CMS Issues Proposed 2012 Medicare Physician Fee Schedule --- Dramatic Cut to Physician Reimbursement if Congress does not act

Unless Congress intervenes (yet again), physicians will incur a 27.4 percent reduction in Medicare payment rates Jan. 1 2012, according to the Center for Medicare & Medicaid Services (CMS) final rule released yesterday. This cut is actually a bit smaller than the the 29.5 percent CMS estimated in March due to reduced physician visits but is clearly a threat of a massive, unsustainable cut.

"This payment rate cut would have dire consequences that should not be allowed to happen," CMS Administrator Dr. Donald M. Berwick said in a press release. "We need a permanent SGR fix to solve this problem once and for all." The American Medical Association (AMA) released a similar statement decrying the cuts and repeating its call for a solution. "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," AMA President Dr. Peter W. Carmel said. He continued, "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 were announced in the rule but most none as significant as this issue including:

• Increases in payments for Medicare beneficiaries' Annual Wellness Visits to reflect the additional office staff time required to administer a health risk assessment in conjunction with the visit


• Continuation of CMS's "misvalued code initiative," focusing on codes billed by physicians in each specialty that result in the highest Medicare expenditures under the fee schedule


• Changes to the way CMS adjusts payment for geographic variation in the cost of practice


• Reduction in payment for a second advanced imaging service provided by the same physician on the same day


• Expansion of covered telehealth services, including smoking cessation

The final rule will appear in the Federal Register Nov. 28 but the real action will be to see when and if Congress will address the SGR issue in at least another temporary way.

House and Senate both Pass a 1-year "Doc Fix" to Avoid Reimbursement Cuts

Breaking news today. The House has just passed the 1-year correction to the Sustainable Growth Rate (SGR) issues that threaten to reduce Medicare reimbursement to physicians by 25% starting on January 1st. The President is expected to sign the measure into law by tomorrow. This is welcome news as it will avoid the type of drama we experienced in 2010 with fee cuts being threatened several times during the year which created a messy patchwork of temporary corrections.

This provision would reverse that reduction and extend current Medicare payment rates through December 31, 2011. The estimated cost of the provision is $14.9 billion over ten years. Please note this is a 12-month fix so this issue has not yet been permanently addressed and given the high price tag to "avoid a pay cut" it remains an issue that is very difficult to explain to Mainstreet USA but has gone on for far too many years (and now across two different administrations). We can only hope that Congress will do what's right and create a permanent fix next year well in advance of the December 31st 2011 deadline.

President signs 1-month SGR Fix -- Congress must work to avoid a Jan 1 Medicare Reimbursement Cut

Some good news and some work to be done. This week, President Obama signed a 31-day Medicare physician payment extension that will temporarily postpone a 23% reduction in the payment rate. The Senate passed the one-month payment extension on November 18, and the House passed the measure on November 29. The temporary patch extends the current Medicare payment rate until December 30, and, as such, postpones the 23% reduction called for by the sustainable growth rate (SGR) formula that was scheduled to take effect December 1st.

However more work remains for this Congress before they can recess. Without further congressional intervention, the payment cut will grow to more than 25% on January 1.
Senate Finance Committee leaders this week continued the effort they started prior to the Thanksgiving recess to pursue legislation to affect a year-long patch to prevent the Medicare payment cut scheduled to go into effect January 1. The current projected cost of a 12-month fix that many expect to be included in a Medicare “extenders package” favored by Senate Finance Committee Chair Max Baucus (D-MT) is nearly $20 billion. As yet, funding offsets to pay for a 12-month patch and any extenders that many be included in future legislation have not been revealed. Both parties appear to be working to try to address this issue for 2011 during this lame duck Congress rather than returning home to their districts with a reimbursement reduction starting on January 1st.

It is important that Congress act on this issue now and avoid a potential issue or gap in reimbursement in January that could impact Medicare beneficiary access to care and would certainly jeopardize the financial stability of some physician clinics.

