“Show Me the Money” Part 2: A Resident’s Guide to Healthcare Reform and How It Will Affect Their Future Paychecks

by Lindsay Janes, MD
Resident, Northwestern University

Most residents currently in training have attempted to follow the healthcare debate of the past decade. Though without intimate knowledge of billing and the business of medicine, understanding some of the key changes is difficult. Buzz phrases like “meaningful use”, “relative value unit”, and “sustainable growth rate” are recognized, but not understood. But understanding healthcare reform is particularly pertinent for residents currently in training because it is changing how we will receive pay for the surgery we provide, thus changing the landscape of available job opportunities.

The Affordable Care act is broken down into ten major titles:

Title I: Quality, affordable health care for all Americans. Title I is generally well-accepted and includes sections for no lifetime or annual limits, coverage of preventative health services, and extension of dependent coverage to age 26. Additional subtitles relate to regulating inflation of insurance premiums.

Title II: The role of public programs. Title II was one of the most hotly debated titles because it outlined the Medicaid expansion. The effect of the Medicaid expansion for plastic surgeons is difficult to assess. Medicaid has the lowest reimbursement rates compared to all other insurance types. However, given that many surgeons covering craniofacial and hand trauma largely provide care for un-insured patients, the effect of the expansion is unclear. Early data has shown a greater number of hand and craniofacial trauma patients are covered by Medicaid, though how that has affected reimbursement varies.

In a study from The Ohio State University looking at 523 patients between January 2012 and December 2014, reimbursement rates for maxillofacial trauma surgery were significantly increased from 14 to 20% after the Afforable Care Act. The average dollar amount billed by surgeons per procedure did not change significantly, but the average dollar amount collected increased 40% [i].

Subsequently, the authors reviewed all patients who underwent hand surgery between January 2008 and June 2016 at The Ohio State University. After implementation of the ACA, the proportion of uninsured patients dropped significantly from 15% to 6.4% while the proportion of patients on Medicaid increased significantly from 9.5% to 17.8%. However, the overall reimbursement rate did not significantly change after ACA (32.3% vs 30.3%) [ii].

A review of patients undergoing plastic surgery procedures, including breast reconstruction, after Medicaid expansion in New York (which pre-dated ACA) demonstrated a 7.2% increase in the proportion of Medicaid beneficiaries without a significant change in the un-insured. The authors concluded that the Medicaid expansion increased access to breast reconstruction in underserved communities. While this study was limited, it is important to consider how Medicaid expansion could affect access to reconstructive procedures in lower income communities [iii].

Title III: Improving the quality and efficient of healthcare Title III received less media coverage, but it is one of the most significant titles for providers. Part I of Subtitle A is entitled “Linking payment to quality under the Medicare Program.” Medicare reimbursements generally set the benchmark for other insurer payments. To understand how this title will affect your future practice pattern, you must first understand how Medicare reimbursements are calculated.

Prior to 1989, Medicare payments to doctors were based on charges, which lead to a rapid increase in health care spending, growing about 13 percent per year between 1962 and 1982 [iv]. In 1989, the relative value unit (RVU) was introduced as part of The Consolidated Omnibus Budget Reconciliation Act (COBRA). The relative value unit associates a given procedure (CPT) code with monetary value based on physician work, practice expense, and liability. The number of RVUs associated with a CPT code is dictated by a committee (RUVC) comprised of independent volunteer physicians. The committee has 31 members; twenty-eight are voting members from various medical specialties who vote on the addition, removal, or re-allocation of RVUs for various procedures. Some specialties are represented every year, while others, such as hematology/ oncology or pediatric surgery, have rotating spots. Importantly, plastic surgery has a voting spot every year [v]. Relative value units are how insurance companies base reimbursements and often how hospitals track a surgeon’s productivity.  For example, a skin graft has a work RVU of 9.9, a fasciocutaneous free flap has a work RVU of 36.9, and liver transplant has a work RVU of 90.0. An interesting exercise is to go to the CMS website and search average reimbursement by CPT code.

Further attempts to control spending introduced the sustainable growth rate (SGR) as part of Balanced Budget Act of 1997. Each year, it utilized a formula to predict whether actual spending would or would not exceed the SGR target, adjusting the conversion factor accordingly. The first 10 years were successful, with steady increase in payments each year until recession in 2001. When the recession hit, the SGR targets demanded that Medicare spending growth slow down, which meant broad, large reductions in Medicare payments to physicians. Every year after 2001, the SGR formula required cuts to the conversion; however, every year since, congress has voted last minute to offset this reduction and prevent dramatic decreases in Medicare payment to physicians [vi].

