Medicare Payments to Psychologists Suddenly Reduced

By Paula E. Hartman-Stein, Ph.D.
September 15, 2013

Medicare Payments to Psychologists Suddenly ReducedDespite an increase in work values for some psychological services in 2013, payments to psychologists under the Medicare system are being reduced overall by 2 percent as of mid-August because of errors made by the Center for Medicare and Medicaid (CMS) in previous calculations of practice expense.

The Aug. 12, 2013 issue of The Federal Register, corrects technical errors published in the final rule carried Nov. 16, 2012, listing all the payments for Medicare services and products.

In a phone interview, James Georgoulakis, Ph.D., the psychology representative to the Relative Update Committee (RUC) of the American Medical Association (AMA), said, “There is absolutely no doubt that reimbursement for psychological services will have reductions for the remaining months of the year. We should have seen a decrease of 2 percent beginning in January 2013, but we did not because the practice expenses had been calculated incorrectly.”

Georgoulakis said he does not know what will happen to payments to individuals that have already been overpaid in 2013. “CMS has a number of different options,” he said.

Just before leaving for a weekend vacation, Georgoulakis learned about the unexpected corrections and studied the lengthy document while on a plane.

“The correction shows psychology has an increase of work values of plus 1 percent but a decrease of minus 3 percent in our practice expense, resulting in the combined impact of minus 2 percent. What is interesting is that psychiatry got a decrease in their overall work values (minus 1 percent) but an increase in practice expense (plus 3 percent), making their impact a plus 2 percent increase in payment for psychiatric services overall.” He said he did not know what accounted for psychiatry’s increase in practice expenses.

Georgoulakis said for over 10 years psychology’s practice expenses were calculated as the same as that of psychiatry. “We rode the coattails of psychiatry, and they had a high practice expense because they often hired nurses in their offices. Last year when CMS studied practice expenses for psychology, it found that typical psychology practices do not have nurses on their staffs, so our practice expense was reduced.”

He said the minus 2 percent impact could have been much worse as psychology’s practice expenses were actually 3 percent less. “Calculating all services psychologists do under the Medicare system, it comes out to a minus 2 percent change overall.”

Georgoulakis said providers need the perspective that reimbursement under Medicare is tempered by government economics. “The amount of money available is fixed. When we get an increase in work values, the funds for that come from a decrease in work values of another specialty.”

The value of work for Medicare services is determined by technical skill and physical effort, mental effort and judgment and stress associated with risk to the patient or others. Reimbursement is determined on an equation that includes a statistically derived factor, known as a conversion factor, plus the relative value units of work, expense of malpractice insurance and overhead.

The impact of the minus 2 percent correction on individual psychology practices will vary because some psychological services have a lower work value than others and individual practices vary in their practice expenses.  “Neuropsychology practices on average have higher practice expenses because of test materials. They could be hit harder perhaps than nursing home practices. We are not all one, even though we share the same title,” Georgoulakis said.

Table 134 in the Aug. 12 The Register shows 57 specialties and services impacted by the corrected practice expenses and the combined impact on total allowed charges. For example, independent laboratories will see a 14 percent reduction overall but Family Practice gets a 7 percent increase and Internal Medicine a 5 percent increase. Examples of specialties other than psychology taking a hit include neurology (minus 7 percent), radiation oncology (minus 7 percent), pathology (minus 6 percent), physical medicine (minus 4 percent), audiology (minus 4 percent) and cardiology (minus 2 percent).

“This is a major correction notice, really big,” Georgoulakis said. “Anytime you look at payment for so many services, there will be errors. Statistically the probability of errors is great when you have so many codes.” He said he was surprised at the lateness in the year of the published correction.

In November CMS will publish the final rule for reimbursement in 2014. Georgoulakis would not speculate on payment for psychological services as he said no one can accurately predict what CMS will ultimately decide. The RUC makes recommendations to CMS, but does not decide the ultimate outcome.

The RUC has come to the attention of the national press over the last year, with some severe criticisms about its secretiveness and the dominance of medical specialties.

“Despite what people are reading about the RUC, the RUC is psychology’s best friend. They have been really supportive of mental health and believe that the mental health services we provide are undervalued,” Georgoulakis said.

“They have been more supportive than during any time I have been on the RUC. They really understand the work that we do. I’d much rather have independent physicians and health care professionals making decisions about work values than politically appointed individuals,” he said.

Paula Hartman-Stein, Ph.D., is a clinical geropsychologist, consultant and member of the Medicare Evidence Development and Coverage Advisory Committee (MEDCAC) to CMS. She can be reached through her website,

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