June 30, 2006

HEADLINE

CMS Releases Medicare 2007 Physician Fee Schedule – On Balance – Good News for Pulmonary/Critical Care Community

Last week, the Centers for Medicare and Medicaid Services (CMS) – which administers the Medicare program – issued the proposed 2007 physician's fee schedule which included significant increases in the work component for several high volume evaluation and management (E/M) CPT codes, including critical care (CPT 99291 and 99292).  

By law, CMS must work with the physician community every 5 years to review the relative value of codes within the CPT coding system to ensure relative appropriation among codes and make adjustments to codes that are under or over valued.   This process is called the 5-Year RUC review.

Reimbursement for physician services is comprised of three components, the physician work value (which accounts for 55 percent of the Medicare reimbursement), physician practice expense (40 percent of physician reimbursement), and physician professional liability costs (5 percent of physician reimbursement).  

Overall, CMS accepted the recommendations of the physician community to increase the physician work value of 299 CPT codes and reject the recommendation for 123 other codes. Of the rejected codes, CMS gave a smaller increase for 3, retained the current work value for 48 and lowered the work value for the remaining 72 codes.  

Through the coordinated effort of the ATS and our colleagues in the internal medicine community, we were able to successfully advocate for major increases in the physician work component in several high level, high volume E/M codes.  

While the increases in the physician work component for these E/M codes is welcome news, there are three factors that adjust these gains in the physician work value.   By law, changes that result from the 5-year RUC review must be budget neutral in terms of Medicare spending.   To offset increases in Medicare expenditures caused by the E/M family and other CPT codes increases, CMS is proposing to cut the physician work value for all CPT codes with a physician work value by 10 percent.   In short, the entire CPT coding structure is being cut by 10 percent to pay for the increases in E/M services and other codes that increased in the 5-year RUC review.

The below chart list the E/M codes that CMS has proposed to increase with the proposed 10 percent budget neutrality factor:

The second mitigating factor is in the proposed changes to calculating physician practice expense costs.   As you will recall, Medicare practice expense reimbursements comprise 40 percent of physician reimbursements.   Medicare is proposing a new method of capturing and valuing physician practice expense costs.   The new system will be phased in over four years and is expected to have cumulative plus 2 percent increase on Medicare reimbursement to pulmonary physicians over the four year phase in period.  

The third variable is the Medicare sustainable growth rate factor (SGR) which determines the Medicare conversion factor.   As has been reported previously, the flawed SGR formula is expected to lead to a 5 percent cut in Medicare reimbursement to physicians in 2007.  Additional cuts caused by the flawed SGR formula are projected through 2011.   In the recent past, Congress has twice intervened to put the SGR formula aside and Congressionally mandate a Medicare conversion factor.    While pressure is mounting on Congress to prevent the projected 5 percent Medicare 2007 cut, it is unclear if Congress will show the political will to act before the November elections.

In summary, in the worst case scenario, the gains in the physician work value may be offset by SGR cuts in the conversion factor.   However, even in this scenario, the pulmonary/critical care community will fare better than more procedure dominated specialties, which would see significant cuts.    Under a best case scenario, Congress will act to prevent the 5 percent SGR cut, the anticipated gains under the new physician practice expense will materialize and gains in physician work values will cumulatively result increased reimbursement for high frequency codes used by the pulmonary critical care community.   Results will vary by practice, with practices billing significant volume of high level E/M codes to see the greatest increases, while practices that do a high volume of procedures may experience cuts.

CLEAN AIR

ATS Comments on NAAQS Review Process

This week, ATS Environmental Health Policy Committee Chair William N. Rom MD, MPH participated in an Environmental Protection Agency workshop to discuss changes to the standards setting process for the National Ambient Air Quality Standards (NAAQS) pollutants – including particulate matter, ozone, NOx and Sox.   The purpose of the workshop was to hold a public discussion on proposed changes to processes whereby EPA establishes NAAQS standards.  

In his comments, Dr. Rom noted that while many of the proposed changes would make improvements to the existing standard setting process, a number of the proposed changes appeared to be designed to limit the ability of EPA career scientists.   The scientists would be limited on their input on the standard setting process while simultaneously strengthening the authority of the political appointees at EPA to set the agenda for the standing setting process.  

PHYSICIAN PRACTICE

ATS Comments on CMS Competitive Bidding for DME

The American Thoracic Society submitted comments to the Centers for Medicare and Medicaid Services (CMS) regarding the competitive bidding program for durable medical equipment (DME) under Medicare.   Under competitive bidding, CMS contracts with a DME provider or providers to supply DME equipment for Medicare beneficiaries in a defined geographic area.   CMS solicits bids from DME providers establishing a reimbursement level for specific items that is below the price established under the existing DME reimbursement schedule.  

To date, the DME competitive bidding program has been tested in two areas.   Congress has mandated that the program expand to 10 areas in 2007 and 80 areas by 2009.  

The ATS comments noted that patients in one of the earlier DME competitive bidding demonstration areas experienced reduced access to portable oxygen systems.   The ATS recommended CMS take steps to ensure appropriate Medicare beneficiary access to portable oxygen systems.   The ATS comments also expressed our disappointment that the final standards for DME providers were not issued in the proposed rule.   

ATS Supports AFIP Tissue Repository

The ATS joined over ten other medical professional organizations in a letter to Congress supporting the continued work of the Armed Force Institute for Pathology (AFIP) Tissue Repository program.   The AFIP repository hosts a tissue sample repository with over 3 million cases and the AFIP program provides both the military and civilian physician community with technical advice, consultative services and pathology training.  

The fate of the AFIP program had been initially questioned by the Defense Base Closure and Realignment Commission (BRAC) – a Congressional convened commission charged with recommending to Congress military installations that should be closed.  

Points of Contact