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    CMS discloses payment changes for services, practice expenses

    Proposal will increase payments for E&M services, agency says


    Bob Gatty
    Washington—Changes are coming in the way the Centers for Medicare and Medicaid Services calculates physician payments for Medicare services. The agency is putting the finishing touches on a new plan that would provide higher physician payments for cognitive services, while making corresponding reductions in practice expense payments.

    The proposal was published in late June, and CMS will consider comments until late August.

    CMS's proposal came as organizations representing physicians repeated warnings that physician payments under the current system will be slashed by another 5% on Jan. 1, 2007, with further reductions totaling as much as 37% planned through 2015 unless Congress comes to the rescue once again.

    Congress recently passed legislation reversing the physician payment cut of 4.4% that went into effect on Jan. 1, 2006, and setting the Medicare conversion factor at its 2005 level. The 2006 Medicare Trustees' report forecasts a cut of about 5% in 2007 and cumulative cuts of more than one-third by 2015.

    The American Medical Association has pointed out that next year's reductions would come in the face of continuing increases in practice expenses.

    While that issue was being waged on the political front, CMS said its new changes, proposed June 21, will improve the accuracy of payments to physicians for Medicare services and will increase payments for evaluation and management services. However, the overall cost of those payment changes is estimated at $4 billion, and the agency must meet budget neutrality requirements imposed by Congress. Thus, CMS also proposed changes in the way it calculates the practice expense portion of the fee schedule, which could cause offsetting reductions in payments.

    According to CMS, its proposed payment rule reflects the recommendations of the AMA's Relative Value Scale Update Committee (RUC).

    "It's time to increase Medicare's payment rates for physicians to spend time with their patients," said CMS Administrator Mark McClellan, MD, PhD. "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."

    CMS said other changes in physician payment policy will be addressed in a separate proposed rule to be published at a later date. The agency said it will respond to public comments on both sets of proposals and will announce final policies in early November. The changes will apply to payments for services furnished to Medicare beneficiaries beginning in 2007.

    According to CMS, the new proposal constitutes the largest revisions ever instituted for services related to patient evaluation and management. For example, the work component for relative value units (RVUs) associated with an intermediate office visit, the most commonly billed physician's service, will increase by 37%. The work component for RVUs for an office visit requiring moderately complex decision-making and for a similar hospital visit will increase by 29% and 31%, respectively.

    CMS said the proposal would revise work RVUs for more than 400 services to better reflect the work and time required of a physician in furnishing service, which can include procedures performed as well as services involved in evaluating a patient's condition and determining a course of treatment. Work RVUs account for approximately $35 billion in Medicare payments, more than half of overall Medicare payments under the fee schedule.

    CMS also is proposing changes to how Medicare calculates the practice expense portion of physician fee schedule payments. Practice expenses account for approximately $30 billion in fee schedule payments, representing about 45% of overall Medicare payments under the fee schedule.

    The proposed change would make the practice expense methodology more transparent and easier to understand, would make it consistent across procedures, and would use data collected by specialty associations and reviewed by the AMA RUC, CMS explained.

    In the notice, CMS is proposing the following:

    • adopt a "bottom-up" methodology for calculating direct costs using procedure-level data for clinical staff times, supplies, and equipment that have been previously reviewed by the RUC
    • modify the methodology used to calculate indirect practice expenses
    • use practice expense survey data for eight specialties: allergy/immunology, cardiology, dermatology, gastroenterology, radiology, radiation oncology, urology, and independent diagnostic testing facilities
    • eliminate an exception to the current methodology, the so-called non-physician work pool that has been used to calculate practice expense RVUs for services without physician work RVUs, and, instead, price these services using the standard practice expense methodology.

    To ease the impact of the practice expense payment changes for physician practices and to ensure continued beneficiary access to services, CMS proposed a 4-year transition to the new practice expense RVUs.

    The proposal appeared in the June 29 Federal Register. Comments will be accepted until Aug. 21, 2006. If adopted, the RVU would be fully implemented for services to Medicare beneficiaries on or after Jan. 1, 2007, while the practice ex-pense revisions would be phased in over a 4-year period.

    For more information, visit http://www.cms.hhs.gov/PhysicianFeeSched/.

    Bob Gatty, a former congressional aide, covers news from Washington for Urology Times.

    Bob Gatty
    Bob Gatty, a former congressional aide, covers news from Washington for Urology Times.

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