Medicare Payment Rule Implements Key Provisions of Reform Law

July 1, 2010

Given the new direction for the nation’s health system, AMA has developed Health System Reform Insight to help you understand the health system reform legislation and what it means to you and your patients.

New 2011 Medicare Payment Rule Implements Key Provisions of Reform Law

With the recent release of the proposed regulation detailing Medicare physician payment policies for 2011, the Centers for Medicare and Medicaid Services (CMS) is beginning to implement many of the Patient Protection and Affordable Care Act provisions — now being referred to as the Affordable Care Act (ACA) — that will have a significant impact on physician practices. For example, the proposed rule outlines CMS’s review of the geographic adjustment factors and proposes a number of improvements in the Physician Quality Reporting Initiative (PQRI). The rule is scheduled for publication in the Federal Register on July 13, and is open for comment until Aug. 24.

PQRI

The proposed rule implements ACA provisions advocated by AMA to ensure timely feedback and establishes an informal appeals process. Per the ACA, the PQRI bonus payments will apply from 2011 through 2014 for physicians that satisfactorily report PQRI measures. For 2011, the bonus for successful reporting is one percent. An additional bonus payment of 0.5 percent per year is available for those who participate in a maintenance of certification (MOC) program required for board certification by a recognized physician specialty organization for at least one year, and complete an MOC practice assessment.

PQRI penalties will begin in 2015 for those who do not satisfactorily submit quality data. AMA — being consistent with its policy — will continue to aggressively work with Congress to delay penalties until the PQRI has been refined to be more efficient and physician friendly.

PQRI Bonus and Penalty Schedule:

• 2011: 1.0% if no MOC, 1.5% if MOC
• 2012: 0.5% if no MOC, 1.0% if MOC
• 2013: 0.5% if no MOC, 1.0% if MOC
• 2014: 0.5% if no MOC, 1.0% if MOC
• 2015: -1.5%
• 2016: -2.0%

As also required by the ACA, CMS will develop a “physician compare” website by Jan. 1, 2011, where the names of physicians and groups that successfully participate in the PQRI will be posted. AMA supports CMS’s proposal not to publicly report any individual or group performance information for the 2011 PQRI, although such reporting is required by law in future years.

In addition to implementing these ACA provisions, the proposed rule responds to AMA advocacy with several other important PQRI improvements. The rule:

• Lowers the threshold for claims-based reporting of individual measures from 80 percent to 50 percent, so more physicians will be able to successfully report and qualify for incentive payments.
• Implements new 2011 PQRI care coordination measures developed by the Physician Consortium for Performance Improvement (PCPI).
• Allows groups with less than 200 physicians, including those with as few as two, to participate in the group practice reporting option.
• Ensures that the 2011 PQRI offers additional measures for electronic prescribing so that additional physician specialties can participate using this reporting modality.

Practice Expense Relative Values

CMS will fully implement the ACA equipment utilization provision on Jan. 1, 2011. An equipment utilization rate of 75 percent will be used for diagnostic imaging services using CT and MRI scanners, including an expansion to angiography when used with these modalities. Also per the ACA, the technical component multiple procedure payment reduction for multiple imaging studies performed in a single imaging session on contiguous body parts increases from 25 to 50 percent effective July 1. CMS estimates that this ACA provision, coupled with the equipment utilization change to 75 percent, will save Medicare $160 million in 2011.

Potentially Misvalued Services

CMS acknowledges the significant progress of the AMA/Specialty Society Relative Value Scale Update Committee (RUC) and the agency in addressing potential misvaluation within the resource-based relative value scale, noting the statement in the March 2009 MedPAC report to Congress: “CMS and AMA RUC have taken several steps to improve the review process.”

The ACA identified seven categories of potentially misvalued services, and CMS explains that the RUC has identified and reviewed numerous services in all seven categories. CMS solicits comments on possible approaches and methodologies to further validate data collected in the valuation process. CMS specifically mentions the desire for public comments regarding the use of time and motions studies “to validate estimates of physician time and intensity that are factored into the work RVUs for services with rapid growth in Medicare expenditures.”

Geographic Adjustments

The proposed rule makes a number of changes to the geographic practice cost indexes (GPCIs). The ACA extended the floor of 1.00 on the work GPCI just through 2010, so the 2011 proposed GPCIs do not incorporate this floor. The ACA also required that the practice expense GPCIs only reflect half of the geographic differences in employee wages and rents for 2010 and 2011, except in localities where this would reduce payments. It also established a permanent, non-budget neutral floor of 1.00 on the practice expense GPCI for five frontier states.

In addition, the ACA also required CMS to evaluate certain aspects of the practice expense GPCIs and implement indicated revisions no later than Jan. 1, 2012. Specifically, CMS was asked to analyze the office expense component of the practice expense GPCI, the weights that are assigned to the various components, and the feasibility of using actual data (for example, office rent data) in place of proxies like apartment rental data.

The original law establishing the Medicare payment schedule required CMS to update the GPCIs every three years. Instead of waiting until the 2012 payment schedule, in the proposed rule for 2011, CMS has combined the ACA-required review with the 2011 regular update of the GPCI data. Several changes have been made, such as using employee wage data from the U.S. Bureau of Labor Statistics instead of the 2000 Census, which has become dated, and using Physician Practice Information survey data to update the weights of the different elements. As required by law, the GPCI updates are being phased in over two years—in 2011 and 2012.

