CMS Proposes Major Changes to Physician Fee Schedule

CMS Proposes Major Changes to Physician Fee Schedule

Washington Report –June, 2006

Bill Finerfrock

Capitol Associates

Table of Contents

CMS Proposes Major Changes to Physician Fee Schedule

OMB Approves New 1500 Claim Form

MedPAC Releases Report on Increasing the Value of Medicare

Health Savings Accounts – Passing Fad or long-term trend?

CMS announces Mid-Year Review of Growth in Medicare and Medicaid Spending

Reminder – Medicare to HOLD provider payments in last week in September

CMS Releases Revised 855I

Pressure Growing on Congress to Delay or Repeal Imaging Cuts

Will Congress Consider Medicare Legislation in ‘06?

Medicaid – Are you an American Citizen? Prove It!

Stark Rule Changes Coming Soon

Electronic Remittance Advice Contingency Plan to Expire 10/1/2006

CMS Program Transmittals for June CMS Proposes Major Changes to Physician Fee Schedule

The Centers for Medicare & Medicaid Services (CMS) has issued a notice proposing changes to the Medicare Physician Fee Schedule (MPFS) that will, according to the press release announcing the proposed changes, “improve the accuracy of payments to physicians for the services they furnish to Medicare beneficiaries.”

Specifically, CMS is proposing major revisions to the physician work component and the practice expense component of the Resource Based Relative Value Scale (RBRVS) system of reimbursement. CMS is poised to recommend major revisions to the Relative Value Units (RVU) that make up the RBRVS methodology.

While much of the press attention has been focused on the positive effect these proposed changes will have on the Evaluation and Management (E & M) Codes, little public attention has been focused on the impact these changes will have on other RVUs.

According to CMS, “the work component for RVUs associated with an intermediate office visit will increase by 37 percent. The work component for RVUs for an office visit requiring moderately complex decision-making and for a hospital visit also requiring moderately complex decision-making will increase by 29 percent and 31 percent respectively.”

In announcing the proposed changes, CMS Administrator Mark McClellan, M.D., Ph.D. said, “It’s time to increase Medicare’s payment rates for physicians to spend time with their patients.” “We expect that improved payments for evaluation and management services will result in better outcomes, because physicians will get financial support for giving patients the help they need to manage illnesses more effectively.”

However, what has received less attention is the announcement by CMS that in order to adopt these changes next January as CMS has proposed, the changes will have to be implemented in a “revenue neutral” manner. In order to be revenue neutral, CMS will have to make changes in other payment categories in order to ensure that total outlays for Medicare do not go up by more than $20 million. CMS estimates that the proposed work RVU changes would increase expenditures by approximately $4 billion. This means that CMS will have to identify and adopt changes in Medicare that would reduce provider payments by $4 billion in order to enact the RVU changes in a “revenue neutral” manner.

CMS also announced plans to change the way Medicare calculates the practice expense portion of physician fee schedule payments. The practice expense RVUs do not include the costs of malpractice premiums, which are accounted for separately in the fee schedule. Practice expenses account for approximately $30 billion in Medicare payments.

CMS will formally make these recommendations through an announcement in June 29th Federal Register. Comments will be accepted until August 21, 2006. If adopted, the RVU revisions in this proposed notice would be fully implemented for services to Medicare beneficiaries on or after January 1, 2007, while the practice expense revisions would be phased in over a four-year period.

This is part of a review of the RVU components CMS is required to undertake every five years. While the Medicare law requires the fee schedule to be updated annually, it requires Medicare to perform a review of the RVUs to adjust for changes in medical practice, coding changes, new data on RVU components and new procedures at least once every five years.

Given the magnitude of the increase for E & M services, it is possible that some elected officials could view the need to repeal the 4.4 percent reduction in the Conversion Factor scheduled to take effect this January as being less important.

OMB Approves New 1500 Claim Form

The National Uniform Claim Committee (NUCC) has announced the approval of the revised version of the 1500 Health Insurance Claim Form (version 08/05) commonly referred to as the HCFA 1500. The Office of Management and Budget (OMB) has approved the 1500 Claim Form with an initial expiration date of June 30, 2007.

The NUCC is currently working to coordinate the printing and distribution logistics and will communicate them via a press release once they are finalized and available. The recommended timeline for implementation is:

October 1, 2006: Health plans, clearinghouses, and other information support vendors should be ready to handle and accept the revised (08/05) 1500 Claim Form.

October 1, 2006 - February 1, 2007: Providers can use either the current (12/90) version or the revised version of the 1500 Claim Form.

February 1, 2007: The current version of the 1500 Claim Form is discontinued; only the revised form is to be used. All rebilling of claims should use the revised form from this date forward, even though earlier submissions may have been on the current form.