Senate Passes 31-Day Medicare Physician Patch; House Action Needed After Thanksgiving

Before the Thanksgiving break, the Senate passed a measure that would create a 31-day payment "patch" to the Medicare sustainable growth rate (SGR) formula and temporarily stave off the 23% cut to physicians scheduled to take effect December 1. The legislation, called the Physician Payment and Therapy Relief Act of 2010, would continue the existing 2.2% update (expiring November 30, 2010) for an additional month through December 31, 2010, and would fully offset the cost.

The one-month physician payment update comes with a price tag of $1 billion over 10 years. The Senate's proposal would offset the cost of the patch by modifying the multiple payment procedure reduction (MPPR) finalized in the calendar year (CY) 2011 Medicare Physician Fee Schedule Final Rule by applying a 20% reduction, rather than the 25% reduction included in the final rule, to the practice-expense component for the second and subsequent outpatient physical therapy services furnished in the office setting.

The month-long patch was announced as part of a two-part deal agreed to yesterday by Senate Finance Committee leaders who will pursue a payment fix through 2011 after they win approval of the patch through 2010. The Senate's proposed fix follows lobbying by the Obama administration and physician and advocacy groups to enact a 13-month payment patch.

The House, already adjourned for the Thanksgiving recess, will take up the measure when it reconvenes, which would then prevent the December 1st reimbursement cut physicians will otherwise face. However, this 31-day fix leaves Congress with a great deal of work remaining to prevent the additional cuts that would otherwise go into effect after January 1st.

CMS Extends Medicare Claims Processing Hold through June 17. Physicians may experience slight delay in claims payment.

CMS announced this morning that they will continue to hold claims pending congressional action this week to address the sustainable growth rate (SGR) issue that otherwise would create a 21% cut in Medicare claims payment for services starting on June 1st. This announcement does mean a potential delays in claims payment for physicians but based on guidance the worse case scenario would be a 3 day delay, if any.

The announcement from CMS to Congress on this issue included the following background and context: The Continuing Extension Act of 2010, enacted on April 15, 2010, extended the zero percent (0%) update to the 2010 Medicare Physician Fee Schedule (MPFS) through May 31, 2010. At this time, Congress is still debating the elimination of the negative update that took effect June 1, 2010. CMS is hopeful that Congressional action will be taken within the next several days to avert the negative update. To avoid disruption in the delivery of health care services to beneficiaries and payment of claims for physicians, non-physician practitioners, and other providers paid under the MPFS, CMS had instructed its contractors on May 27th to hold claims for services paid under the MPFS for the first 10 business days of June (i.e., through June 14, 2010). This hold only affects MPFS claims with dates of service of June 1, 2010, and later. Given the possibility of Congressional action in the very near future, CMS is now directing its contractors to continue holding June 1 and later claims through Thursday, June 17, lifting the hold on Friday, June 18. This action will facilitate accurate claims processing at the outset and minimize the need for claims reprocessing if Congressional action changes the negative update. It also should minimize the provider and beneficiary burdens and costs associated with reprocessing claims. CMS indicated that they understand that the delayed processing of Medicare claims may present cash flow problems for some Medicare providers. However, it is expected that the delay, if any, beyond the normal processing period will be only a few days.

Health care providers and advocacy groups are urging Congress to take action on this issue quickly and hopeful provide for a longer term fix to this issue.

Congress has not acted to address 21.3% Medicare Physician Fee cut on June 1 -- CMS announces they will hold claims

CMS announces they will temporarily hold claims starting June 1st in case Congress fails to act.

Currently, neither the House of Representatives and the Senate have approved legislation to stop the pending 21.3 percent cut to physician Medicare payments, which will take effect unless final legislation is signed into law by June 1. Despite a proposal earlier this week calling for modest updates through the end of 2014, legislators ultimately scaled back many areas of the bill, including the Medicare physician payment provision, to reduce the overall cost of the bill. However, House members continued to object to the revised cost of the bill, making it unclear when the House would hold a vote.