The percentage changes from the 2010 to 2011 geographic adjustment factors are displayed in Addendum D of the regulation. The 2010 GPCIs and the 2011 and 2012 proposed GPCIs are shown in Addendum E. Because there are so many different changes to the GPCIs occurring at one time, it is not possible to differentiate their various effects on locality payments. For example, increases and decreases in geographic adjustments from 2010 to 2011 could be driven by the expiration of the work GPCI floor, the change to Bureau of Labor Statistics data, or a combination.

Disclosure Requirement for In-office Ancillary Services

The proposed rule implements a ACA provision requiring physicians whose practices both refer patients for and also provide MRI, CT and PET scans to inform patients that they may obtain the services from other providers and furnish them with a list of those providers in their area.

CMS proposes that at the time of the referral for these services, the referring physician must provide the patient with a written list of at least 10 alternate suppliers of the services within 25 miles of the physician’s office. If there are fewer than 10 alternate suppliers, then the referring physician will need to list all of the alternate suppliers within 25 miles. If there are no alternative suppliers, CMS proposes that the referring physician document that they have disclosed to the patient that they may receive the services from another supplier but not provide a list.

The disclosure requirements will become effective on Jan. 1, 2011, following issuance of the final rule.

Preventive Services

As required by the ACA, CMS proposes Medicare coverage and payment policies for annual preventive visits, including development of personalized prevention plans. CMS proposes two new services — one for the patient’s first annual preventive visit, which is distinct from and must occur at least 12 months after the patient’s “Welcome to Medicare” physical, and a second code for subsequent annual preventive visits. Relative values for the first annual visit are linked to code 99204, a “level four” new patient office visit, and subsequent visits are linked to code 99214, and a “level four” established patient office visit.

The rule also implements ACA provisions eliminating cost-sharing for Medicare-covered preventive services with a grade of A or B from the U.S. Preventive Services Task Force. For these services, which include flu and pneumonia immunizations and most cancer screening, the Medicare program will pay physicians 100 percent of the payment schedule amount and patients will not be responsible for the usual 20 percent copayment. Some Medicare preventive services do not have a grade of A or B, including diabetes self-management training and glaucoma screening, however, patients will continue to be responsible for cost-sharing these services.

Bonus Payments for Primary Care Practitioners

The ACA provides for a 10 percent payment bonus to some primary care practitioners with more than 60 percent of their Medicare allowed charges attributable to a defined set of nursing home and outpatient visits. The bonus will apply to the same set of visit codes and will be made on a quarterly basis.

A key issue has involved the identification of which practitioners will be eligible for the bonuses. Some had interpreted the law to say that bonuses were available to any internist (including sub-specialists) who met the threshold while others believed it was restricted to general internists.

In the rule, CMS says that to be eligible, physicians must have met the 60 percent threshold in 2009 and must have listed family practice, internal medicine, pediatrics or geriatrics as their primary specialty designation at the time the service was provided. Several non-physician groups, including nurse practitioners and physicians assistants, are also eligible. The threshold will be calculated as a percentage of all Part B allowed charges, including lab and other ancillary services, which is expected to greatly limit the number of physicians who qualify.

Eligibility will be redetermined each year based on claims patterns and specialty designations from two years earlier. This means new physicians will not be eligible until two years after they enroll in Medicare, although CMS is looking for suggestions on how to get around this problem. The agency will be monitoring requested modifications in specialty designations.

Bonus for Major Surgical Procedures in Shortage Areas

As is also required under the ACA, the rule contains a proposal to pay a 10 percent bonus to general surgeons for some 4,300 major surgical procedures when they are furnished in an area that the government has designated as a health professions shortage area. These payments also will be made on a quarterly basis. To qualify, physicians must have designated general surgery as their primary specialty. CMS will be closely watching for specialty switching here as well.

Confidential Feedback Reports and Value-based Modifier

In the ACA, Congress directed CMS to refine and expand its current efforts to provide confidential feedback reports comparing the cost and quality of care across physicians and to use this data to create a value-based payment modifier by 2015. As required under a prior law, the agency has done some limited testing with confidential feedback reports based on existing commercial software to compare resource use for different types of care episodes.

As noted in the rule, CMS found these groupers “do not work well” for beneficiaries with chronic conditions and has been directed by Congress to create a Medicare-specific, transparent method of grouping episodes by Jan. 1, 2012. Until that software exists, CMS intends to provide physicians with feedback reports showing how they compare to their peers on total costs per Medicare beneficiary and total costs of treatment with any of the following five conditions: diabetes, congestive heart failure, coronary artery disease, chronic obstructive pulmonary disease and prostate disease.

The rule also lays out CMS’s current thinking regarding attribution methods, integration of cost and quality data, risk adjustment, minimum number of patients to be included in comparisons, and other statistical issues.

More Information

There are numerous other elements of the proposed rule that physicians are likely to find of interest. For example, after the AMA argued for years that the Medicare Economic Index (MEI) — which is the government’s index of inflation in practice costs—was woefully outdated and does not adequately reflect the costs of 21st-century medical care, the rule contains a welcome provision announcing CMS’s intent to convene a technical panel to review all aspects of the MEI and inviting comments on issues to be considered by the panel. Visit AMA's website for a complete summary and analysis of the rule.