What Does the QZ Modifier Really Mean?

Howard Greenfield, MD
Founder and Principal, Enhance Perioperative & Anesthesia Consulting Aventure, FL

Jody Locke, MA
Vice President of Anesthesia and Pain Practice Management Services Anesthesia Business Consultants, LLC, Jackson, MI

Healthcare Policy and its Unintended Consequences

American medicine has many quirky aspects. Those who claim they can fix it have no clue what they are up against. Perhaps the most bizarre is the relationship between payer policies and clinical behavior. The law of supply and demand may apply to many disciplines, but not medicine, at least not consistently. Public and private payers are always trying to adjust the supply of medical services by raising or lowering rates or implementing rules to limit utilization of services. Normally this process of utilization review and policy revision kicks in when billing patterns change. An increase in the number of epidural steroid injections billed ultimately resulted in lower payment per injection and rules that limited how many injections could be billed in a six-month period. The same can be said in anesthesia for screening endoscopy: a dramatic increase in billings resulted in new codes and lower base values. Sometimes, though, it is just not that simple. And so we come to the story of the payment policy for anesthesia. The implications of the anesthesia care team take us to a whole new level of economic complexity.

It all started with a simple question: what is the best way to allocate the allowable payment of an anesthetic case when there is an anesthesiologist and a CRNA involved in providing the care? Once upon a time, when an anesthesiologist and a CRNA managed a case together, the practice would generate one bill for each, which obviously made medical direction look very expensive. In the early 1980s, the Healthcare Finance Administration (HCFA) started tinkering with various payment methodologies. It was a most interesting period to be in the anesthesia billing business because each year the formula changed until the current Medicare methodology was finally adopted as a compromise to achieve three objectives.

The first was to establish standard rules for the billing of cases involving anesthesiologists and CRNAs. The second was to provide consistent guidelines for the calculation of the allowable value of a case. And, lastly, it was intended to recognize the value of the CRNA’s service, a fact that would also be memorialized in CRNAs being given Medicare provider numbers.

One piece of this puzzle was the creation of a series of claim modifiers that would inform the payer what the relationship was between the providers involved in the care of the patient. In the early days these “Q” codes, as they were often called, were only known to coders and billers. Physicians and CRNAs did not concern themselves with the mechanics of claim submission, nor with the arcane process of payment verification. What was first intended as a way of flagging a payer how to pay for an anesthetic case soon became one of the hottest topics in anesthesia practice management. Now it is the rare provider who has not heard of the QZ modifier and who does not have an opinion as to its significance in practice management.

How It All Began

A table in the Medicare Carriers Manual was disseminated to all Medicare intermediaries and then to all anesthesia practices. (See Table 1).

HCFA established seven criteria that must be met for payment of the medical direction portion of the allowable. They are listed in Chart 1 with the acceptable exceptions. They define the documentation requirements for QK claims. While the necessary details are not submitted with each claim, the assumption is that if the claim were audited, the necessary detail could be provided to the auditor. Many practices have established an attestation statement on their anesthesia record that meets the compliance requirements.

When these medical direction modifiers were first implemented they only applied to Medicare and Managed Medicare plans.

Table 2 represents the current state of these modifiers for a practice in New Jersey. These are the contractual claim requirements. Clearly, the concept has caught on. Plans that expect one claim per medically directed case are now the exception rather than the rule.

The result was a conversation across the specialty about the significance between billing for CRNA care as medically directed or non-medically directed. As is so often the case, there are different perspectives.

Three sets of distinct stakeholders approach this issue with very different perspectives. They are anesthesiologists, CRNAs and hospital administrations.

What is so interesting about these medical direction modifiers is that they have gone from being arcane claim indicators to the identification of very specific and distinct models of practice. While it used to be that only billing staff worried about AA vs QZ modifiers, now it is one of the hot topics of the specialty.

Billing For Anesthesiologists and CRNAs and How It Affects Hospital Administrators

Chart 2 provides a breakdown of cases performed between January 2019 and June 30 by all Anesthesia Business Consultants’ (ABC) clients across the country for Medicare patients. The data was pulled based on the Medicare concurrency modifier used for billing. Based on this sample, 72 percent of all cases billed by ABC to Medicare involved care by a CRNA.

