Debate Begins on Physician Payment Reform
Over the past several weeks, Congress and the Bush Administration have been discussing
various aspects of physician payment reforms. Much of this has been reported to the
HBMA membership. In addition several Congressional hearings on the topic, CMS
announced that they will be proposing significant changes in the values assigned to
hundreds of CPT codes under the Resources Based Relative Value Scale payment
methodology. While no major reforms in physician payments are expected to be adopted
before the end of 2006, changes could still occur – but at a price.
In mid-July, an Energy and Commerce Health Subcommittee hearing reviewed the cuts
in Medicare payments for medical imaging services included in the Deficit Reduction Act
(DRA). The principle DRA change would cap payment for imaging services provided in
a physician’s office at the same level as what Medicare would pay if the image was
performed in a hospital outpatient department. It has been reported that in some cases,
this would result in reductions in the neighborhood of 30 to 40 percent.
Next, the Subcommittee looked at issues involving the flawed fee schedule update
process called the Sustainable Growth Rate (SGR) formula. According to CMS, the SGR
formula is projecting a 4.4 percent reduction in the Conversion Factor used to determine
the cash value of the Relative Value Units (RVUs) assigned to every CPT code. Unless
Congress intervenes to prevent the cuts, the payment reduction will go into effect January
1, 2007.
This was followed by a lengthy hearing on the concept of incorporating Pay For
Performance (P4P) into the physician payment process. Although few specifics are
available, the concept here is that physicians who provide high quality services would
receive higher payments than those whose care is determined to be inferior.
Not to be left out, CMS announced recently that they had completed a thorough review of
the RVUs assigned to hundreds of CPT codes. According to the June 29 Federal Register
Notice.
These revisions to work RVUs are proposed to be effective for services furnished
beginning January 1, 2007. These revisions reflect changes in medical practice, coding
changes, new data on relative value components, and the addition of new procedures that
affect the relative amount of physician work required to perform each service as required
by the statute.
While the policy discussions were interesting and informative, there was little discussion
about how changes in Medicare payment policy might affect the Medicare Trust Fund.
Such discussions are essential because under the parliamentary rules governing
Congressional debate on entitlement programs such as Medicare, any change in policy
that affects expenditures that have not been budgeted, cannot be considered unless the
proposal is deemed “revenue neutral” by the Congressional Budget Office (CBO). As a
practical matter, this means is that if a Member of Congress wants to have legislation
considered that would cause Medicare to spend more money in a particular area (i.e.
eliminating the SGR reduction) then that legislation can only be considered if there are
corresponding cuts elsewhere in the Medicare program so that there is no change in
aggregate spending for Medicare. Current estimates show that eliminating the SGR cuts
would increase Medicare Part B expenditures by $10 Billion over the next 5 years. So in
order for Congress to consider legislation that would prevent the SGR reduction from
taking place on January 1, 2007, corresponding cuts of $10 Billion will have to be made
on other Medicare payments to offset this increase. Similarly, repealing the imaging cuts
mandated by the DRA would have to be “offset” by cuts in some other area of the
Medicare program to stay within the 2007 budget. It has been estimated that the DRA
imaging cuts will “save” Medicare approximately $2.5 Billion over the next five years.
If CMS makes an administrative change in Medicare that affects Medicare expenditures
by more than $20 Million, the agency must propose offsets so that the policy is “revenue
neutral”. Much public fanfare accompanied CMS’s announcement that based upon the
RVU evaluation process, the Evaluation and Management (E&M) codes (99201 – 99215)
were, on average going to rise by more than 30 percent of the CMS recommendations
were adopted. Specifically, CMS noted that, “the work component for RVUs associated
with an intermediate office visit, the most commonly billed physician’s service, 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.” What
drew far less public attention was the acknowledgement that in order to raise some codes,
CMS would have to propose reductions in other codes to offset the E & M increase.
According to the press release announcing the proposed changes, “The proposed notice
revises work RVUs for over 400 services to better reflect the work and time required of a
physician in furnishing the service, which can include not just procedures performed, but
also the services involved in evaluating a patient’s condition, and determining a course of
treatment (known as ‘evaluation and management’ services).”
Of the 400 proposed revisions put forward by the Relative Value Update Committee
(RUC), CMS accepted the recommendations for the work value for 299 codes (the RUC
recommendation could be higher, lower or stay the same). CMS disagreed with the
RUC’s recommendations with regard to 123 codes. Of the codes in which CMS
disagreed, CMS is proposing a higher work value for 3 codes, maintaining the current
work RVU for 48 codes, and a lower work value for 72 codes.
Although anyone may comment on the physician work value recommendations, it is
expected that only those organizations representing physician specialties affected by the
changes will have the ear of CMS.