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Published 8/1/2007
the AAOS Washington Office

AAOS reports on proposed revisions to the Medicare Physician Fee Schedule

On July 12, 2007, the proposed rule for the 2008 Medicare Physician Fee Schedule appeared in the Federal Register. The American Association of Orthopaedic Surgeons (AAOS) will be submitting comments (due on August 31, 2007) on many of the important areas. The AAOS also is taking action in the legislative arena to address the negative impact of specific provisions.

Proposed cuts
For 2008, the Centers for Medicare and Medicaid Services (CMS) is proposing revisions that will result in an approximate overall 11 percent cut for orthopaedic services, primarily due to the following three factors:

  • An approximate 10.0 percent cut in Medicare payments for all medical services and procedures because of the flawed Sustained Growth Rate (SGR) formula
  • An approximate 0.5 percent cut in overall Medicare payments for orthopaedics because of an increase in the factor that CMS uses to maintain budget neutrality in the Medicare payment system
  • An approximate 0.5 percent cut in overall Medicare payments for orthopaedics because of a decrease in relative values units for physician practice expenses

Although this reduction reflects an average for overall orthopaedic services, individual orthopaedic procedures will be affected differently. For example, the revisions will result in a 12 percent cut in Medicare payments for the three procedures—total hip arthroplasty, total knee arthroplasty, and hip fracture treatment—on which the AAOS and American Association of Hip and Knee Surgeons focused last year during the AMA RVS Update Committee (RUC) Five-Year Review process.

To avoid these drastic cuts, the AAOS has been diligently working with members of Congress to fix the flawed payment formula. Congress has avoided cuts to physician payments in the past by enacting short-term fixes, due to budgetary restraints.

This year, because Congressional authorization for the State Children’s Health Insurance Plan (SCHIP) ends on Sept. 30, Congress has taken an unprecedented early interest in healthcare policy, including Medicare physician payments. Although the physician payment fix has previously been addressed in December, some House Democratic leaders are hoping to include provisions in the SCHIP reauthorization legislation that would provide physicians with a positive update for 2 years and permanently repeal the flawed SGR formula.

AAOS supports repealing the SGR and positive updates for Medicare physician payments. Staff will continue to meet with Congressional leaders to promote a permanent fix to the flawed Medicare payment formula.

Eliminating the payment floor
CMS is also proposing changes to the geographic adjustment factors that affect Medicare payments. CMS uses the Geographic Practice Cost Index (GPCI) to adjust Medicare payment rates to reflect differences in the costs of living and practicing in different geographic locations. The average GPCI is 1.0. A more expensive area has a GPCI greater than 1.0; a less expensive area has a GPCI less than 1.0. CMS has set new GPCIs, effective Jan. 1, 2008, for most locales based on updated economic data.

In 2007, CMS set a payment floor of 1.0 for the GPCI, resulting in higher payments to physicians in areas with GPCIs less than than 1.0. For 2008, CMS proposes eliminating the floor, which would mean that physicians in areas with a GPCI of less than 1.0 will go back to their lower Medicare payment rates. AAOS expects that Congress will reinstate the GPCI floor again, at least for 2008, and the AAOS will continue to advocate for a legislative fix.

Expanding the PQRI
CMS proposes continuing and expanding the Physician Quality Reporting Initiative (PQRI), which began collecting data on physician performance on selected measures on July 1, 2007. The proposed 2008 program will expand the list of measures and, for the first time, include structural measures.

Under the proposed rule, the 2008 PQRI program will include all of the orthopaedic-related measures used in the 2007 PQRI and will add structural measures related to the adoption and utilization of e-prescribing and health information technologies (including electronic health records). The following three measures have also been proposed for inclusion:

  • Perioperative temperature management for surgical procedures under general anesthesia
  • Patients with osteoporosis who receive anti-inflammatory or analgesia medication
  • Patients with osteoporosis who have an assessment of their pain and function

Finally, CMS proposes including podiatric measures, being developed by the American Podiatric Medical Association, that focus on neurologic evaluation, Ankle Brachial Index (ABI) measurement, and footwear evaluation for diabetic patients.

As an active participant in the measure development process, AAOS will continue promoting measures that are reasonable and truly reflective of the quality of care delivered.