The Anesthesiologist Perspective

Anesthesiologists have typically viewed the Medicare documentation requirements for medical direction as yet another burdensome documentation requirement. An anesthesiologist sees four current practice models: those that consist of only anesthesiologists, practices that employ CRNAs, those that work with hospital-employed CRNAs and those that consist of CRNAs and no physicians. In addition, it should be noted that some CRNAs are employed by a hospital and these are typically medically directed to a private anesthesia group. Physicians that medically direct hospital-employed CRNAs want to make sure they get their medical direction payment so they have a compelling motivation to comply. Those that employ their CRNAs have been most preoccupied with the QZ versus medical direction question.

Because the distinction, in most cases, is revenue neutral, a growing number of ABC clients that employ CRNAs bill CRNA claims with the QZ modifier knowing that, technically, this means that the CRNA cases are non-medically directed, which may or may not actually be the case. The reality is that many such practices have what is best referred to as an oversight or zone model. Typically, this means that there is an anesthesiologist available to assist and intervene in cases where the CRNA needs help. From a revenue perspective, however, this means there is no medical direction payment to the overseeing physician. The only revenue opportunity exists when he or she performs a specific procedure that is paid separately from a fee schedule such as invasive monitoring, or ultrasonic guided nerve block.

There is considerable confusion about the use of the term “supervision.” From a Medicare perspective supervision refers to a scenario in which the criteria for medical direction are not met, which means that the physician is only allowed a maximum of four units per case, three base units and one time unit for induction. While the term oversight is not part of the Medicare vocabulary, we believe it best describes these scenarios.

In short, the concept of QZ billing is gaining popularity because it is simple to implement and revenue neutral. As is true of so many things that appear to be a simple solution, there may be more to this discussion than meets the eye. It is always worth exploring the other dimensions of any practice management option.

The CRNA Perspective

From the CRNA perspective, QZ represents a significant state of recognition, independence and autonomy. HCFA experimented with various payment options for team care through the early 1980s. For a period of time the payment formula changed almost every year, with different percentages of the allowable going to the physician and the CRNA. And then, finally, the issue was resolved: 50 percent of the allowable to the physician and 50 percent to the CRNA. This established a mechanism to allocate the allowable, but the American Association of Nurse Anesthetists (AANA) wanted full recognition for CRNAs as independent providers. When this finally happened in the late 1970s, and all CRNAs got Medicare provider numbers, they could start competing with physicians for the right to provide anesthesia care. The final step in this process was achieved when 17 states agreed to become “opt-out states,” meaning that there was no requirement for a physician to oversee or medically direct a CRNA.

AANA marketing focuses on the cost savings associated with CRNA care. Much of it is based on a claim that there is no difference between the care provided by physician anesthesiologists and CRNAs. This approach has even spawned its own vocabulary: some CRNAs refer to anesthesiologists as MDAs as an analogous comparison to CRNAs, MDAs vs CRNAs. While it is true that the average total compensation package for anesthesiologists is higher than that for CRNAs, the gap is slowly closing. Where there is a subsidy from the facility, the inclusion of CRNAs may reduce the total cost of anesthesia care under some circumstances, but the cost savings is most dramatic when most of the CRNA care is QZ care.

This trend towards more QZ care raises some interesting questions about argue that the inclusion of physician anesthesiologists is essential for the effective management of complex cases and clinical complications.

The Hospital Perspective

Hospital administrations often find themselves caught on the horns of a dilemma. On the one hand they want to reduce the cost of anesthesia care, especially when they must pay a significant subsidy, while on the other they want their patients to get the best quality care. It is the rare administrator who does not agree that physician anesthesiologists must be part of the service solution. Ironically many of the practices that have migrated to a QZ model work in facilities that have specific oversight requirements, many of which mirror the Medicare medical direction rules.

Historically the anesthesia model was defined by the local culture and norm. Consider the state of Pennsylvania. The state has the highest number of CRNAs in absolute terms and may still reflect the history of the specialty and the fact that nurse anesthesia preceded physician anesthesia. There are virtually no physician-only practices and a disproportionate number of practices that medically direct hospital-employed CRNAs. California, by contrast, has been a state where virtually all anesthesia groups consisted only of anesthesiologists. Texas and Nevada even had a number of what are referred to as “surgeon request practices.” In other words, the anesthesiologists affiliated themselves with surgeons such that they became circuit riders following their client surgeons. Each model seemed to fit the unique needs of the local market and appeared to be acceptable so long as no financial support for anesthesia was required from the hospital.