It is not clear that Congress will be able to pass even another short temporary fix before June 1. To address this possibility, earlier today the Centers for Medicare & Medicaid Services (CMS) released the following statement:

The Continuing Extension Act of 2010, enacted on April 15, 2010, extended the zero percent (0%) update to the 2010 Medicare Physician Fee Schedule (MPFS) through May 31, 2010. The Centers for Medicare & Medicaid Services (CMS) believes Congress is working to avert the negative update scheduled to take effect June 1, 2010. To avoid disruption in the delivery of health care services to beneficiaries and payment of claims for physicians, non-physician practitioners, and other providers of services paid under the MPFS, CMS has instructed its contractors to hold claims containing services paid under the MPFS (including anesthesia services) for the first 10 business days of June. This hold will only affect MPFS claims with dates of service June 1, 2010, and later.

This hold should have minimum impact on provider cash flow because, under the current law, clean electronic claims are not paid any sooner than 14 calendar days (29 for paper claims) after the date of receipt. Be on the alert for more information about the 2010 Medicare Physician Fee Schedule Update.

Health Reform Could Increase Medigap Cost-Sharing for Seniors

Patient advocates are expressing new concerns that the language in the health reform bill will hit Medigap plans with higher cost-sharing requirements and would likely lead to increased copays starting in 2015 for the two most popular types of Medigap plans, Plans C and F.

Some health care experts worry the provisions, targeted for their savings and the hope that extra out-of-pocket costs will reduce unnecessary medical services, would unfairly hurt patients newly enrolling in the program.

Currently, Medigap policies pay the full 20 percent of cost-sharing for physician care and other outpatient Part B services, but the new law indicates that patients have to pay some of the cost sharing in order to reduce unnecessary medical care. Since there is no cap on the Medicare Part B copayment, many seniors prefer Medigap plans C and F as they cover all of those costs. Such coverage is critical for chronically ill patients and cancer patients.

Clearly, this will be one several key issues that impact patient copayment exposure and related access to care.

CMS will temporarily hold claims while we wait for Congress to address SGR Issue and health reform update

The Senate was unable to pass legislation to block the scheduled 21% Medicare cut to physicians scheduled for Monday, March 1st. Earlier in the week, Senate Majority Leader Harry Reid (D-NV) attempted, unsuccessfully, to procure unanimous consent (UC) from the Senate on a bill that would extend current Medicare rates for 30 days among other healthcare provisions. The 30-day extension plan was part of a two-step approach that involved two legislative measures: a smaller measure, which included a 30-day extension in SGR-imposed cuts and unemployment benefits, as well as COBRA insurance programs; and a larger, more comprehensive measure that would delay the cuts through the end of the year along with a more comprehensive set of health-related and tax "extenders." Reid's plan was blocked by Senator Jim Bunning (R-KY), over objections that the healthcare-related "extenders" in the measure were not offset, or paid for. The House passed the 30-day extension bill on February 24th.

Senate Democrats will, reportedly, try again next week by taking up a longer-term (year long) extension package, which is expected to include most of what Senate Democrats were unable to pass in the 30-day extenders package. The bill is not expected to clear the floor until the latter part of next week at the earliest.

CMS instructed Medicare contractors to hold claims for the first 10 days of March pending further developments on the payment cuts. Prior to the announcement, there were a number of anecdotal reports that physicians had planned to hold claims, reschedule Medicare patients or stop seeing Medicare patients altogether until the payments are restored. Under current regulations, physicians can hold claims up to 14 days before submission. What all this means is that we have a 2 week buffer before claim payment is reduced and physician practices begin to feel this devastating cut in payment. We need to all work to keep the pressure on all members of Congress to address this now.

While debate continues following the "health summit" last week, we can not let these core issues such as SGR and other Medicare extenders impact patient access to care.
The white house summit ended with the President making it clear that he intends to move forward with reform legislation with or without the Republicans within the next 4 to 6 weeks. The process to do so will either be a scaled-down plan ("skinny plan") or Democrats could use the process of reconciliation that would likely be modeled on the President's proposed outline which is based on some modifications to the Senate bill.

