Skip to main content

Medicare Physician Fee Schedule Impacts

We know the Medicare Physician Fee Schedule is "budget neutral" but that doesn't mean that all physician specialities are treated equally. Here's a chart of some of the winners and losers in this year's proposed rule. Remember though, things can -- and will change by November when the rule is finalized. Read on for more...


Every year the Centers for Medicare & Medicaid Services releases thousands of pages of proposed regulatory changes affecting the way the Medicare program pays for physician services. Since the Omnibus Budget Reconciliation Act of 1989 was passed -- and the Medicare Physician Fee Schedule began its transition in 1992, Medicare has paid for physician services on a relative value basis. By shifting the focus of payment from "reasonable and customary charges" to the resources required to provide the service, Medicare expected to reduce spending on physician services.

The resource based, relative value unit system (RBRVS) looks to rank order services based on three measures of the intensity of the services. These measures are: physician work, practice expenses, and malpractice insurance. Each measure evaluates the amount of effort required for its respective portion of the service. The National Health Policy Forum defines these three measures as follows:

"Physician work RVUs account for the time, technical skill and effort, mental effort and judgment, and stress to provide a service. Practice expense RVUs account for the nonphysician clinical and nonclinical labor of the practice, as well as expenses for building space, equipment, and office supplies. Professional liability insurance RVUs account for the cost of malpractice insurance premiums" [“The Basics: Relative Value Units.” National Health Policy Forum, 2015, www.nhpf.org/library/the-basics/Basics_RVUs_01-12-15.pdf].

It isn't simply enough to measure the relative intensity of each proportion of the service. Those RVUs need to be converted into dollars -- that is the amount of reimbursement under the fee schedule. Since Congress pass the Medicare Access and CHIP Reauthorization Act of 2015, the Medicare conversion factor has been adjusted each year by the application of two primary factors. First a statutory update percentage, which in recent years has been zero percent, is applied to the previous year's conversion factor. Then a budget neutrality adjustment is applied.

From the beginning, it was acknowledged that the shift to a resource based, relative value unit payment system would have disparate impacts on different provider specialty types. Services that require more physician time, or which are inherently more complicated procedures are paid at higher rates that services which are not. Similarly, when a procedure is performed in a physician's office, and that procedure requires a significant amount of clinical staff time, equipment and supplies than another procedure, the more complex procedure will have a higher RVU for its practice expense.

A number of factors can cause an RVU to change from one year to the next. Efforts to revalue codes based on stakeholder feedback, or through a regular audit process can result in changes to RVUs from the prior year. Changes to individual codes, including changes to supply costs, can also result in changes to RVUs. Legislative changes and CMS policy changes -- such as the recent changes to office- and outpatient-based evaluation and management (E&M) visits, can also affect RVUs for some services.

Further complicating the matter is that the MPFS is a budget neutral system. If the sum of all RVU changes across all physician services exceeds $20 million CMS is required to make budget neutrality adjustments in order to ensure that spending is managed appropriately. These adjustments are applied through a budget neutrality adjustment applied to the MPFS conversion factor.

While the changes to most specialties tend to be rather modest -- between zero and five percent up or down, some specialties are impacted by these changes more than others. For instance, if the proposed rule is finalized without any changes,  endocrinologists would receive an overall 10% increase in payments based on changes to the codes that they normally bill. On the other hand, nurse anesthetists would see an overall 11% decrease in payments.

While it may not seem fair that certain specialties are disproportionately affected by these changes, it is a result of the structure of the physician fee schedule payment system. Specialty societies are well aware of these changes and remain mindful of the impact that these changes have on Medicare payments. 

John Warren is the Owner and Principal Consultant at Gettysburg Healthcare Consulting in Hanover, Pennsylvania. He worked at CMS for 22 years and he and his staff at CMS worked closely with the staff responsible for the Medicare Physician Fee Schedule. He has consulted with numerous clients in the Medicare space interested in navigating physician payments from Medicare. Visit http://www.policypros.net for information about GHC and it's services

Comments

Popular posts from this blog

Bridging the Gap: The Long Road from FDA Approval to Medicare Coverage

A new study published in JAMA Health Forum reveals that the road to Medicare coverage for novel medical technologies is a long and winding one. Researchers found that only 44% of innovative devices and diagnostics approved by the FDA from 2016-2019 had even “nominal” Medicare coverage by 2022. This data highlights major hurdles in the system that delay patient access to beneficial emerging technologies. About the Research The study examined 281 novel products cleared through the FDA from 2016-2019 via the high-risk premarket approval, de novo, and breakthrough 510(k) pathways. These included things like groundbreaking diagnostic tests, implantable devices, and other innovative treatment technologies. The goal was to measure how long it took to establish national or regional Medicare coverage policies for these newly approved products. This is important because Medicare coverage is required before hospitals, physicians and patients can reliably access new technologies. Key Findings The

The Problem of Limited-Supply Agreements for Medicare Price Negotiation

A recent JAMA Viewpoint article discusses how limited-supply agreements between brand name and generic drug makers could impact Medicare price negotiation under the Inflation Reduction Act (IRA). These agreements allow brand manufacturers to maintain some market exclusivity by limiting the supply of generic competitors. The article suggests these deals may increase as the Centers for Medicare and Medicaid Services (CMS) implements the IRA's price negotiation provisions. From a business perspective, it's understandable why brand manufacturers might find limited-supply agreements preferable to having their drugs subject to Medicare negotiation. Maintaining even partial exclusivity is likely better for revenue than triggering government-dictated price reductions. However, policymakers and patients are increasingly concerned that these deals keep prices high despite generic availability. The use of limited supply agreements could also produce unintended consequences.  Balancing som

FDA Pilot Program for Certain In Vitro Diagnostic Tests

The U.S. Food and Drug Administration (FDA) has announced a pilot program designed to improve oncology patient care by establishing minimum performance standards for in vitro diagnostic tests (IVDTs) used with a limited number of oncology drug products. An IVDT is a device that provides critical information for the safe and effective use of a therapeutic product. The FDA typically requires a companion diagnostic to receive marketing authorization concurrently with the approval of the corresponding therapeutic product. However, in cases where no satisfactory alternative treatment exists for a serious or life-threatening condition, the FDA may approve a therapeutic product even without a companion IVDT. Currently, laboratory developed tests (LDTs) are being used in such cases, and the FDA exercises enforcement discretion regarding these tests. The pilot program aims to improve drug selection and patient care by establishing minimum performance characteristics for certain LDTs used in id