Medicare 2007 Fee Cut to Physicians Only 5.0%

On November 1, 2006, the Centers for Medicare and Medicaid Services announced its final 2007 Medicare Part B physician fee schedule rule. Medicare Part B reimburses physicians based on a resource based relative value schedule (RBRVS). In August CMS published a proposed rule calling for a 5.1% reduction in physician reimbursement levels based on a statutory formula. The final rule reduces that reduction slightly to 5.0%. That change will go into effect on January 1, 2007, unless Congress amends the Medicare law to reverse the reduction as it did earlier this year to reverse the 2006 reduction.

CMS made significant payment policy changes in order to increase payments for direct patient care and for expanded preventive care:

The hallmark of this rule is a stronger emphasis on the physician-patient relationship. The final rule increases significantly the work component for the [relative value units] RVUs for the face-to-face visits (evaluation and management or “E&M services”) during which the physician and patient discuss the patient’s health status and the steps that can be taken to maintain or improve the patient’s health. For example, the work component for RVUs associated with an intermediate office visit, the most frequently billed physician’s service, is increasing by 37 percent. The work component for RVUs for an office visit requiring moderately complex decision-making and for a hospital visit also requiring moderately complex decision-making are increasing by 29 percent and 31 percent respectively. Both of these services rank in the top 10 most frequently billed physicians’ services out of more than 7,000 types of services paid under the physician fee schedule. * * *
“We believe this increase in the work component will encourage physicians to spend more time with their patients, assessing their health status, and educating them about how to live longer, healthier lives,” said [CMS Acting Administrator] Ms. [Leslie] Norwalk. Beginning January 1, Medicare will expand its preventive services benefits, as provided for in the Deficit Reduction Act of 2005 (DRA). Medicare will pay for preventive ultrasound screening for abdominal aortic aneurysms (AAA) for at risk beneficiaries as part of the Welcome to Medicare physical. AAA refers to a weakening in the wall of the large artery that takes blood from the heart to the body. Caught early, there are a number of treatment options, but if the AAA ruptures, it can be fatal. AAA affects 6-9 percent of men over 65 and is the 10th leading cause of death for men over 55. The screening will be available to men aged 65 to 75 who have smoked at least 100 cigarettes in their lifetimes, individuals with a family history of AAAs and any other individuals recommended for screening by the United States Preventive Services Task Force. The rule expands the number of beneficiaries who qualify for bone mass measurement due to long term steroid therapy. For these beneficiaries, the rule reduces the dosage equivalent required for eligibility by one-third, from an average of 7.5 milligrams per day of prednisone for at least three months to 5.0 milligrams. The final rule also exempts the colorectal cancer screening benefit from the Part B deductible, eliminating a potential financial barrier to using this benefit. Colorectal cancer is the second leading cause of cancer deaths, and survival is closely related to the stage of the disease at diagnosis. The five-year survival rate when the cancer is detected early approaches 90 percent. Unfortunately, approximately 65 percent of patients present with advanced disease. Once the lymph nodes are involved, chances of survival drop to a range of 35 to 60 percent and with metastatic disease, less than 10 percent.

Also on November 1, CMS announced its final 2007 Medicare Part A outpatient hospital prospective payment system (OPPS) rule.

Hospitals would receive an estimated $32.5 billion in CY 2007 under the final rule that revises policies and payment rates under the OPPS for outpatient services provided to Medicare beneficiaries. The final rule affects outpatient services furnished by general acute care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, long-term acute care hospitals, children’s hospitals, and cancer hospitals. As provided by statute, the rule includes a 3.4 percent market basket update to Medicare payment rates for services paid under the hospital OPPS for CY 2007. After taking into account other factors that affect the level of payments, CMS estimates that hospitals will receive an overall average increase of 3.0 percent in Medicare payments for outpatient department services in 2007 due to the changes in this final rule. While the market basket update accounts for increases in the costs of providing a service, much of the growth in outpatient spending results from increases in utilization and complexity (volume and intensity). CMS estimates that between 2005 and 2006, hospital outpatient expenditures increased by nearly 12 percent, mainly due to growth in the volume and intensity of services. CMS projects that the expenditures under the OPPS in CY 2007 will be approximately 9.2 percent higher than the estimated CY 2006 expenditures. That rate of growth in expenditures is of great concern to CMS, not only because of its impact on all taxpayers, but especially on beneficiaries whose monthly premiums cover 25 percent of Part B expenditures. In order to promote greater value in the purchase of hospital outpatient services for Medicare beneficiaries, the final rule ties OPPS rate increases to the reporting of quality measures beginning in 2009. The final rule announces CMS’ plans to develop additional quality measures that are specifically appropriate for hospital outpatient care, and will require hospitals to report the outpatient-specific measures beginning in CY 2009.

The final Medicare OPPS rule is scheduled to be published in the Federal Register on November 9, 2006, and the final PFS rule is scheduled to be published there on December 1, 2006.