An Analysis of Procedural Medicare Reimbursement Rates in Hand Surgery: 2000 to 2019

Abstract

Background:

Medicare reimbursement trends across multiple surgical subspecialties have been analyzed; however, little has been reported regarding the long-term trends in reimbursement of hand surgery procedures. The aim of this study is to analyze trends in Medicare reimbursement for commonly performed hand surgeries.

Methods:

Using the Centers for Medicare and Medicaid Services Physician and Other Supplier Public Use File, we determined the 20 hand surgery procedure codes most commonly billed to Medicare in 2016. Reimbursement rates were collected and analyzed for each code from The Physician Fee Schedule Look-Up Tool for years 2000 to 2019. We compared the change in reimbursement rate for each procedure to the rate of inflation in US dollars, using the Consumer Price Index (CPI) over the same time period.

Results:

The reimbursement rate for each procedure increased on average by 13.9% during the study period while the United States CPI increased significantly more by 46.7% (P < .0001). When all reimbursement data were adjusted for inflation to 2019 dollars, the average reimbursement for all included procedures in this study decreased by 22.6% from 2000 to 2019. The average adjusted reimbursement rate for all procedures decreased by 21.92% from 2000 to 2009 and decreased by 0.86% on average from 2009 to 2019 (P < .0001).

Conclusion:

When adjusted for inflation, Medicare reimbursement for hand surgery has steadily decreased over the past 20 years. It will be important to consider the implications of these trends when evaluating healthcare policies and the impact this has on access to hand surgery.

Introduction

There is substantial financial uncertainty regarding the U.S. healthcare system secondary to the ever-changing political landscape and rising healthcare costs. Over the past 20 years, major changes have occurred in reimbursement of physicians by the Centers for Medicare and Services (CMS). The implementation of the Balanced Budget Act in 1997 significantly impacted CMS payment rates through the enactment of the Sustainable Growth Rate (SGR), which based reimbursement on CMS spending and gross domestic product from the previous fiscal year. ¹ This was expected to produce a $133 million decrease in CMS spending by reducing payments for Medicare and Medicaid in the first 5 years. ² Incentive-based reimbursement in the form of the Medicare Access and CHIP Reauthorization Act replaced the SGR in 2015, and since this change, there has been a lack of literature on Medicare reimbursement trends, in particular for hand surgery reimbursement.

Compensation by CMS for various physician services is based on set national relative values for each procedure performed. Each procedure eligible for reimbursement is assigned a Current Procedural Terminology (CPT) code, which is linked to a set reimbursement amount based on the resources required for the procedure. This amount is then adjusted for geographic cost variations, and a relative value unit (RVU) is determined for each CPT code. Finally, this RVU is multiplied by a conversion factor to determine the final reimbursement rate for each CPT code. ³

The reimbursement trends across multiple surgical subspecialties have been analyzed and show a decreasing reimbursement rate over the past 2 decades; however, little has been reported regarding the long-term trends in reimbursement of hand surgery procedures.^4-7 The purpose of this study was to analyze the trends in Medicare reimbursement for the most commonly performed hand surgeries and discuss the implications for access to these services.

Methods

The CMS Physician and Other Supplier Public Use File was used to identify the 20 hand surgery procedure codes most commonly billed to Medicare in the year 2016 ⁸ (Table 1). Reimbursement rates were collected for each of these CPT codes from the Physician Fee Schedule Look-Up Tool from CMS. ⁹ The reimbursement data for each CPT code include Medicare reimbursement schedules for nearly 100 geographic locations across the United States for each year between 2000 and 2019. Reimbursement rates for each CPT code were collected using all Medicare Administrative Contractor options and modifiers, and geographic variations in reimbursement were averaged to reflect comprehensive reimbursement trends for each procedure in each respective year. The raw percent change in reimbursement rate for each procedure was then calculated from years 2000 to 2019 and averaged. This was compared to the change in Consumer Price Index (CPI), a standard measure of inflation in US dollars, over the same time period using a 2-tailed t test comparison of means. More specifically, the change in reimbursement over time was compared to the change in the prices of consumer goods and services during that same time period. This is calculated by taking the cost of a consumer product or service during the index time period and dividing this by the cost of that same item or service during an earlier time period and taking this value times 100. ¹⁰ CPI data (May 2019) were acquired from the U.S. Department of Labor, Bureau of Labor Statistics. ¹⁰ The CPI from each year was used to adjust all reimbursement rates to 2019 dollar values. This adjusted data were used to perform trend analyses in 2019 dollar values. Adjusted R² and average annual and total percent changes were calculated based on adjusted data and its change over time. Compound annual growth rate, a measure of annual rate of change over a period of time that minimizes the effects of short-term variation, was calculated with the adjusted data based on the following formula: ¹¹

Table 1.