Key components of that proposal include the following:

• Insurance Exchange: Sets up 50 insurance marketplaces administered by the states, in which small businesses and people without employer coverage could buy insurance that meets new federal standards; establishes a new federal authority that would address insurance premium hikes.
• Individual Mandate: Individuals must purchase insurance or pay a penalty that would be the greater of $695 or 2.5% of income by 2016.
• Employer Responsibility: Does not include an employer mandate, but requires companies with 50 or more employees to help defray the cost if taxpayers are paying for their worker's insurance. Also penalizes companies with 50 or more employees that don't provide coverage, but exempts the first 30 workers when calculating the tax. Companies that don't offer insurance would be charged $2,000 annually per employee.
• Medicaid Expansion: Expands Medicaid to cover everyone earning less than 133% of the FPL ($29,327) for a family of 4. Increases the federal share of covering new eligible beneficiaries, and proposes to simplify several eligibility rules for the current program. The proposal also seeks a middle path between the House and Senate bill's subsidies for low-income Americans.
• Closes the Medicare Part B Doughnut Hole: Closes the doughnut hole by 2020 by increasing the amount of money provided for rebates to beneficiaries and by reducing co-insurance payments.
• Pathway for Follow-on Biologics: The proposal includes very little detail, but includes establishing "a new pathway to create generic versions of biological products." The proposal does not include data exclusivity terms.
• Financing: Combination of Medicare cuts, new taxes and increased industry fees. The proposal includes a tax on high-cost insurance (or "Cadillac" health plans), but pushes it up to $27,500 for family plans and $10,200 for individual plans, up from $23,000 and $8,500, respectively, compared to the Senate bill. It extends the 2.9 percent Medicare payroll tax into unearned income for couples earning more than $250,000. It also Increases the pharmaceutical industry fees to $33 billion (up from the $23 billion in the Senate bill), and builds on Medicare cuts included in the House and Senate bills.

Rumors have begun to emerge that a scaled-down measure is being prepared by Democratic lawmakers should they lack the votes needed to pass reform legislation through the reconciliation process.

Health Reform Debate May Take a Break but Medicare Physician Reimbursement Issue Must be Fixed Now

While health care reform is in limbo, we do need some form of health care legislation to pass in order to prevent a looming cut to Medicare reimbursement for physicians at the end of February. We understand that Senate leadership and the chairmen of the Finance and Budget committees are working to try to include a fix to the Medicare physician payment formula as part of legislation being considered to increase the federal debt ceiling.

While details have not been confirmed, but the deal being discussed reportedly includes a 5-year exemption from the pay-as-you-go rules for a physician pay fix. The plan also includes creation of a deficit reduction commission, which would make recommendations to Congress on how to proceed with reducing the federal debt. The commission's recommendations would be put to congressional vote for approval. There is disagreement within Senate leadership on the creation and scope of the commission, and some leaders support creation of such a commission via executive order instead of legislation. The physician pay fix could have a modest increase to Medicare fees but all of the scenarios are very modest at this point. Without congressional action, a 21.2 percent cut to the fee schedule is scheduled to kick in at the end of February making this a critical health care issue that must be addressed regardless of other health care legislation.

Politics vs Good Health Policy: Senate unable to gain votes to fix Medicare SGR Physician Payment Issue

Despite widespread, bipartisan acknowledgement that the Medicare Physician Reimbursement issue (known as Sustainable Growth Rate or SGR) needs to be fixed, today the Senate failed to assemble the votes necessary to move this issue forward. Feels like politics at play versus taking advantage of the larger health reform debate to address issues that have needed to be fixed for several years.

Due to the flawed SGR issue, physicians will receive a 21% cut in Medicare reimbursement on January 1st and the Senate was attempting to permanently fix this issue separate from health reform since the issue was skewing the debate. The Senate Finance Health Bill does have a one year fix which would (once again) defer this issue which is a huge distraction and frustration since the "cost" to fix the issue grows each time a temporary fix is made.

Today, a vote on the motion to invoke cloture on the motion to correct this issue (S. 1776) failed in the Senate, 47-53. 60 votes were needed to move forward.

Republicans and some Democrats questioned the price of the Medicare measure -- $247 billion over 10 years -- and said proponents haven't offered any new revenue sources or spending cuts to offset the cost. Supporters of the bill say the sharp payment cuts, unless reversed, would encourage doctors to stop seeing Medicare patients.

Since a temporary fix is needed we will likely hear more debate on this issue in the remaining weeks of this year given the looming January 1st massive reimbursement cut.