Inclusion of clinical registries in PQRI
TRHCA, which authorized the PQRI, also mandated the identification of ways that physicians could provide data on PQRI measures through a registry. Although CMS will not collect PQRI data via registries in 2008, it proposes exploring five different registry-based data submission options. It is also studying the feasibility of allowing healthcare professionals to submit data via electronic health records.

The most comprehensive data transfer of the five registry options would transfer all registry data to Medicare (for information contained in the registry on Medicare patients). For CMS to calculate PQRI performance rates, the registry would need to contain all elements necessary for analysis. This option could affect the American Joint Replacement Registry. The testing and evaluation process, however, could expose the inherent problems with the model and eliminate it from further consideration. CMS will accept voluntarily submitted data by existing registries to analyze the five options.

Funding for bonus payments
Part of TRHCA included a “Physician Assistance and Quality Initiative Fund” of $1.35 billion. The AAOS is disappointed that these funds will be applied to the PQRI bonus payments, rather than first addressing the flawed physician payment formula. In the proposed rule, CMS cites logistical issues in applying the fund to physician payment inequities. The AAOS believes that CMS, with reasonably little effort, could find a method for applying the funds to physician payments and that this would be a better use of taxpayer and Medicare beneficiary money.

The maximum bonus allowable under the 2007 PQRI is 1.5 percent of a physician’s allowable Medicare claims. Under the current 2008 proposal, CMS fails to state the percentage but estimates that the bonus percentage (based on allowed Medicare claims under the physician fee schedule) could range between 1.5 percent and 2 percent.

To address the PQRI language in TRHCA and the CMS rule, the AAOS and Alliance of Specialty Medicine requested that Senators Ben Cardin (D-Md.) and Arlen Specter (R-Pa.) and Representatives Bart Gordon (D-Tenn.) and John Shadegg (R-Ariz.) introduce the “Voluntary Medicare Quality Reporting Act of 2007.” This legislation would codify a structure for measure development and a realistic timeline for the implementation of a plan.

Representatives of the 11 different specialty groups within the Alliance visited Congressional offices urging support of the legislation on July 11. E. Anthony Rankin, MD, AAOS first vice-president, and David Teuscher, MD, chair of the Advocacy Resource Development and Coordinating Committee (ARDCC) represented AAOS. AAOS members are encouraged to contact members of Congress and urge their support of the Act. (See story on page 9.)

Additional payment cuts
Under the Medicare Modernization Act of 2003, CMS paid a 5 percent bonus to physicians practicing in areas defined as having a scarcity of practicing physicians. That law expires on Dec. 31, 2007, and the bonus will be eliminated for 2008.

“Stark Law” changes
Although CMS recently postponed the release of the third phase of “Stark II” or physician anti-self referral regulations, it included a list of revisions and clarifications of existing Stark regulations in the Physician Fee Schedule proposed rule.

CMS is soliciting comments on whether an “anti-markup provision” that would apply to the technical component of the Medicare payment should be enacted and how it should be applied. CMS is concerned that a billing physician who contracts with another physician to perform certain services may be able to negotiate such a low rate that the billing physician would realize a significant profit on the Medicare reimbursement.

CMS is also considering additional criteria for meeting the “in-office ancillary services” exception. CMS has received “hundreds of letters from physical therapists and occupational therapists stating that the in-office ancillary services exception encourages physicians to create physical and occupational therapy practices.” CMS is also concerned about the proliferation of imaging technology in physician offices that allows physicians to both order and perform the imaging service. Although no specific proposal regarding changes to the “in-office ancillary services” exception was included, CMS is soliciting comments on how to address this issue.

AAOS has consistently fought for broadening the in-office ancillary service exception. For more information and background on the CMS self-referral regulations, visit http://www.cms.hhs.gov/.

Therapy caps
Although monetary caps apply to Medicare-covered outpatient physical, occupational, and speech-language therapy, Congress has frequently directed CMS to create an “exceptions process for the cap.” Instead of allowing the exceptions process to expire in 2006, Congress extended the process until Dec. 31, 2007. CMS is acknowledging 2007 implementation of this directive in this proposed rule.

CMS has also stated that, for 2008, it will increase the 2007 cap on the Medicare outpatient therapy benefit by the Medicare economic index (MEI), estimated at 1.9 percent. If the actual MEI is near that estimate, the 2008 cap will be approximately $1,814.

To receive regular updates on federal legislative activities, sign up for the biweekly AAOS Legislative Update at www.aaos.org/dc.

Click here for Medicare spending table (pdf format)