Top 20 Most Commonly Billed Hand Surgery CPT Codes.

CPT code	Procedure
26055	Tendon sheath incision (eg, for trigger finger)
26160	Excision of lesion of tendon sheath or joint capsule (eg, cyst, mucous cyst, or ganglion), hand or finger
26480	Transfer or transplant of tendon, carpometacarpal area or dorsum of hand; without free graft, each tendon
26123	Fasciectomy, partial palmar with release of single digit including proximal interphalangeal joint, with or without Z-plasty, other local tissue rearrangement, or skin grafting
26145	Synovectomy, tendon sheath, radical (tenosynovectomy), flexor tendon, palm and/or finger, each tendon
26951	Amputation, finger or thumb, primary or secondary, any joint or phalanx, single, including neurectomies; with direct closure
26860	Arthrodesis, interphalangeal joint, with or without internal fixation
26116	Excision, tumor, soft tissue, or vascular malformation, of hand or finger, subfascial; less than 1.5 cm
26210	Excision or curettage of bone cyst or benign tumor of proximal, middle, or distal phalanx of finger
26440	Tenolysis, flexor tendon; palm or finger, each tendon
26727	Percutaneous skeletal fixation of unstable phalangeal shaft fracture, proximal or middle phalanx, finger or thumb, with manipulation, each
26418	Repair, extensor tendon, finger, primary or secondary; without free graft, each tendon
26531	Arthroplasty, metacarpophalangeal joint; with prosthetic implant, each joint
26010	Drainage of finger abscess; simple
26615	Open treatment of metacarpal fracture, single, includes internal fixation, each bone
26437	Realignment of extensor tendon, hand, each tendon
26011	Drainage of finger abscess; complicated (eg, felon)
26020	Drainage of tendon sheath, digit and/or palm, each
26113	Excision, tumor, soft tissue, or vascular malformation, of hand or finger, subfascial
26080	Arthrotomy, with exploration, drainage, or removal of loose or foreign body; interphalangeal joint

Note. CPT = Current Procedural Terminology.

$$CAGR=\left[{\left(\frac{2019Value}{2000Value}\right)}^{\frac{1}{\#ofYears\left(19\right)}}\right]-1$$

A subanalysis was performed to compare the change in average adjusted reimbursement rate from 2000 to 2009 with changes from 2009 to 2019 via a 2-tailed t test to compare means. All data analysis was performed using SPSS version 23 software (IBM Corp, released 2015. IBM SPSS Statistics for Windows, Version 23.0). Statistical significance was set at P < .05. Because the data used for this study were publicly available, the study was deemed exempt from institutional review board approval.

Results

Between the years 2000 and 2019, the unadjusted reimbursement rate for each included procedure changed at varying rates but increased on average by 13.9% during the study period. However, the U.S. CPI increased by 46.7% over this same time period, which is significantly more than the unadjusted change in rate of reimbursement (P < .0001) (Table 2) (Figure 1). When all reimbursement data were adjusted for inflation to 2019 dollars, the average reimbursement for all included procedures in this study decreased by 22.6% from 2000 to 2019. From 2000 to 2019, the adjusted reimbursement rate for all included procedures decreased on average by 0.7% each year and had an average compound annual growth rate of −1.4%, indicating a steady annual decline in reimbursement when adjusted for inflation (Table 3).

Table 2.

Unadjusted Reimbursement Trends Compared to Change in CPI.