The following is the proposed Medicare implementation timeline: the new Form CMS-1500 (08/05) will be effective for optional use starting January 2, 2007 through March 30, 2007, but will be required starting April 2, 2007.

Providers will need to check with their payer and/or clearinghouses to determine when they will begin to accept the revised forms.

MedPAC Releases Report on Increasing the Value of Medicare

The Medicare Payment Advisory Commission (MedPAC) released its June 2006 Report to the Congress: Increasing the value of Medicare. The report examines new directions to increase the value of the Medicare program: increasing accountability and care coordination, providing better information and the tools to use it, and improving pricing accuracy.

MedPAC is an independent Congressional advisory body charged with providing policy analysis and advice concerning the Medicare program and other aspects of the health care system. Its 17 commissioners represent diverse points of view and include health care providers; payers; beneficiary representatives; employers; and individuals with expertise in biomedical, health services, health economics research, and prescription drug benefit programs.

To download a copy of the entire report, go to:

http://www.medpac.gov/publications/congressional_reports/Jun06_EntireReport.pdf

If you only want to view the Table of Contents, go to:

http://www.medpac.gov/publications/congressional_reports/Jun06_TOC.pdf

The following are excerpts from the report:

Improving accountability and care coordination. Providers must be held accountable for the quality of care they provide and the resources consumed in providing that care. Quality pay-for-performance programs are the first step. The next step toward improving accountability is measuring physician resource use. The report examines one method to achieve this—episode groupers. It finds that the two groupers tested generally agree on the number of episodes created and the types of services in episodes, and that resource use and quality vary for certain conditions across the 13 metropolitan statistical areas tested. MedPAC plans to examine linking episodes and quality to individual physicians.

Private plans in Medicare. The biggest change in Medicare in recent years is the advent of the prescription drug benefit. The report finds that nearly 80 organizations are offering 1,429 stand-alone drug plans across the country. More than 20 stand-alone plans are available to beneficiaries in every region of the country. Plan premiums vary, but in almost every region beneficiaries have access to coverage for a premium of less than $20 per month. There are also 1,303 Medicare Advantage (MA) plans with drug coverage. They tend to charge lower premiums for Part D coverage (nearly 40 percent charge nothing), but beneficiaries must agree to receive all of their Medicare benefits from these plans to take advantage of the lower cost for Part D coverage. There are clear patterns in benefit design, for example 66 percent of private drug plan offerings and 83 percent of MA drug offerings have no deductible or a reduced deductible, and more than 90 percent of all drug plans use tiered formularies with copayments. Plans usually apply at least some drug utilization tools—such as prior authorization, step therapy, and quantity limits—to selected drugs. Plans use these tools for drugs that are expensive, potentially risky, subject to abuse, or to encourage use of lower cost therapies.

Providing better information and the tools to use it. Medicare policymakers and administrators need better information both to formulate policies and to create tools to give useful information to beneficiaries and providers. Providers need better information to assure quality care and limit unnecessary resource use; beneficiaries need information to maintain a healthy lifestyle and to choose the highest quality care at lowest cost.

Improving the accuracy of prices. The prices Medicare pays for individual services may not be accurate. The report considers how to improve payment accuracy.

Health Savings Accounts – Passing Fad or long-term trend?

The Government Accountability Office (GAO) has released a new report entitled “Consumer-Directed Health Plans: Small but Growing Enrollment Fueled by Rising Cost of Health Care Coverage” which looks at the prevalence of Health Savings Accounts and their potential for reducing the number of uninsured.

According to GAO, insurance companies, employers, and individuals are showing increasing interest in consumer-directed health plans (CDHP). CDHPs typically combine a high-deductible ($5,000 - $10,000) health plan with some type of reimbursement arrangement most commonly a Health Savings Account (HSA). Similar to IRAs, HSAs are tax-advantaged accounts used to pay enrollees' health care expenses. To the extent the owner of the HSA does not use all of the money in the account during the year in which it was deposited, the money carries over from year-to-year and is available for future use. Because the consumer is essentially paying out of pocket for most health expenditures, the theory is that the “purchaser” has the incentive to purchase health care more prudently.

GAO was asked to review the prevalence of CDHPs, how the associated accounts are funded and used, and the factors that may contribute to the growth or limit the appeal of these plans. GAO examined survey data on CDHP enrollment and interviewed or obtained data from employers, insurance carriers, individuals, financial institutions, and other CDHP experts.

GAO found that a small but growing share of Americans with private health insurance coverage have enrolled in CDHPs. From January 2005 to January 2006, the number of persons covered by CDHPs increased from about 3 million to between about 5 and 6 million. Reflecting the growing consumer and employer interest in this type of coverage, GAO found an increasing number of health insurance carriers were offering CDHPs during 2005.

According to interviews with representatives of the health insurance industry and health policy experts, the primary factor responsible for the growth of CDHPs is the rising cost of health care coverage. These experts also said that the lower premiums of CDHPs and the ability to accumulate tax-advantaged savings have prompted the enrollment growth.

