CMS Proposes Physician Fee Schedule Changes

CMS Proposes Physician Fee Schedule Changes

On August 10, 2006, the CMS released a proposed rule recommending numerous changes in the Medicare payment system for 2007. Individuals and organizations wishing to comment on the proposals have until October 10 to submit their responses.

The proposed rule implements a provision in the Deficit Reduction Act (DRA) signed into law by President Bush earlier this year that exempts the colorectal cancer screening benefit from the Part B deductible. The proposal also recommends expanding the number of beneficiaries who qualify for bone mass measurement due to long time steroid therapy.

Although earlier reports indicated that the reduction in the physician fee schedule update would be between 4.4 percent and 4.7 percent, the official announcement indicates that the reduction will be 5.1 percent unless Congress intervenes to prevent the cut from taking place.

The Medicare law includes a statutory formula that requires CMS to implement an expected minus 5.1 percent update in payment rates for physician-related services. According to the CMS release announcing this change,

This formula compares the actual rate of growth in spending to a target rate, which is based on such factors as the growth in number of Medicare fee-for-service beneficiaries and statutory or regulatory changes in benefits. If the actual rate of growth exceeds the target rate, the update is decreased; if it is less, the update is increased.

The negative update projected for 2007 occurs because spending on physicians’ services and other Part B services has been growing at a much faster rate than target spending. CMS data shows that expenditures for physicians’ services in 2005 increased 10 percent over 2004. It appears that this faster than expected growth occurred mainly due to an increase in the number and complexity of services furnished to Medicare beneficiaries.

Specifically, CMS cites the following as explanations for the increase expenditures: more frequent and intensive office visits; rapid growth in the use of imaging techniques; increased use of laboratory services; and more claims for physician-administered drugs.

Additional details on recent expenditure growth in Part B and the impact of growth in physician-related spending are available on the CMS website:

www.cms.hhs.gov/apps/media/press/release.asp?Counter=1895.

Every year since 2002, the statutory update formula has projected payment cuts. In 2002, an update of negative 4.8 percent was applied to payment rates. To avoid further payment reductions, Congress intervened and temporarily suspended the requirements of the formula in favor of specific, statutorily dictated updates for 2003 through 2006. In passing these measures, Congress did not adjust the target, further increasing the gap between actual spending and the targets, and exacerbating the already difficult situation.

In announcing the proposed changes, CMS Administrator Mark McClellan said,

We need to get out of the vicious circle of rapid growth in utilization and spending, and falling real payment rates. Physician groups have been working hard to identify better ways to pay – ways that help them provide higher-quality care without increasing overall health care costs. We will continue to work with Congress and with physician groups to provide more efficient and higher quality care for beneficiaries without increasing Medicare spending.

Other proposals included in the proposed rule are:

Updating the wage index and drug add-on adjustments applied to the composite payment rate for dialysis services provided by ESRD facilities. The total drug add-on adjustment to the composite rate for CY 2007, including the growth update adjustment of 0.6 percent, would be 15.2 percent.

Assigning work relative value units to medical nutrition therapy services, CPT codes 97802, 97803, and 97804 and HCPCS codes G0270 and G0271.

Amending the reassignment regulations to clarify that any reassignment pursuant to the contractual arrangement exception is subject to program integrity safeguards that relate to the right to payment for diagnostic tests; and amending the physician self-referral regulations to place restrictions on what types of space ownership or leasing arrangements will qualify for purposes of the in-office ancillary services exception or the physician services exception to the physician self-referral prohibition.

Amending the reassignment regulations so that employees who reassign benefits are allowed unrestricted access to the billing information submitted on the employee's behalf, similar to what is allowed for independent contractors under the contractual arrangement reassignment exception.

Establishing supplier standards applicable to independent diagnostic testing facilities. Failure to comply with one or more of these standards could result in a denial of enrollment, and failure to maintain compliance could result in revocation of billing privileges.

The HBMA Government Relations Committee is currently reviewing the proposed changes and will be preparing comments for the Association should they be warranted. Individual members are encouraged to review the proposal and submit personal comments.