CMS' final physician fee rule cuts rates 27.4%; AMA urges fix

The Centers for Medicare & Medicaid Services (CMS) issued a final rule that updates payment policies and rates for physicians and non-physician practitioners (NPPs) for services paid under the Medicare Physician Fee Schedule (MPFS) in calendar year (CY) 2012.

CMS projected that total payments under the MPFS in CY 2012 will be approximately $80 billion.

“Without a change in the law from Congress, Medicare payment rates to providers paid under the MPFS will be reduced by 27.4 percent for services in CY 2012—less than the 29.5 percent reduction that CMS had estimated in March of this year because Medicare cost growth has been lower than expected,” CMS said in a statement. “This is the eleventh time the SGR [sustainable growth rate] formula has resulted in a payment cut, although the cuts have been averted through legislation in all but CY 2002.”

In the CY 2012 final rule, CMS is expanding the potentially misvalued code initiative, an effort to ensure Medicare is paying accurately for physician services and more closely managing the payment system. This year, CMS is focusing on the codes billed by physicians in each specialty that result in the highest Medicare expenditures under the MPFS to determine whether these codes are overvalued.

CMS is also making changes in how it adjusts payment for geographic variation in the cost of practice. The Patient Protection and Affordable Care Act (PPACA) and the Medicare and Medicaid Extensions Act made some temporary adjustments that were in place for two years while CMS and the Institute of Medicine (IOM) began to comprehensively study these issues. As part of this initiative, CMS is replacing some of the data sources—such as using data from the American Community Survey (ACS) in place of the Department of Housing and Urban Development (HUD) rental data and also using ACS data in place of the data currently used for non-physician employee compensation.

Peter W. Carmel, MD, president of the American Medical Association, commented on the ruling stating that "[t]he release of the Medicare physician fee schedule rule serves as a reminder to Congress that there is a looming crisis in the Medicare program only they can stop, and the clock is ticking. Without swift action by Congress, on Jan. 1 physicians who care for Medicare patients will be hit with a 27.4 percent cut caused by the broken Medicare physician payment formula.”

According to Carmel, many physicians are struggling with Medicare payment rates and the ongoing threat of future cuts from the physician payment formula. “Payments for Medicare physician services have fallen so far below increases in medical practice costs that there is a 20 percent gap between Medicare payment updates and the cost of caring for seniors,” Carmel wrote. “The Joint Select Committee on Deficit Reduction must include repeal of the formula in their recommendation to Congress to protect access to care for seniors and stabilize the Medicare program.”

Other changes being adopted in the final rule include:

• CMS is expanding its multiple procedure payment reduction policy to the professional interpretation of advance imaging services to recognize the overlapping activities that go into valuing these services.
• CMS is adopting criteria for a health risk assessment (HRA) to be used in conjunction with Annual Wellness Visits (AWVs), for which coverage began Jan. 1 under the PPACA. The HRA is intended to support a systematic approach to patient wellness and to provide the basis for a personalized prevention plan. CMS is increasing AWV payment modestly to reflect the additional office staff time required to administer an HRA to the Medicare population.
• CMS is expanding the list of services that can be furnished through telehealth to include smoking cessation services. CMS is also changing the criteria for adding services to the telehealth list to focus on the clinical benefit of making the service available through telehealth. This change will affect services proposed for the telehealth list beginning in CY 2013.
• The final rule updates or modifies aspects of a number of physician incentive programs including the Physician Quality Reporting System, the e-Prescribing Incentive Program and the Electronic Health Records Incentive Program.
• The final rule also implements the third year of a four-year transition to new practice expense relative value units, based on data from the Physician Practice Information Survey that was adopted in the MPFS CY 2010 final rule.

The final rule with comment period will appear in the Nov. 28 Federal Register.  CMS will accept comments on those provisions that are subject to comment until Jan. 31, 2012, and will respond in the MPFS for CY 2013.