Despite recent growth, some health policy experts and industry officials cited several factors that may limit the appeal of CDHPs. Some of the things HSA advocates would like to see to further promote this type of health insurance:

  • Higher annual contribution limits for HSAs
  • Improved decision-support tools that provide enrollees with sufficiently detailed data on the cost and quality of health care
  • Improved ability of insurers to determine the amount to be deducted from the patient's CDHP account at the time of service
  • Modification of some state insurance laws that impose additional restrictions on HSAs

To review the entire 38 page report, go to:

http://www.gao.gov/new.items/d06514.pdf

CMS announces Mid-Year Review of Growth in Medicare and Medicaid Spending

On July 11, CMS released Fact Sheets that summarize mid-year spending trends for Medicare and Medicaid. According to CMS, Medicare Part D (prescription drug) spending has been lower than originally projected. Unfortunately, the release also notes that “projected expenditures for Medicare Part A and Part B are higher.” CMS analysts concluded that one of the primary reasons spending has exceeded projections is the rapid growth in the “use of Medicare services.”

This finding is significant because future cuts or increases in the physician fee schedule are affected by whether spending in Medicare Part A and B exceeds or falls below projections. If these early trends continue, they could lead to additional future cuts in Medicare physician fee schedule payments. Some of the findings in the fact sheets:

Medicare

Medicare Part A and Part B expenditures are higher, primarily because of continuing rapid growth in the use of Medicare services. Part A projected expenditures over five years (2006-2010) are $17 billion higher and Part B projected expenditures over five years are $30 billion higher than in the President’s Budget. Rapid growth in physician-related services and hospital outpatient services are the main factors responsible for a projected increase in the Medicare Part B premium of 11 percent for next year.

Medicaid

Federal Medicaid spending growth is declining from over 12 percent per year in fiscal year 2000-2002 to 7.2 percent from 2002-2005, and down further to 4.6 percent projected for fiscal year 2006-2007. State Medicaid spending growth has simultaneously slowed significantly, with many states projecting lower costs in FY 2006 than FY 2005.

The Deficit Reduction Act of 2005 (DRA) has resulted in greater use of private sector health plans rather than government-run “fee for service” that rewards providers for driving demand and creating incentives for over-utilization. It has also resulted in more use of community-based long-term care services that beneficiaries with a disability prefer, and more alternatives to costly Medicaid-financed nursing home care.

Reminder – Medicare to HOLD provider payments in last week in September

A brief hold will be placed on Medicare payments for ALL claims (e.g., initial claims, adjustment claims, and Medicare Secondary Payer (MSP) claims) for the last 9 days of the Federal fiscal year, i.e., September 22, 2006-September 30, 2006.

In essence, no payments on claims will be made from September 22-30, 2006. Providers need to be aware of these payment delays, which are mandated by section 5203 of the Deficit Reduction Act (DRA) of 2006.

No interest will be accrued or paid, and no late penalty will be paid to an entity or individual for any delay in a payment by reason of this one-time hold on payments. All claims held as a result of this one-time policy that would have otherwise been paid on one of these 9 days will be paid on October 2, 2006.

CMS Releases Revised 855I

When CMS announced a few months ago the new 855I provider enrollment form, many in the billing community were surprised to see a request for the billing company’s NPI in Section 8: Billing Agency Information. Given that billing companies are unable to obtain an NPI, asking them to provide this information would be impossible.

HBMA staff immediately contacted CMS staff and was informed that this was a typographical error on the new form. HBMA was assured that a new form would be posted on the CMS Website.

We are pleased to announce that a revised 855I has now been posted on the CMS site for download. To get a copy of the new form, go to:

http://www.cms.hhs.gov/cmsforms/downloads/cms855i.pdf

Pressure Growing on Congress to Delay or Repeal Imaging Cuts

The American College of Radiology (ACR) has been joined by several other physician groups, including the American Medical Association, in support of legislation that would either delay or repeal cuts in imaging payments slated to take effect January 1, 2007. The imaging cuts were a last minute addition to the Deficit Reduction Act signed into law this past February by President Bush.

On June 28, 2006 H.R. 5704 was introduced to provide for a budget-neutral two-year moratorium on payment reductions for imaging services. The bill, sponsored by Representative Joseph Pitts (R-PA) was referred to both the House Committee on Energy and Commerce and to the House Committee on Ways and Means. H.R. 5704 has already been cosponsored by more than 50 Representatives and enjoys strong bi-partisan support. Despite the strong showing of early support, chances of the legislation being enacted are considered slim due to the cost involved in delaying the cuts. In order for Congress to delay the cuts, they would have to come up with cuts elsewhere in the Medicare program – never an easy task, particularly in an election year.