Enter MACRA (Medicare Access and CHIP Reauthorization Act), the new legislative answer to eliminate sustainable growth rate yet control Medicare spending. It does so by linking payments to the quality of care you provide. To quantify the quality of care, MACRA uses four performance categories (quality, resource use, clinical practice improvement activities, and advancing care information) to generate your “MIPS” score [vii]. Depending on your score, you will receive Medicare payments either neutral to, above, or below other clinicians within your specialty. In order to avoid payment reductions, you will have to report information such as: how much you utilize electronic medical records (previously known as “meaningful use”), how many CT scans you order compared to others within your specialty, the DVT rate of your patients, your surgical site infection rate, your patient satisfaction scores—the list goes on. Sound like something you don’t want to deal with? Many surgeons don’t, which is why more hospitals are moving toward salaried positions and taking care of a lot of this for you. However, in taking a job like this, you also give up a lot of freedom about the types of patients you see, the types of surgeries you perform, and what your schedule looks like.

Title IV: Prevention of Chronic Disease and Improving Public Health. Title IV outlined measures to promote public health awareness, such as standardized labeling of nutrition items at chain restaurants.

Title V: Healthcare workforce. For those of you with large student loans, this established loan repayment programs if you work in areas that are medically underserved after residency (though it is important to note that most of these programs are geared toward those in family medicine, pediatric, and mental health specialties).

Title VI: Transparency and Program Integrity. Title VI mandated reporting guidelines for payments to physicians from drug, device, and medical supply companies. Additionally, it set aside more money to investigate Medicare Fraud.

Title VII: Improving access to innovative medical therapies. Title VII created abbreviated protocols for certain biologic products to expedite the FDA approval processes.

Title VIII: Community Living Assistance Service and Supports. Title VIII was unworkable and was dropped by the Obama administration in October 2011.

Title IX: Revenue Provisions. This title proposed how all of these new proposals would be paid for: through greater taxes on prescription pharmaceuticals, medical device manufacturers, and insurance companies. Initially included was a cosmetic surgery tax, but thanks to the hard work of American Society of Plastic Surgeons (ASPS), the American Society for Aesthetic Plastic Surgery (ASAPS), and PlastyPAC, this was repealed.

Title X: Reauthorization of the Indian Health Care Improvement Act. Title X improved healthcare services for American Indians and Alaskan Natives.

Healthcare reform is making private practice a model of the past and changing the job market to salaried positions. As residents leaving training and entering the job market, we must understand the payment mechanisms so as to best advocate for ourselves and the practice we want. The next phase of healthcare reform will shift toward bundled and alternative payment models. These models will attempt to associate a lump sum with a given treatment plan: if the hospital can decrease costs during a patient’s care, they will make money, but if complications are encountered, the hospital eats the cost. Often plastic surgeons are consulted during hospital courses that have not gone according to plan and need wound coverage or reconstruction. How will plastic surgeons get payed for these services if we are not part of the pre-determined, bundled plan? It is essential that plastic surgeons understand payment mechanisms as they evolve so that we can continue to advocate on behalf of ourselves and our specialty.


[i] Khansa, I, Khana L, Pearson GD. Surgeon Reimbursement in maxillofacial trauma surgery: effect of the Affordable Care Act in Ohio. Plast Recon Surg. Feb 2016;137(2):613-8.

[ii] Khansa I, Khansa L, Pearson, GD, Jain S. The Effects of the Affordable Care Act on physician reimbursement in hand surgery. J Hand Surg. Jum 2018;43(6):511-515.

[iii] Giladi AM, Aliu O, Chung K. The Effect of Medicaid Expansion in New York State on Use of Subspecialty Surgical Procedures by Medicaid Beneficiaries and the Uninsured. J Am Coll Surg. May 2014;218(5):889-97.

[iv] Center for Medicare Services. History of Health Spending in the United States. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/HistoricalNHEPaper.pdf. Accessed 9/28/2018.

[v] AMA. The RBRVS and the AMA/Specialty Society RVS Update Committee (RUC) Process 2014. http://www.apapracticecentral.org/reimbursement/ruc-survey-presentation.pdf. Accessed 9/28/2018.

[vi] Conor, Ryan. Explaining The Medicare Sustainable Growth Rate. American Action Forum. https://www.americanactionforum.org/insight/explaining-the-medicare-sustainable-growth-rate/. Accessed 9/28/2018.

[vii] Learn About MACRA. ASPS Website. https://www.plasticsurgery.org/for-medical-professionals/health-policy/macra/about-macra. Assessed 9/28/2018

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