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Published 8/1/2011
Mary Ann Porucznik; Matthew Twetten

Physicians Face Medicare Cliff

Proposed 2012 physician fee schedule includes 29.5 percent payment cuts

On July 1, the Centers for Medicare & Medicaid Services (CMS) issued two proposed rules for 2012 payments under Medicare. The first covered payment policies and rates for physicians and nonphysician practitioners (NPPs) for services paid under the Medicare Physician Fee Schedule (MPFS) in calendar year (CY) 2012; the second covered the 2012 Outpatient Prospective Payment System (OPPS).

The SGR requirement
By law, CMS must use the current sustainable growth rate (SGR) formula to determine payments to providers; based on this formula, physicians would face a 29.5 percent cut for services rendered in 2012.

More than 1 million providers of vital health services to Medicare beneficiaries—including medical and osteopathic physicians, limited license practitioners such as podiatrists, and NPPs such as nurse practitioners and physical therapists—are paid under the MPFS. CMS projects that total payments under the MPFS in CY 2012 will be $80 billion. Even CMS, however, recognizes the problems inherent in the current SGR formula.

“This payment cut would have serious consequences, and we cannot and will not allow it to happen,” said Donald M. Berwick, MD, CMS Administrator. “We need a permanent SGR fix to solve this problem once and for all. That’s why the president’s budget and his fiscal framework call for averting these cuts and why we are determined to pass and implement a permanent and sustainable fix.”

This is the eleventh time the SGR formula resulted in a payment cut, although Congress has passed legislation to avert the cuts for every year but CY 2002. Each time the cuts are deferred, however, the cost of “fixing” the SGR increases. Under President Obama’s proposed 2012 budget, Medicare payments would remain at current (2011) levels for the next 2 years—through Dec. 31, 2013.

The 29.5 percent cut, however, is higher than the 28.3 percent “cliff” used by the administration when crafting the budget. Thus, keeping payments at current levels could cost more than $63 billion, while the 10-year cost of repealing the formula would significantly surpass the budget estimate of nearly $370 billion.

“The American Association of Orthopaedic Surgeons (AAOS) is continuing to work with Congressional leaders and urging them to permanently address the broken Medicare physician payment system,” said Peter J. Mandell, MD, chair of the AAOS Council on Advocacy. “Medicare beneficiaries and their physicians need a more stable and predictable mechanism that takes into account the actual cost of providing care.”

Other proposed changes
In its 2012 proposed rules, CMS plans to expand its potentially misvalued code initiative by focusing on the highest volume and dollar codes billed by physicians to determine whether these codes are overvalued and whether evaluation and management (E&M) codes are undervalued. This could have a significant impact on orthopaedic codes for procedures such as total joint replacements, which are both high volume and high dollar.

The following changes are also included in the proposed rule:

  • Expanding the multiple procedure payment reduction to apply to the professional interpretation of advance imaging services “to recognize the overlapping activities that go into valuing these services”
  • Expanding the list of services that can be furnished through telehealth to include smoking cessation services
  • Establishing a new value-based modifier that would reward physicians for providing higher quality and more efficient care, as required under the Affordable Care Act; the modifier would debut in 2015 and be used only for certain physicians and physician groups, but would be extended to include all physicians by Jan. 1, 2017
  • Implementing the third year of a 4-year transition to new practice expense relative value units, based on data from the Physician Practice Information Survey that was adopted in the 2010 final rule
  • Updating physician incentive programs such as the Physician Quality Reporting System (PQRS), the ePrescribing Incentive Program and the Electronic Health Records (EHR) Incentive Program

For example, CMS proposed to change the definition of “group practice” under both the PQRS and the EHR incentive programs to groups with 25 or more eligible professionals. However, the agency still recognizes the need to equalize the reporting burden by establishing different reporting criteria for small and large groups.

Also under the PQRS program, CMS proposes not to count measures that have a 0 percent performance rate. That is, if the recommended clinical quality action is not performed on at least one patient, CMS will not count the measure. The agency also announced that the reporting period for purposes of the 2015 PQRS payment adjustment (negative 1.5 percent) will be the 2013 program year. The adjustment will increase to negative 2 percent for 2016 and beyond.

For purposes of the 2013 and 2014 payment adjustments under the ePrescibing Initiative, CMS is proposing significant hardship exemption categories for professionals who meet the following criteria:

  • Practice in a rural area with limited high-speed internet access
  • Practice in an area with limited available pharmacies for electronic prescribing
  • Unable to prescribe electronically due to local, state, or federal law
  • Prescribe fewer than 100 prescriptions during a 6-month, payment adjustment reporting period

Outpatient payment rule
The proposed 2012 Outpatient Prospective Payment System (OPPS) rule updates payment policies and rates for hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs). CMS projects that total payments under the OPPS to HOPDs—including general acute care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, long-term acute care hospitals, children’s hospitals, and cancer hospitals—for services furnished to Medicare patients in 2012 will be approximately $41.9 billion. CMS projects that payments to Medicare-participating ASCs under the ASC payment system will be approximately $3.61 billion.

Among the rule’s proposals is the addition of nine quality measures to the Hospital Outpatient Quality Reporting Program.

The new measures include the following:

  • Six chart abstracted measures
  • One healthcare associated infection measure to be reported to the National Health Safety Network
  • One measure about the use of a safe surgery checklist
  • One measure collecting hospital outpatient department volume for selected surgical procedures

Other proposals in the rule include making changes to the Medicare EHR Incentive Program, strengthening the Hospital Value-Based Purchasing Program, and establishing a quality reporting program for ASCs.

CMS will accept comments on the proposed rules through Aug. 31, 2011, and will issue the final rules by Nov. 1, 2011. The AAOS is reviewing both proposed rules and will submit comments by the deadline.

Mary Ann Porucznik is managing editor of AAOS Now. Matthew Twetten is senior manager, regulatory, quality, and medical affairs in the AAOS office of government relations.