Subsidy contracts for anesthesia services changed everything. Once anesthesia was no longer a free service, hospital administrators started to pay much closer attention to what they were paying and what value they were getting. Many a California hospital administrator, for example, who found himself having to pay a substantial subsidy to a physician-only group suddenly started suggesting the need to include CRNAs in the mix. In fact, the CRNA option has become a popular focus of many a California hospital administrator.

The experience of the past five or so years clearly indicates that the quality-versus-cost balance is tipping increasingly towards cost. Objectively, one can argue this may have been inevitable. All anesthesia care has become incredibly safe thanks to modern pharmacology and the technology of anesthesia monitoring. Patients are often told that they are at greater risk driving to the hospital than undergoing general anesthesia. The current state of the specialty in terms of patient safety appears to have somewhat undermined its value proposition.

While it used to be that the hospital administrator was given a certain anesthesia delivery model, now he or she plays a much more active role in determining the model There is considerable fluidity and flux in the configuration of anesthesia departments these days. The form of an anesthesia practice is now much more a function of the venue and the types of cases being performed. One model may work in the main OR, while another may be more appropriate to the endoscopy suite.

The concept of opt-out states for the Federal Physician Supervision Requirement is changing customer expectations. While the alternative to physician-only anesthesia care used to be medical direction, now unsupervised CRNA care, the QZ model is gaining popularity. In fact, new models of delivery such as the zone model are being developed to restrike the traditional relationship between doctor and nurse. The zone model assumes that a physician oversees, not medically directs, a squad of CRNAs.

Curiously, these alternative delivery models do not always reduce the need for financial support. The configuration of the anesthesia team, and the respective compensation packages of anesthesiologists and CRNAs, may actually not be the real determinant of the need for a subsidy, which is ultimately determined by the relationship between the coverage requirements of the facility and the revenue potential of the cases performed.

Final Thoughts

How often do we hear anesthesia practice managers say that the only constant in medicine is change? It has become the refrain to a long ballad of frustrating economic, social and political challenges. The mantra used to be “if it ain’t broke don’t mess with it,” but today’s mantra suggests that if you don’t see the problem you are not looking closely enough. Medicine is a business. Business is about competition. Only the fittest survive. And so it is with the specialty of anesthesia. Never have anesthesia providers felt so unsure that their current practice situation would survive. The market for anesthesia services is undergoing a dramatic state of reinvention. Whatever your model of delivery today; it is likely to be different tomorrow or next year.

QZ was once a technical statement of billing policy; it is now a philosophical question. It was once a proposal of parity; now it is a question of value. It was once a guarantee of access to payment; now it is a window of opportunity to capture market share. As private payers review and revise their fee schedules, CRNAs appear to be losing ground financially. Ironically, payers may be accepting the AANA argument that nurse anesthesia represents a more cost-effective option. A number of plans now pay less for QX and QZ than they do for AA and QK cases. QZ has become the emblem and beacon of an alternative model of care. None of us knows for sure where this will end up, but one thing is now very clear—there is no going back. QZ has become yet another layer of complexity in an already complex set of anesthesia management challenges.

Howard Greenfield, MD, is a board-certified anesthesiologist and graduate of Temple University School of Medicine with anesthesia training at Jackson Memorial/University of Miami. He is an experienced clinician, and has served as Chief of Anesthesia at Memorial Regional Hospital. He became one of the original founding partners of Sheridan Healthcare. Greenfield later went on to found Enhance Healthcare with Dr. Robert Stiefel. Together, they have extensive national experience helping hospitals and anesthesia groups structure and negotiate anesthesia service agreements, optimize the revenue cycle, and implement operating room improvement initiatives. Enhance Healthcare partners are actively involved in the anesthesia merger and acquisition space. They have advised a number of anesthesia practices on strategic alternatives, and have worked with investment banking and private equity to help complete a number of group transactions. Dr. Greenfield can be reached at hgreenfield@enhancehc.com.

Jody Locke, MA, serves as Vice President of Anesthesia and Pain Practice Management Services for Anesthesia Business Consultants. Mr. Locke is responsible for the scope and focus of services provided to ABC’s largest clients. He is also responsible for oversight and management of the company’s pain management billing team. He is a key executive contact for groups that enter into contracts with ABC. Mr. Locke can be reached at Jody.Locke@AnesthesiaLLC.com.