productivity model and/or a base salary with a WRVU-based bonus model?

Due to the complexity of the CMS Medicare Physician Fee Schedule (MPFS) and the magnitude of codes listed, CMS and the AMA do not rebase WRVUs for each CPT code each year. As a result, advances in medical technology and the development of new, innovative procedures lead to services being provided to patients who are unlisted on the MPFS. VMG Health has observed a sizeable uptick in unlisted services including, but not limited to, implants, imaging, surgical, and laparoscopic services.

When determining physician compensation for unlisted services, health systems should ensure the proposed payment is consistent with fair market value (FMV). In addition, contractual terms should be considered to prevent the potential for duplicate payments. One approach VMG Health has frequently observed in the marketplace is compensating the physician based on a percentage of revenue received for the unlisted service. A few important factors to consider:

• Is the procedure solely performed by the physician?
• Is the revenue solely for professional services or is the revenue received on a global basis? In other words, are all technical expenses and revenues included in the payment (space, equipment, supplies, non-provider staff, etc.)?
• If applicable, what incremental costs are associated with the unlisted service, and are the costs primarily fixed or variable?
• Is the physician’s contract structured as a base salary with a WRVU-based bonus? Payments for unlisted procedures should not be paid in addition to the base salary until the base salary is met.
• Is the procedure considered cosmetic and how do revenues and costs vary between cosmetic and medical procedures?

Another approach when compensating a physician for unlisted procedures is a comparative code method and utilizing the WRVU associated with the comparative code. However, it can be difficult to confirm an accurate comparative code for certain procedures. This could understate or overstate the WRVU associated with the unlisted service. There are several factors to consider when selecting a comparison code such as:

• Procedures of similar nature on the same body area.
• Physician work effort required.
• Percentage of time the unlisted procedure takes compared to the comparison code.

As more new technology is introduced to the healthcare market, determining physician compensation for unlisted procedures will continue to be a topic of discussion for health systems. Before paying physicians for unlisted services, health systems should ensure that the compensation arrangements are commercially reasonable and do not result in compensation that exceeds FMV.