CMS Issues 2010 Physician Fee Schedule Final Rule

On Friday evening, October 30, Centers for Medicare and Medicaid Services (CMS) announced final changes to policies and payment rates for services to be furnished during calendar year (CY 2010) by over 1 million physicians and nonphysician practitioners who are paid under the Medicare Physician Fee Schedule (MPFS).  The MPFS sets payment rates for more than 7,000 types of services in physician offices, hospitals, and other settings.   

Read the Final Rule here: CMS 2010 Physician Fee Schedule Final Rule  

Read CMS' Press Release on the Final Rule here: CMS ANNOUNCES PAYMENT, POLICY CHANGES FOR PHYSICIANS SERVICES TO MEDICARE BENEFICIARIES IN 2010  

Summary of Key Provisions  

On the whole, excluding the 21.2% across the board cut to the MPFS pursuant to the Sustainable Growth Rate (SGR) formula currently used to set aggregate MPFS spending, CMS estimates that in 2010 the changes in the Final Rule will result in:

o        a 1% decrease to the specialty of radiation oncology (versus a 19% decrease in the proposed rule); o        a 1% decrease to the specialty of medical oncology (versus a 6% decrease in the proposed rule); and o        a 5% decrease to the specialty of radiology (versus an 11% decrease in the proposed rule).  

Pursuant to the 4-year phase-in of changes described below, on the whole CMS estimates that in 2013 the changes in the Final Rule will result in:

o        a 5% decrease to the specialty of radiation oncology -
                    (versus a 19% decrease for 2010 in the proposed rule);
o        a 6% decrease to the specialty of medical oncology -
                    (versus a 6% decrease for 2010 in the proposed rule); and
o        a 16% decrease to the specialty of radiology -
                    (versus an 11% decrease for 2010 in the proposed rule).  

Utilization Rate Assumption for Services Using Expensive Equipment (inc imaging & radiation therapy)  

In response to MedPAC's recent survey of CT and MRI equipment usage and subsequent recommendation that the equipment utilization rate assumption used to estimate the cost to the physician of the major medical equipment needed to perform those services, CMS proposed increasing the equipment utilization rate assumption for ALL medical equipment over $1 million, including radiation therapy equipment.  In the Final Rule, CMS exempts radiation therapy equipment from the change, limits the change to MR and CT imaging, and phases the MR and CT change in over 4 years.  

US Oncology worked successfully with ASTRO, ACRO, Varian, 21st Century Oncology, Vantage Oncology, OnCure and Alliance Oncology to jointly push CMS to exclude radiation therapy services from the cut.  

Practice Expense Update  

The AMA conducted a new survey, the PPIS, which was expanded to include nonphysician practitioners (NPPs) paid under the PFS. The PPIS, administered in CY 2007 and CY 2008, was designed to update the specialty-specific PE/HR data used to develop PE RVUs.  The results of the AMA PPIS survey suggest that radiation oncology practice expense per hour increased from $114 to $126.66 and medical oncology practice expense per hour have decreased 8% from $141.84 to $129.94 even as overall physician practice expenses have increased 42% from $69.74 to $99.32.  CMS proposed to use PPIS survey data to set PE values in 2010.  In the Final Rule, CMS will phase in over 4 years the use of the PPIS data to set PE values, but will not use the PPIS data to set medical oncology PE values.

While 2010 impact estimates are much improved from the proposed rule, the CMS action will result in a 6% reduction to the specialty of medical oncology in 2013 when fully phased in, including a cut to chemotherapy drug administration payments estimated at 20%.  As Medicare already reimburses far below cost for these needed services, US Oncology will continue to work with ASCO, COA and others in the medical oncology community to ensure that practices providing needed services to Medicare beneficiaries fighting cancer are paid fairly for their services.  

Elimination of Consultation Codes  

CMS proposed to stop making payment for consultation codes, which are typically billed by specialists and are paid at a higher rate than equivalent evaluation and management (E/M) services.  In the Final Rule, CMS finalized the elimination of consultation codes.  Practitioners will use existing E/M service codes when providing these services instead.  Resulting savings will be redistributed to increase payments for the existing E/M services.  

Removal of Part B Drugs from SGR Calculation  

CMS proposed removing physician-administered drugs from the definition of "physician services" for purposes of computing the physician update formula in anticipation of enactment of legislation to provide fundamental reforms to Medicare physician payments.  While the proposal will not change the projected update for services during CY 2010, CMS projects that it would reduce the number of years in which physicians are projected to experience a negative update.  In the Final Rule, CMS finalized the removal of Part B drugs form the SGR calculation.  

CMS' action is expected to significantly reduce the Congressional Budget Office (CBO) score -- or projected government cost -- of eliminating or otherwise changing the flawed SGR policy.  In practice over the past several years, increases in Part B drug spend have directly resulted in decreases in physician services spending (and more specifically, physician fee schedule values pursuant to the conversion factor) in each year.  CMS' action will avoid such a result going forward.  

Implementation of Accreditation Requirement for Suppliers of Technical Component of Advanced Imaging Services

CMS proposed to implement a requirement in the MIPPA that suppliers of the technical component of advanced imaging services be accredited beginning January 1, 2012 by designating accrediting organizations (AOs) for these suppliers and utilizing the imaging quality standards that have been developed by the AOs.  The accreditation requirement applies to mobile units, physicians' offices, and independent diagnostic testing facilities that create the images, but does not apply to the physician who interprets them.  In the Final Rule, CMS finalized the implementation of the accreditation requirement for IDTFs, mobile services and physician offices that perform the technical component of advanced imaging services.

Sustainable Growth Rate (SGR)

In the Final Rule, CMS updated the cut to the conversion factor required for 2010 by the current statute pursuant to the flawed Sustainable Growth Rate (SGR) formula to -21.2% from -21.5%.  This cut must be averted by the Congress before January 1, 2010.  Legislation to avert the cut is pending in each house of Congress and it is expected that the Congress will act to avert the cut, either by eliminating permanently the SGR formula or by delaying its application for one or more years as has been done for most of the past decade.