Physicians Take Another Big Medicare Pay Hit; Opens Annual Congressional Battle
Obama administration has consistently fought to change 1997 law that causes annual lobbying effort by medical groups
2011 - The annual big-dollar battle over the rate of pay for physicians kicked off yesterday with a rule from the Centers for Medicare &
Medicaid Services that set the rates for 2012 – the cut was slightly less than expected but still a gigantic 27.4 percent. The CMS rule was
mandated to follow current law, although the administration is firmly against the cuts.
“This payment rate cut would have dire consequences that should not be allowed to happen,” said Donald M. Berwick, M.D.,
“We need a permanent SGR fix to solve this problem once and for all. That’s why the President’s Budget and his Plan for
Economic Growth and Deficit Reduction call for permanent, fiscally responsible reform and why we are committed to working with the Congress to
achieve a permanent and sustainable fix.”
“Almost every year for more than a decade, doctors have faced this annual threat and the Congress has in turn acted to
temporarily prevent these deep reductions from taking effect,” said Kathleen Sebelius, Secretary of Health and Human Services.
“We have not and will not let deep cuts to doctors’ payments occur. The Obama Administration is 100 percent committed to
fixing the flawed Medicare payment system and protecting Medicare beneficiaries’ access to doctors.”
She said the cut in pay was the “result of a flawed 1997 law.”
The final rule issued by CMS updates 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.
More than 1 million providers of vital health services to Medicare beneficiaries – including 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 approximately $80 billion.
CMS is required to issue a final rule that reflects current law. Under current law, providers will face steep
across-the-board reductions in payment rates, based on a formula– the Sustainable Growth Rate (SGR) – that was adopted in the Balanced Budget
Act of 1997.
Without a change in the law from Congress, Medicare payment rates to providers paid under the MPFS will be reduced by
27.4 percent for services in CY 2012 - less than the 29.5 percent reduction that CMS had estimated in March of this year because Medicare cost
growth has been lower than expected.
This is the eleventh time the SGR formula has resulted in a payment cut, although the cuts have been averted through
legislation in all but CY 2002. The Obama Administration is committed to fixing the SGR and ensuring these payment cuts do not take effect.
In the CY 2012 final rule, CMS is expanding the potentially miss valued code initiative, an effort to ensure Medicare is
paying accurately for physician services and more closely managing the payment system.
This year, CMS is focusing on the codes billed by physicians in each specialty that result in the highest Medicare
expenditures under the MPFS to determine whether these codes are overvalued.
In the past, CMS has targeted specific codes for review that may have affected a few procedural specialties like
cardiology, radiology or nuclear medicine but has not taken a look at the highest expenditure codes across all specialties. This effort
results in increased payments for primary care services that have historically been undervalued by the fee schedule.
“We believe strong efforts are needed to evaluate Medicare’s fee schedule to ensure that it is paying accurately and to
ensure that Medicare beneficiaries continue to have access to vital services,” said Jonathan Blum, deputy administrator and director for the
Center for Medicare.
CMS is also making changes in how it adjusts payment for geographic variation in the cost of practice. The Affordable
Care Act and the Medicare and Medicaid Extensions Act made some temporary adjustments that were in place for two years while CMS and the
Institute of Medicine (IOM) began to comprehensively study these issues.
As part of this initiative, CMS is replacing some of the data sources - such as using data from the American Community
Survey (ACS) in place of the Department of Housing and Urban Development (HUD) rental data and also using ACS data in place of the data
currently used for non-physician employee compensation.
Consistent with IOM’s recommendation, CMS is also adjusting its payments for the full range of occupations employed in
physicians’ office as well as making other adjustments called for in prior year public comments.
Although these improvements result in very little change to the indices, they show that the data Medicare has used in the
past and will be using in the future produce consistent results—suggesting past year adjustments have accurately reflected geographic
variations in the cost of practice.
National Public Radio reporters explain the history
on All Things Considered
March 4, 2010 – The legislatively mandated cut in
Medicare’s pay to physicians of 21.2 percent has been delayed until at
least April 1 by a bill passed by the Democrats late Tuesday and signed
by President Obama. Senior citizens scratch their heads trying to
understand this annual dance in Washington – doctors face an annual
reduction in Medicare pay, they threaten to stop treating seniors and
Congress stops the pay cut.
The IOM provided its first of three reports on geographic adjustment factors to CMS on June 1. IOM provided a supplement
to its report at the end of September that largely supported changes CMS is making in the final rule and recommended additional changes, many
of which would require a change in law. CMS is continuing to evaluate all of the IOM’s recommendations.
Other changes being adopted in the final rule include:
● CMS is expanding its multiple procedure payment reduction policy to the professional interpretation of advance
imaging services to recognize the overlapping activities that go into valuing these services. This policy better recognizes efficiencies that
are expected when multiple imaging services are furnished to the same patient, by the same physician or group practice, in the same session on
the same day.
● CMS is adopting criteria for a health risk assessment (HRA) to be used in conjunction with Annual Wellness Visits (AWVs),
for which coverage began Jan. 1, 2011 under the Affordable Care Act. The HRA is intended to support a systematic approach to patient wellness
and to provide the basis for a personalized prevention plan. CMS is increasing AWV payment modestly to reflect the additional office staff
time required to administer an HRA to the Medicare population.
● CMS is expanding the list of services that can be furnished through telehealth to include smoking cessation
services. CMS is also changing the criteria for adding services to the telehealth list to focus on the clinical benefit of making the service
available through telehealth. This change will affect services proposed for the telehealth list beginning in CY 2013.
● The final rule updates or modifies aspects of a number of physician incentive programs including the Physician
Quality Reporting System, the ePrescribing Incentive Program and the Electronic Health Records Incentive Program.
● The final rule also finalizes quality and cost measures that will be used in establishing a new value-based modifier
that would adjust physician payments based on whether they are providing higher quality and more efficient care.
The Affordable Care Act requires CMS to begin making payment adjustments to certain physicians and physician groups on
Jan. 1, 2015, and to apply the modifier to all physicians by Jan. 1, 2017.
CMS intends to work closely with physicians to ensure that efforts to improve the quality, safety, and efficiency of care
do not diminish patient access to care. The rule also finalizes CY 2013 as the initial performance year for purposes of adjusting payments in
● The final rule also implements 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 MPFS CY 2010 final rule.
The final rule with comment period will appear in the Nov. 28, 2011, Federal Register. CMS will accept comments on those
provisions that are subject to comment until Jan. 31, 2012, and will respond in the MPFS for CY 2013.
Military families are also hurt by March 1 reduction
as TRICARE ties its payment rates to Medicare
March 2, 2010
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