By Jean Covillo, DNAP, MA, CRNA, APRN

Physician Anesthesiologists (ANs) and Certified Registered Nurse Anesthetists (CRNAs) are qualified and licensed to provide anesthesia services. CMS directly reimburses both providers precisely the same, simply because it recognizes that both providers perform the same service, with the same patient safety outcomes, while adhering to the same quality performance standards. Reimbursement parity has already been established in law as clearly defined in the provider nondiscrimination section of the Affordable Care Act (ACA).

Why, then, are commercial payers (Payers) reimbursing CRNAs significantly less for the same service? The reason is obvious….. because they can. Payers are too rich, too powerful, and too influential to be held accountable by the “little folk.” The case for CRNA reimbursement parity is clear and convincing, as outlined in the article below. Although winning the argument and affecting real change might seem as challenging as David vs. Goliath, gaining support from Hospital C-Suite executives who can appreciate the financial benefits, might be all that is needed to tip the scales.

Takeaways:

• CMS has set the value for the anesthesia procedures and reimburses only those providers “qualified” to perform them. CMS has deemed CRNAs “qualified” as long as the procedure is within the CRNA state scope of practice. Reimbursement parity between the two provider categories is recognized and established by Medicare Part B in reimbursement rules and regulations.
• CRNAs are the only nursing specialty authorized by Medicare Part B to receive direct reimbursement at 100% of the physician fee schedule, while all other nursing specialties receive a lesser percentage.
• CRNAs are not physician extenders and are not dependent on ANs to provide the service.  Both providers deliver the same service with the same patient safety outcomes, and both deliver this service according to the same quality and performance measures and standards.
• Fee Valuation-Resourced Based Relative Value Scale (RBRVS). All physician fees (with the exception of ANs)  are valued according to the RBRVS -where the “cost of educational training” is one of three factors contributing to the underlying fee. In contrast, anesthesia fees are based on the “complexity” of each procedure with value added for actual time spent providing the service.   Educational costs and training expenses were not factored into the underlying AN fee calculations.  This method is unique to ANs and CRNAs. Given that both CRNAs and ANs  provide the same services for the exact same procedures, and educational expense was never factored into the fee valuation, it follows that educational expense  simply cannot serve as a basis to rationalize reimbursement disparities when the “deliverable” remains  the same.
• When Payers discriminately lower CRNA rates, they effectively sabotage hospital cost-saving efforts by keeping a portion of the CRNA fee for themselves. Conversely, when Payers are held accountable to nondiscrimination laws, reimbursement is equitable among providers.  Revenues are passed to hospitals and businesses where they belong; serving to offset operating expense and eliminate the need for hospital subsidies.
• The simplest argument to be made is that the law requires it to be so. Patient Protection and Affordable Care Act. 42 U.S. Code § 300gg–5 – Nondiscrimination in health care.⁶

a)Providers  – A group health plan and a health insurance issuer offering group or individual health insurance coverage shall not discriminate with respect to participation under the plan or coverage against any health care provider who is acting within the scope of that provider’s license or certification under applicable State law. This section shall not require that a group health plan or health insurance issuer contract with any health care provider willing to abide by the terms and conditions for participation established by the plan or issuer. Nothing in this section shall be construed as preventing a group health plan, a health insurance issuer, or the Secretary from establishing varying reimbursement rates based on quality or performance measures.

The case for parity begins by reviewing important background information relevant to the argument: the historical significance behind the Medicare decision to accord CRNAs direct billing rights and a brief review of the mechanisms associated with billing under the four anesthesia delivery models. The case will follow with a reliance on facts showing clear and compelling arguments in favor of legislatively mandated reimbursement parity, the economic consequences when ongoing disparities exist, and the importance of holding commercial insurance companies accountable to parity policies.

Background

CRNAs were the first nursing specialty to be accorded the right to bill Medicare Part B for services through the Omnibus Reconciliation Act of 1986 (OBRA), becoming effective in 1989 when payment rules and regulations were established. CRNAs are the only nursing specialty authorized by Medicare Part B to receive direct reimbursement at 100% of the physician fee schedule, while all other nursing specialties receive a lesser percentage.¹ When CRNAs provide nonmedically directed anesthesia services, under the QZ modifier code, Medicare reimburses at the same rate as physicians.^2-4

The reason for the government’s decision to recognize parity is likely due to the conclusion that CRNAs were not “physician extenders,” as stated by the Physician Payment Review Commission (PPRC) in the Annual report to Congress in 1989.⁵ The PPRC report describes CRNAs as

“distinctly unique compared to other Nonphysician Practitioners (NPP) in that they (CRNAs) were not considered “physician extenders.”

