CMS Finalizes Controversial 2010 Medicare Physician Fee Schedule

The Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2010 Medicare's Physician Fee Schedule (MPFS) final rule last week. The final rule with comment period includes a negative 21.2 percent reduction in 2010 Medicare physician payments, which is slightly less than the 21.5 percent cut in the proposed rule released July 1. The cuts, resulting from the Sustainable Growth Rate (SGR) payment update formula, will take place unless Congress passes legislation to reverse them. At this point we expect Congress will implement a temporary fix again this year although there has been hope of a permanent fix.

The SGR issue is only part of the concern with this final rule as the there are other significant policy changes in the rule which seems particularly harsh on oncology and cardiology as well as services with high levels of work from non-physicians. Some drug administration codes (including chemotherapy) will see reimbursement cut over 20% even after the SGR issue is fixed. The increases in reimbursement appear limited to office visit codes.

Key points:

• Finalizes the policy to remove physician-administered drugs from the definition of physician services for purposes of computing the physician update formula
• Moves forward with updating practice expenses using a new survey, the Physician Practice Information Survey (PPIS), over a 4-year transition period. CMS will continue to use the specialty supplemental survey data for determining practice expenses for medical oncology
• Finalizes the proposal to stop making payment for consultation codes other than the G codes that are used to bill for telehealth consultations
• Adopts in part the proposal to increase the equipment utilization percentage used for setting practice expense (PE) for expensive equipment valued at more than $1 million from 50 percent to 90 percent.

The display copy of the final rule can be accessed here . The final rule with comment will be published in the November 25, 2009 Federal Register. While provisions of this final rule are expected to go into effect January 2010, CMS will accept comments on designated provisions of the final rule with comment period until December 29, 2009. The new payment rates and policies will apply to services furnished to Medicare beneficiaries on or after January 1, 2010.

Our preliminary analysis of the MPFS final rule identified several additional provisions of importance to physician offices:

• Implements a conversion factor of $28.4061 based on the statutory SGR formula, a reduction from the CY 2009 conversion factor of $36.0666
• Implements work, practice and malpractice relative value unit reductions that will redistribute payments under the fee schedule. As a result of these changes, specialists' service codes, including drug administration codes, among others will experience significant cuts while primary care services, including visit codes, will experience increases.
• Finalizes several of the proposed changes to the Competitive Acquisition Program (CAP), such as instituting a quarterly payment update instead of an annual update, narrowing the CAP drug list, and limiting the geographic area to the 48 contiguous states (as a temporary solution). The rule does not indicate timelines for the return of the CAP.
• Finalizes the proposal, per MIPPA, to create new benefit categories for cardiac and pulmonary rehabilitation services and for chronic kidney disease education
• Finalizes the proposal to increase by 1.0% the current composite rate for End Stage Renal Disease (ESRD) services to $135.15 and continues the drug add-on payment amount of $20.33 per treatment for services furnished on or after January 1, 2010
• Continues the threshold percentage of 5% for the Widely Available Market Price (WAMP) and Average Manufacturer Price (AMP). The Office of the Inspector General (OIG) will continue to compare ASP to WAMP and AMP.
• Finalizes changes to the PQRI program, such as adding an additional 30 individual PQRI measures and six measures groups on which individual eligible professionals (EPs) may report; codifies MIPPA requirements that will enable group practices to qualify for a 2010 PQRI incentive payment based on a determination at the group practice level, rather than at the individual EP level; and adds an electronic health record (EHR)-based reporting mechanism which will allow EPs to count their submission of EHR-based measures toward their eligibility for a PQRI incentive payment.
• Finalizes proposed changes to the E-prescribing Incentive Program including simplifying the reporting requirements for the electronic prescribing measure. For 2010, the rule requires EPs to report an e-prescribing code only when a patient visit results in an electronic prescription being placed. In addition, the rule implements a MIPPA provision that enables group practices to qualify for a 2010 e-prescribing incentive payment based on a determination at the group practice level, rather than at the individual EP level.

As the healthcare reform debate unfolds, it is unclear the mechanism and scope of the approach Congress will take to address the SGR-imposed cuts scheduled to take effect next year. However, Congress is expected to take action to either permanently address this revolving issue, or at a minimum, make another temporary fix to avoid significant cuts in Medicare physician reimbursement in 2010.