Cut of 27.4 Percent Looms for Physicians Under CMS's Final 2012 Fee Schedule Rule

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By Mindy Yochelson

The Centers for Medicare & Medicaid Services said Nov. 1 that Medicare physician pay rates will be cut by 27.4 percent starting Jan. 1, 2012, unless Congress intervenes to change the underlying law.

“By law, we are required to make these reductions,” CMS said in the final 2012 physician fee schedule rule, “and these reductions can only be averted by an Act of Congress.”

Health and Human Services Secretary Kathleen Sebelius said in a statement released in conjunction with the final rule that “the pattern of threatened SGR [sustainable growth rate] cuts and last-minute Congressional rescues is in itself not a sustainable solution and must be remedied.”

The cut is slightly less than announced in the proposed rule, issued in July (128 HCDR, 7/5/11). In the proposal from the summer, CMS said that payments would be cut by 29.5 percent. CMS said it is required to use for the final rule “the best data available” as of Sept. 1.

CMS projected that total payments under the physician fee schedule in 2012 will be approximately $80 billion. The CMS final rule is expected to be published in the Nov. 28 Federal Register.

According to CMS, physician pay is determined through relative value units or RVUs for a particular service, which are multiplied by a fixed-dollar conversion factor and a geographic adjustment factor to determine the payment amount for each service. The conversion factor, which determines particular payment rates, will be $24.6712 for 2012, compared with $33.9764 for 2011.

Lawmaker Action Urged

American Medical Association President Peter W. Carmel said Nov. 1 that the congressional Joint Select Committee on Deficit Reduction “must include repeal of the formula in their recommendation to Congress to protect access to care for seniors and stabilize the Medicare program.”

According to Carmel, “Payments for Medicare physician services have fallen so far below increases in medical practice costs that there is a 20 percent gap between Medicare payment updates and the cost of caring for seniors.”

Congressional aides predicted earlier in October that a physician payment fix could move as a stand-alone bill, if the joint committee were to fail to include a fix in its legislative package.

An aide said legislation canceling the cut would cost between $20 billion and $25 billion for one year.

The high cost of a permanent fix for Medicare's physician payment system—estimated to be as much as $300 billion over 10 years—has prevented Congress from acting on such a plan to date (201 HCDR, 10/18/11).

Comments Sought

The final rule included areas in which comments will still be accepted until Dec. 31.

These include the interim final work, practice expense, and malpractice RVUs for new, revised, potentially misvalued, and certain other 2012 Healthcare Common Procedure Coding System codes, as well as the physician self-referral designated health services codes.

Responses to the comments will appear in the 2013 fee schedule, CMS said.

E-Prescribing, Electronic Records

The rule also implemented the third year of a four-year transition to new practice expense RVUs, and updated a number of physician incentive programs including the Physician Quality Reporting System, the e-Prescribing Incentive Program, and the Electronic Health Records Incentive Program.

CMS also finalized an expansion of its “potentially misvalued code initiative,” intended to ensure Medicare is paying accurately for physician services. In 2012, CMS will focus on codes billed by physicians in each specialty that result in the highest Medicare expenditures under the fee schedule, to determine whether these codes are overvalued.

Previously, CMS said it 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,” the agency said.

CMS also finalized revisions to geographic practice cost indices (GPCIs) for each Medicare locality, as well as the cost-share weights for the three GPCI components. Congress made some temporary adjustments that were in place for two years while CMS and the Institute of Medicine began to study these issues.

Value-Based Modifier

The fee schedule also finalized quality and cost measures that will be used in establishing a new value-based modifier that would adjust physician payments based on the level of quality and efficient care.

CMS is required by the Patient Protection and Affordable Care Act to begin making payment adjustments to certain physicians and physician groups by 2015, and to apply the modifier to all physicians by 2017.

By 2012, CMS had to establish quality of care measures, cost measures, dates for implementation, and initial performance period.

The payment modifier provides for differential payment to a physician or a group of physicians “based upon the quality of care furnished compared to cost—during a performance period.”

The rule said that 2013 will be the initial performance year for purposes of adjusting payments in 2015.

“In other words, performance during 2013 would be used to calculate the modifier that would apply to items and services furnished by specific physicians and groups of physicians under the 2015 physician fee schedule,” CMS said.

A prepublication copy of the rule is at .