Answer: Medicare's basic physician anesthesia fee schedule calculation adds allowable base units and time units, then multiplies the total by the anesthesia conversion factor for the applicable locality. One anesthesia time unit equals 15 minutes. The federal Medicare agency notes exceptions to this basic calculation. A Medicare contractor also gives a separate allowance formula for medically directed nurse anesthetists.
The short answer
The basic formula is: (allowable base units + billed minutes ÷ 15) × the applicable locality anesthesia conversion factor.
A Medicare contractor expresses time units as billed minutes divided by 15. The federal Medicare agency identifies 15 minutes as one anesthesia time unit. In this calculation, minutes must first be expressed as time units. Those time units are then added to the allowable base units.
For medically directed nurse anesthetists, a Medicare contractor gives the allowance as 50% of the sum of base and time units multiplied by the appropriate participating physician locality conversion factor. That percentage belongs to the allowance for that provider arrangement.
What usually goes wrong
A charge and an allowable payment are different figures. A practice management consultant explains that most anesthesia charges and payments use base and time units, typically with a 15-minute time unit. Total billable units multiplied by a practice conversion factor determine the charge. Total billable units multiplied by a payer conversion factor determine the allowable payment.
Minutes and time units are also different quantities. In the Medicare contractor's formula, billed minutes are divided by 15 before the resulting time units are added to base units. The conversion factor multiplies that combined unit total.
Provider arrangement also matters. A state health department report explains that modifiers indicate whether services involve an anesthesiologist alone, an anesthesiologist with nonphysician anesthetists, or a nonphysician anesthetist.
What a veteran checks first
- Base units: the allowable base units included in the basic calculation.
- Time: billed minutes divided by 15 to express time units.
- Conversion factor: the anesthesia factor for the applicable locality.
- Financial terminology: whether the discussion concerns a practice charge or a payer allowed amount.
- Provider arrangement: which arrangement the modifiers indicate and which allowance formula addresses it.
How the payment calculation works
The federal Medicare agency bases the physician anesthesia fee schedule amount on allowable base and time units multiplied by a locality-specific anesthesia conversion factor, with exceptions noted. The basic formula therefore includes both the unit total and the factor for the applicable locality.
A state health department report connects anesthesia payment with service complexity, care time in 15-minute increments, and an anesthesia conversion factor. It also connects modifiers with the provider arrangement.
The practice management consultant's distinction between charge and payment helps frame an owner discussion: the practice factor determines the charge, while the payer factor determines allowable payment. For the medically directed nurse anesthetist allowance, the Medicare contractor specifies the 50% calculation and the appropriate participating physician locality factor.
Questions to bring to the partner meeting
- Does the figure being discussed represent a charge or an allowed amount?
- What allowable base units and billed minutes appear in the calculation?
- How are billed minutes expressed as time units?
- Which locality does the anesthesia conversion factor represent?
- Which provider arrangement does the allowance description address?
Sources
- Centers for Medicare & Medicaid Services
- First Coast Service Options
- Jody Locke, MA
- Maryland Department of Health
- Noridian Medicare