The report states in part,

“CRNAs began administering anesthesia in the mid-nineteenth century and, in doing so, became the first nurse specialists. Their early role was not as physician extenders, but rather as primary providers of anesthesia.” ^{5 pg. 185} 

The PPRC report spoke directly to parity in payment between the two provider categories, clarifying the intentions behind the decision.

“Beginning in 1991 and extending through the transition to the full Medicare Fee Schedule in 1996, the nonmedically directed CRNA conversion factor will gradually increase until it is equal to the physician conversion factor.  This places the nonmedically directed CRNA on parity with physicians and provides a differential payment to medically directed CRNAs.^{(5 pg. 194)}

Although Medicare authorized CRNA reimbursement at the same rate as physicians, Payers have been reticent to do so. Payers regularly update reimbursement policies within days of Medicare changes to mirror these policies. Still, many ignore payment parity, probably because there has never been any recourse or consequence. Some Payers continue to apply negative payment adjustments to the CRNA rates, while others exclude reimbursement for some procedures. Some commercial and state Medicaid plans do not recognize the CRNA as eligible for reimbursement for specific procedures under the QZ modifier even though the CRNA is authorized through their scope of practice and state licensure to provide these services. To participate in commercial plans, CRNAs often must accept reduced payments and occasional denials, resulting in a lower percentage of the prevailing physician rates and, in some instances, receiving no payment.

These practices and policies contradict existing laws in the provider nondiscrimination section of the affordable care act (ACA).⁶ Payer reductions in CRNA reimbursement based purely on licensure rather than performance and quality disincentivize cost-effective strategies and unfairly disadvantage the CRNA from freely competing in the market. As it stands, Payers, rather than hospitals and anesthesia businesses, are benefitting from the “cost savings” when CRNAs provide the same services as provided by more costly AN medical direction models. Although patients continue to receive the same quality anesthesia service when CRNAs provide the service, the Payer directly benefits from the savings generated by compensating CRNA about a third less than an AN. When Payers can discriminately reimburse two separate providers even while both deliver the same service, hospitals or groups have no incentive to hire less costly CRNAs. Although increasing the CRNA utilization dramatically lowers operating expense, the  reduction in reimbursement offsets the effort. But when Payers are held accountable to nondiscrimination laws, the savings are passed to hospitals and businesses where they belong; serving to offset operating expense and eliminate the need for hospital subsidies. Consequently, these businesses are incentivized to utilize more cost-efficient anesthesia delivery models comprised of higher numbers of CRNAs and less costly ANs resulting in lower overall healthcare costs.

Anesthesia Delivery Models and the QZ Modifier

Anesthesia reimbursement is calculated differently from all other physician procedures. Each procedure is assigned a base unit value. The “procedural complexity determines the number of base units”; the more complex the procedure, the higher the base units. Each 15-minute interval is equal to one time unit. Modifier units can add more units to the procedure, i.e., hypotensive technique, etc., as the procedure gains complexity beyond the existing base units.  Reimbursement is calculated by taking the base units  + modifier units + time units to get the total billable units.  Total billable units are multiplied by a conversion factor  (CF) to complete the billable charge.  The conversion factor is the rate or dollar amount assigned to 1 unit of work.   Medicare sets the value for the CF annually, and both CRNAs and ANs are reimbursed the same according to this “set” rate.  But this doesn’t hold with Payers.  Payers negotiate the rate (CF) separately with each contracting provider or group. Confidentiality and nondisclosure language in these commercial contracts prevent providers from sharing their contracted rates.  Consequently, providers are hard-pressed to know the prevailing rates in the area or what the market will bear.

Anesthesia services are provided through one of the four delivery models:⁷ Physician “personally performed,” CRNA “personally performed” without medical direction by a physician (QZ), “Medical Direction,” and “Medical Supervision.”Two of these delivery models involve anesthesia delivery by a solo provider, AN, or CRNA.  In the “personally performed” delivery model, reimbursement is fully allocated to the service provider.  In other words, the provider is given the whole pie. When CRNAs provide anesthesia service alone, the QZ modifier code is used on the billing claim to signify the CRNA administered the services without medical direction from an AN.  The two remaining anesthesia delivery models effectively increase non-reimbursed expenses through the added overhead costs of another provider, supervising or directing the anesthesia delivery without any corresponding offset in reimbursement. When ANs “medically direct” or “supervise,” separate provider modifier codes are placed on the claim identifying the conditions in which the anesthetic is being delivered.  A properly submitted claim will show each of the provider’s codes.   The combination of codes used represents the anesthesia delivery model.   For example, the code QK/QX would signify a medically directed model, and payment would be conditioned on the AN performing all seven TEFRA steps (see table below for TEFRA steps).