CPT code	Average reimbursement rate 2000 (in year 2000 dollars)	Average reimbursement rate 2019 (in 2019 dollars)	Unadjusted percent change in reimbursement (2000-2019)	Unadjusted percent change in CPI (2000-2019)	P value comparison between reimbursement % change and CPI
26055	$280.70	$321.11	+14.40%
26160	$283.09	$345.61	+22.08%
26480	$671.31	$761.87	+13.49%
26123	$796.09	$864.94	+8.65%
26145	$579.73	$531.58	−8.31%
26951	$426.69	$663.84	+55.58%
26860	$461.51	$573.38	+24.24%
26116	$490.53	$545.27	+11.16%
26210	$484.82	$458.78	−5.37%%
26440	$531.09	$627.44	+18.14%
26727	$388.27	$487.25	+25.49%
26418	$465.74	$585.64	+25.74%
26531	$742.74	$647.26	−12.86%
26010	$123.09	$140.55	+14.18%
26615	$431.90	$595.37	+37.85%
26437	$515.35	$633.21	+22.87%
26011	$207.90	$190.29	−8.47%
26020	$440.23	$449.77	+2.17%
26113		$567.26
26080	$415.12	$405.44	−2.33%
Average			+13.90%	+46.70%	P < .0001

Note. CPT = Current Procedural Terminology; CPI = Consumer Price Index.

Figure 1.

Comparison of average unadjusted reimbursement across all procedures to rate of U.S. inflation.

Table 3.

Adjusted Reimbursement Trends. All Values Adjusted for Inflation.

Procedure	Adjusted CAGR	Average % change year to year adjusted	R 2	Total % change 2000-2019 adjusted
26055	−1.3%	0.62	0.35	−22.1
26160	−1.0%	−0.32	0.36	−16.8
26480	−1.3%	−1.02	0.68	−22.7
26123	−1.6%	−1.21	0.48	−26.0
26145	−24%	−1.39	0.49	−37.5
26951	0.3%	0.63	0.31	+ 6.0
26860	−0.9%	−0.57	0.63	−15.3
26116	−1.5%	−0.57	0.36	−24.3
26210	−2.3%	−1.22	0.47	−35.5
26440	−1.1%	−0.61	0.61	−19.5
26727	−0.8%	−0.56	0.59	−14.5
26418	−0.8%	−0.33	0.58	−14.3
26531	−2.7%	−1.82	0.51	−40.6
26010	−1.3%	−0.41	0.40	−22.2
26615	−0.3%	−0.10	0.08	−6.1
26437	−0.9%	−0.65	0.64	−16.3
26011	−2.5%	−1.40	0.49	−37.6
26020	−1.9%	−0.97	0.46	−30.4
26113
26080	−2.1%	−0.94	0.43	−33.5
Average of all Procedures	−1.4%	−0.74	0.47	−22.6

Note. CAGR = compound annual growth rate.

The average linear r² regression value of this adjusted data were 0.47, indicating a somewhat nonlinear but consistent annual decline throughout each analyzed year (Table 3). A subanalysis comparing average adjusted reimbursement percent change demonstrates that the average adjusted reimbursement rate for all procedures decreased by 21.9% from 2000 to 2009 and decreased by 0.86% on average from 2009 to 2019 (P < .0001).

Discussion

When adjusted for inflation, Medicare reimbursement for the 20 most commonly billed hand surgery procedures has decreased from 2000 to 2019. Although the CPI during this time period increased by 47%, the adjusted reimbursement rate for hand surgery procedures decreased by 23%. From 2000 to 2009, there is a stark decrease in unadjusted reimbursement; however, in 2010, there is a slight improvement (Figure 1). This does not, however, increase at a rate consistent with the rate of inflation. This decrease in reimbursement from 2000 to 2009 and 2009 to 2019 can be partially attributed to changes in the health care policy over the past 2 decades.

In 1997, the Balanced Budget Act was enacted in an effort to balance the federal budget by 2002. ¹ Through the Balanced Budget Act, the SGR was established to ensure that the yearly Medicare expenditures did not exceed the annual increase in the Gross Domestic Product. The SGR calculated reimbursement annually in accordance with the target growth rates based on projected Medicare spending and the national Gross Domestic Product per capita of the previous fiscal year. ² Congress enacted the Balanced Budget Refinement Act in 1999 in response to concerns about the severity of provider payment reductions. Economic growth during this time period resulted in an increase in yearly reimbursement until 2002, when this growth slowed. In 2003, a series of “SGR patches” were implemented to decrease the likely future payment reductions. ¹² The SGR was replaced by the Medicare Access and CHIP Reauthorization Act in 2015, which increased payments annually by 0.5% through 2019. The SGR legislation may be partly responsible for the discrepancy evident in our study between adjusted reimbursement trends from 2000 to 2009 and 2010 to 2019 (Table 4).

Table 4.

Average Adjusted Percent Change in Reimbursement Rate From 2000 to 2009 and 2009 to 2019 Respectively. All Values Adjusted for Inflation.

