The Problem Of New Technology

We all love new technology. So what's the problem? Getting reimbursed. Here is insight from an insider.

The Problem Of New Technology
We all love new technology. So what's the problem? Getting reimbursed. Here is insight from an insider.

William L. Rich III, MD

We all love technology when it improves or simplifies our lives. But the same new advances that enhance our patients' lives can cause problems with coding and reimbursement. How can we avoid these problems? We can start by learning about new coding options and the finer points of technology assessment.


Any time you do something, you have to be able to identify it. That's coding. Then it has to be valued. Then someone has to develop a coverage policy. And finally, someone has to pay for it. These are the steps to payment.

We're all familiar with Category 1 codes, such as 66984 for cataract. These are the gold standard codes that are readily recognized and reimbursed. Category 2 codes are the performance measure codes.

The new Category 3 codes are an excellent innovation. With this alphanumeric system, anyone who is doing a study can apply electronically for a new Category 3 or new technology code. These are available three times a year. They can be used to accurately track procedures during ongoing studies. If the new technology isn't viable, it sunsets in 5 years.

Best of all, carriers may pay for Category 3 codes if there is good literature. But once you assign a new code, how do you determine its worth?

All new Category 1 codes are referred to the AMA Relative Value Update Committee (RUC). The RUC assigns work values and practice expenses for these codes. The Centers for Medicare and Medicaid Services accepts 94% of these values, and all commercial payers use this system.

Every one of the 7,500 CPT codes has a total relative value unit (RVU), and the fee for any service you perform is the total RVU of that code multiplied by a conversion factor, which can vary greatly depending on the payer. The RVUs for a membrane peel, for example, don't change, but the fee changes by the conversion factor. Most of an RVU is the work you do, about 43% represents practice expenses and a small portion is your malpractice insurance.

By a two-thirds vote, 24 doctors determine the value of your work, based on time, mental effort and judgment, technical skill and iatrogenic risk.


How do carriers approve Category 1 payment? Among commercial carriers, only Blue Cross and Blue Shield have an evidence-based independent technology assessment center. Most other commercial carriers adopt the Blues' technology assessment. Negative assessments may be appealed if further evidence supports the technology.

Public carriers, namely Medicare and Medicaid, make coverage decisions at national and state levels. National coverage, in which one decision applies across the country, would appear to be simpler. However, I frequently advise against seeking national coverage because it requires a much higher level of evidence. What's more, national coverage decisions supersede all local decisions, so failure at the national level puts an end to reimbursement at all levels.


Coverage for new technologies comes out of the entire pool of Medicare dollars for all physicians. And it's a finite pool, the growth of which is set at the country's gross domestic product (GDP).

The GDP is growing a little, and the amount of services delivered per beneficiary per year has gone up about 8.6%. Of that, there's been a 13.8% increase per year in diagnostic testing. Surgical services haven't gone up at all.

So basically, the greatest threat to the long-term financial viability of Medicare is not the aging population, but rather the growth in technology.


Our role in this process is to understand technology assessment. As we develop good technology, we need to work with industry to advocate for it. And we need to honestly evaluate and address marginal technologies. Value-blind technology assessment leads to value-blind payment cuts, and the greatest threat to physician payment is marginal technology.

Dr. Rich is Secretary for Federal Affairs for the American Academy of Ophthalmology and chairs the American Medical Association Relative Value Update Committee. He is in private practice in Falls Church, Va.