Modifiers signify the provider type (physician or CRNA) and the delivery model. There are other modifiers, but these will be the only ones addressed for the discussion. The following table summarizes the modifiers, the conditions for payment assigned to each delivery model, and the percentage of the payment (or pie) each provider receives for the procedure charge.

Modifier Codes and Anesthesia Delivery Models^7,8

Medicare Claims Processing Manual Chapter 12 – Physicians/Nonphysician Practitioners, see Section 50 for AN Services and 140 for CRNA Services

It is important to note that in most cases, only one payment is allowed per procedure regardless of delivery model or AN involvement.  In other words, there is only one pie.  “Medical direction” and “medical supervision” increase the number of providers billing for the same procedure, effectively forcing the pie to be shared between the two providers.  Though the billable charge remains the same, the anesthesia delivery model reallocates the payment between both providers.  In other words, the whole pie offered as payment to the solo providers is now split between the two.  The CRNA is always reimbursed for half the units delivered when not working alone, but the AN portion depends on meeting the conditions defined in the anesthesia delivery model. The medical direction model lists 7 steps that must be completed for the AN to meet the conditions for payment.

When ANs cannot perform these 7 steps, conditions are not met for medical direction, and the model defaults to medical supervision (unless the AN decides to bill the claim as QZ).  The medical supervision model results in pieces of the pie being left on the table and less payment than if the CRNA had performed the procedure alone.  In this instance, not only is the pie divided but parts of it are being left behind.  Under the “failed” medical direction model, the model defaults to “medical supervision,” and payment is nearly cut in half; 50%  CRNA and 3-4 units for the ANs. This is definitely not cost-efficient.  Consequently, ANs provide a “workaround” when failing to meet the conditions of medical direction by submitting the claim under the QZ  modifier as a means to recoup the lost units instead of accepting the alternative of losing units under “medical supervision.”⁹ In this manner, the claim is reimbursed at 100% since the portion assigned to the CRNA increases.  Since the physician wasn’t able to meet the conditions, coding the claim as QZ  could be considered technically accurate, but using this code for this type of “workaround” renders any kind of reporting related to the QZ modifier useless since an AN was onsite at the location.  As it stands, it is impossible to ascertain how many CRNAs are truly providing QZ services without an AN onsite, what geographical location QZ services are provided, and in which settings these services are administered, i.e., hospitals, surgery centers, clinics, etc.

Valuation

The higher cost of education received by physicians as compared to CRNAs has formed the basis for arguments by physicians and insurance Payers that rationalize disparities in reimbursement rates. These arguments would have merit if the educational costs were included in the original methods of fee valuation. While all other physician specialties included the educational expense as one of the three components contributing to their valuation,^10,11 ANs did not. Instead, ANs valued the service by the total number of billable units derived from the procedure, where total units equal the sum of procedural base units, modifier units, and time units. The reimbursement amount is then calculated by multiplying the total units by a conversion factor (rate in dollars) which CMS determines. Base units merely reflect “procedural complexity” and do not consider operating costs such as overhead or education.

Given that both CRNAs and ANs are licensed and qualified to provide the same anesthesia services for the exact same procedures, and educational expense was never factored into the valuation of the fee, it follows that these arguments simply cannot serve as a basis to rationalize reimbursement disparities when the “deliverable” is the same.

Quality and Safety

Finally, arguments suggesting differences in “quality and safety” as the reasons for higher physician payments have been shown to be without merit. Multiple research studies have failed to demonstrate a difference in safety between the two groups.^12-17 In a recent study conducted by Negrusa in 2016,^15, more than 5.7 million anesthesia claims were identified from a 2011-2012 large commercial database. These claims were analyzed for differences in patient safety outcomes between the anesthesia delivery models.   The results suggest that there is strong evidence of differences in the likelihood of anesthesia complications by patient characteristics, patient co-morbidities, and the procedures being administered, but virtually no evidence that the odds of a complication differ by the scope of practice or delivery model.