Average % change from 2000 to 2009	Average % change from 2010 to 2019	P-value of comparison
−21.92	−0.86	<.0001

In an effort to lower the proportion of uninsured individuals and provide relief to medical centers who provide a substantial amount of care to uninsured patients, the Affordable Care Act (ACA) was implemented in 2014. ¹³ The desired effect of the ACA was to make health insurance more affordable, increase the percentage of Americans with access to healthcare, and ultimately decrease healthcare costs. ¹⁴ A study by Khansa et al ¹⁵ evaluated the effect of the ACA on hand surgery at a single institution and found a reduction in the number of uninsured individuals; however, the overall reimbursement rate decreased significantly from 27% prior to implementation of ACA to 22% afterwards.

Decreasing trends in Medicare reimbursement were also seen in neurosurgical, ⁵ general surgery,^6,11 and cardiothoracic ¹⁶ procedures. Reimbursement trends in orthopedic surgery from 2000 to 2016 were also analyzed and found to decrease across all orthopedic specialties by 29% on average (except for orthopedic oncology procedures, which increased by 10%). ¹⁷ The authors found that the reimbursement for hand procedures decreased by 17% from 2000 to 2015 when adjusted for inflation.

A 2019 single-center study by Odom et al ¹⁸ evaluated the variation in reimbursement for 4 commonly performed hand surgeries between private, worker’s compensation, Medicare, and Medicaid over a 10-year period. The authors found that the reimbursement rate did not increase at the appropriate rate with inflation in all payer groups; however, the difference between Medicare and private insurance reimbursement decreased.

As the U.S. population continues to age and life expectancy increases, the percentage of patients using the Medicare system is expected to increase. ¹⁹ The current decrease in Medicare reimbursement, along with increasing administrative requirements for surgeons, increasing medical complexity of patient conditions, and capitation concerns may contribute to fewer surgeons accepting Medicare patients or offering care to a smaller proportion of their practice to Medicare patients.^20,21 Disparities in access to hand and other surgical subspecialties may be further exacerbated as procedures that require more physician work and resources are decreasing at a greater rate than less complex surgeries.^22-24 For example, physician reimbursement for digit and thumb replantation per RVU was found to be $78, whereas a less time-consuming and less complex revision amputation was reimbursed at $108 per RVU. ²³ As a result, practice patterns may tilt in favor of revision amputation despite viability of digital replantation.

The effect of decreasing Medicare reimbursement has also been evaluated for major joint replacement.^25,26 A hypothetical Medicare-only practice model for orthopedic surgeons specializing in total joint arthroplasty was not found to be sustainable based on current Medicare reimbursement rates. ²⁷ While a Medicare-only reimbursement model is not realistic, a physician practice model, and ultimately the physician salary, with a large percentage of Medicare beneficiaries may become less sustainable.

Decreasing access to hand surgery has already been seen to affect patients with government-sponsored insurance. The mean driving distance to obtain elective specialty hand care from Medicaid providers has been shown to be higher when compared to driving distance of patients with private insurance. ²⁸ Draeger et al ²⁹ also found that patients with acute flexor tendon injury were 2.2 times more likely to receive care from a hand surgeon if they had private insurance versus Medicaid. The authors speculated that this disparity was due to both the large difference in reimbursement rates between the 2 patient groups as well as the perception that Medicaid patients have less access to resources, thus limiting compliance with treatment and postoperative rehabilitation.

There are several limitations to our study, including the data being limited exclusively to Medicare reimbursement data. As such, the results are not applicable to the entire reimbursement market for hand surgery. The trends demonstrated in this study are, however, still likely representative of the market trends of hand surgery reimbursement, as the difference between private and public reimbursement rates are decreasing. ¹⁸ In addition, reimbursement data were averaged for all geographic regions of the country, which is another limitation; however, regional variations in Medicare payments for hand surgery have been described in the literature.^30,31

Since our collection of the 2019 data, there have been additional changes to healthcare policy. Clinicians accepting Medicare switched to a value-based model known as the Merit-Based Incentive Payment System ¹² in which reimbursement was based on performance measures. Further study will be needed to determine the effects recent congressional changes will have on reimbursement. It will be important for U.S. policy-makers, hospitals, and surgeons to consider reimbursement trends over the prior 20 years and the effects healthcare policies have on access to hand surgery.