Senate Democrats move to fix Medicare Physician Payment Issue

In a surprise move today, Senate Democrats are making a push to separate the troubling Medicare physician fee schedule issue from health reform. There is bipartisan support to address the issue but the cost of doing so has grown over many years. Now the cost of permanently fixing the Sustainable Growth Rate (SGR) flaw in the Medicare Physician Fee Schedule artificially adds over $200 Billion to the cost of health reform which is why only another one-year temporary fix was included in the Senate Finance Committee's health plan.

Today, Senator Debbie Stabenow (D-MI) introduced the "Medicare Physician Fairness Act of 2009" (S. 1776). The bill would repeal permanently the sustainable growth rate (SGR) payment methodology. Senator Stabenow requested that the bill be considered immediately under a procedure called Rule 14, which waives Committee consideration of the bill. Senate Majority Leader Harry Reid will attempt to bring S. 1776 before the full Senate tomorrow. However if there is an objection, Senator Reid will file a cloture motion which would limit debate and require 60 votes.

Note that our understanding is that this does not have an offset, the Senate will be required to waive the Budget Act prior to final passage which also requires 60 votes. From a health policy perspective, separately addressing this Medicare issue makes sense since the issue has been deferred for many years with one year temporary fixes and has basically led to no increases in Medicare reimbursement for physicians for close to a decade.

Senator Baucus pushes for bipartisan support of Senate Finance Health Reform Proposal

In today's Washington Post, Senate Finance Chairman Max Baucus is said to be urging his Republican colleagues to support the $900 billion health-care reform package they have helped to negotiate over the past two months -- creating a bipartisan proposal before President Obama's speech Wednesday night.

The Baucus plan, circulating among the Finance Committee's "Gang of Six" this weekend, sets forth provisions that have already gained the group's unofficial support but now there is pressure from other Republican colleagues to let the Democrats fight for a health reform bill on their own.

The Baucus plan creates bipartisan options for some of the most controversial aspects of health reform. Instead of a government insurance option, the Baucus proposal would create a network of non-profit cooperatives which is an alternative that Grassley, the lead Republican negotiator, has backed. The Baucus plan also creates new fees on "high cost plans" which may be controversial since many union households could be impacted.

At a cost of under $900 billion for 10 years, the finance bill would appears to be at least $100 billion less than other legislation on the table. Analysts indicate the plan is designed to "bend the cost curve" downward over time to make health-care more affordable for businesses, individuals and government, while reducing the federal deficit within 10 years.

In addition to the fee on high-cost plans, the proposal also would extract about $400 billion in cost-savings from Medicare, cuts that are stirring unease among both parties.

Under Baucus's plan, Medicaid would be expanded to cover all individuals -- except illegal immigrants -- who make up to 33 percent above the current federal poverty level. The plan would provide tax credits to help low and middle-income families purchase private insurance coverage, and would set up health insurance exchanges so small business workers and other individuals whose employers don't provide health coverage, could select from a menu of plans.


We expect to see more detail tomorrow from the Senate Finance team tomorrow in advance of the President's speech on Wednesday. The Senate Finance health plan proposal has been projected to be the best opportunity for bipartisan health reform legislation this year.

House Health Reform Includes Important Technical Change to ASP

The House Energy and Commerce Committee had a marathon mark-up session last night on the health care reform bill (as further described in the following article), but one of the key amendments adopted late last night would exclude customary prompt-pay discounts extended to distributors from a manufacturer's calculation of Average Sales Price (ASP) for Medicare Part B Drugs and Biologics. This widely supported technical change would help to ensure consistent and accurate ASP calculations and is consistent with how prompt pay terms are reported to Medicaid. As currently drafted, it would sunset after 5 years and exclude prompt pay terms up to 2 percent of wholesale acquisition cost (WAC). Prompt pay legislation was introduced in the House by Rep. Green (D-TX) and Rep. Whitfield (R-KY). Similar legislation has been introduced in the Senate by Sen. Specter (D-PA) and Sen. Roberts (R-KS).

Why does this matter? This is a key issue and flaw in the current ASP system used to reimburse all Medicare Part B products (including injections and infusions) in the physician office and hospital outpatient settings. This will clarify appropriate reporting which will make reimbursement consistent and accurate across products. This is a key issues for physicians and hospitals.