Reimbursement Parity Vs. Cost-Effective Strategies

Parity in reimbursement means reimbursing CRNAs at the same rate/unit as their physician counterparts when providing the same service.  Medicare has fixed rates that effectively establish parity between the provider categories; both are reimbursed through the same conversion factor.   Payers negotiate these rates with each contracting group of providers.  CRNA groups that don’t include physicians under the contracting roster are reported to receive a much lower rate from these Payers than physician counterparts.  Oftentimes Payers negotiate CRNAs rates based on a percentage of the physician rates.  CRNAs who wish to participate in the plan are forced to accept these lower rates or risk even lower out-of-network payments.

CRNAs that argue against parity do so out of concern that parity demands could be misconstrued as a “not so subtle” CRNA campaign to increase salaries. While others rely on the flawed premise that cost-effectiveness cannot be attained when reimbursement is the same.  Reimbursement and cost-effective strategies are not synonymous, nor are they similar terms (other than both relating to money). Cost-effective strategies do not relate to the “fixed cost” of an item. In this case, the “fixed cost of reimbursement” refers only to the cost of the anesthesia procedure and does not contemplate additional expenses arising from the service itself, i.e., number of providers needed per case, call services, and time otherwise spent between cases, all of which add to the underlying operating expense.

CRNAs are more cost-effective simply because the non-reimbursed operating expense associated with the “CRNA-only” delivery model is significantly less than other models that require redundant staffing, or sharing the “pie” between two equally qualified providers^18-24.  In addition, the CRNA’s salary is less than half that of an AN, which further reduces operating costs and contributes to a much more cost-efficient service. Even though reimbursement is fixed, profitability is translated directly to hospitals and surgery centers through lower operating costs and contracts free from stipends or guarantees. When reimbursement parity exists, the reimbursement amount is sufficient to offset these costs.  Without it, hospitals are left to make up the difference which unfairly disadvantages the CRNA in the competitive market.

CRNAs serving hospitals and surgery centers across the country must negotiate with commercial insurance Payers for their reimbursements. Many of these nurse anesthetists report an inability to negotiate rates equivalent to their AN counterparts. In addition to lower rates, Payers are refusing to reimburse CRNAs for procedures they are qualified to perform. This form of payment discrimination obstructs free and fair competition within the market. In the presence of reimbursement parity, operating expenses associated with the actual cost of providing anesthesia services (24-hour call and downtime between cases) could be fully offset through the QZ delivery model.

Summary/Conclusion

True reimbursement parity is blind to the credentials of the anesthesia provider. An equitable payment model enables CRNA services to become self-sustaining and competitive as a cost-effective solution in today’s healthcare market. Long-term reductions in healthcare costs can be sustained when the business entity (hospital or group) has the power to control and implement changes that directly translate to cost-saving benefits for themselves without altering the quality and safety of the service provided. Cost-effective strategies only work when companies are incentivized to improve profitability by initiating changes to staffing models that result in reduced operating expenses without offsetting revenue loss.

The passage of the ACA has resulted in the increased cost of medical and preventive health services to more than 30 million additional people.  For a country recovering from a national pandemic and arguably the highest health care costs in the world, it is essential to recognize the economic value CRNA-directed care brings to hospitals struggling to stay afloat.

The ACA requires Payers to reimburse providers non-discriminately regardless of licensure when performing the same service. The intent of this Act was to challenge the system to improve processes designed to reduce overhead and increase productivity without any loss in revenue. Hospitals have risen to the challenge with “efficiency-driven anesthesia models” where higher numbers of CRNAs can more flexibly provide the same services while decreasing overhead expenses.  This can only be achieved through reimbursement parity and ensuring Payer policies provide equitable opportunities among providers.

But when Payers discriminately lower CRNA rates, they effectively sabotage these cost-saving efforts by earmarking a portion of the CRNA fee as “profitable savings” for themselves.The ACA wasn’t intended to serve as a profitable windfall for Payers or prevent CRNAs from freely competing in the market. Currently, there are no regulations to enforce Payer compliance with nondiscrimination provisions. Instead, Payers are “trusted to use good faith efforts when interpreting the law” which has left many hospitals holding the bag- necessitating anesthesia subsidies to offset revenue loss.

Simply put, when Payers are held accountable to nondiscrimination laws, the savings are passed to hospitals and businesses where they belong. Consequently, these businesses are incentivized to utilize more cost-efficient anesthesia delivery models comprised of higher numbers of CRNAs and less costly ANs which ultimately lowers healthcare costs, reduces/eliminates subsidy requirements, and improves the overall healthcare economy.

References

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