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Medical Coding News Archives

Proposed 2012 Medicare Physician Fee Schedule Released

July 13, 2011:

Regina Magnani, Clinical/Technical Editor

The proposed rule for physician payment under Medicare in calendar year 2012, aside from putting forth yet another payment reduction that may or may not be reversed by Congress, expands the number of misvalued codes and adjusts payment for geographic variation in practice costs. The rule also takes steps to implement some of the stipulations in the Affordable Care Act.

The Centers for Medicare and Medicaid Services (CMS) issued the proposed rule on July 1, 2011. The rule updates payment policies and rates for physicians and nonphysician practitioners (NPPs) for services paid under the Medicare physician fee schedule (MPFS) in 2012. CMS projects that total payments under the MPFS in CY 2012 will be $80 billion.

Among the provisions is a large reduction in payment based on the sustainable growth rate (SGR), a formula adopted in the Balanced Budget Act of 1997. If the formula goes into effect, Medicare payment rates will be 29.5 percent lower for services in 2012. This is the 11th time the SGR formula would result in a payment cut, although most all of the cuts have been averted through legislation. CMS Administrator Dr. Donald M. Berwick is calling for a permanent SGR fix to solve this problem once and for all.

In the 2012 proposed rule, CMS is significantly expanding its review of the potentially misvalued codes, an effort to ensure Medicare is paying accurately for physician services. This year, CMS is focusing on the highest volume and dollar codes billed by physicians to determine whether these codes are overvalued and if evaluation and management codes are undervalued. 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 not taken a look at the highest expenditure codes across all specialties.

CMS is also proposing changing how it adjusts payment for geographic variation in practice costs. The Affordable Care Act made some temporary adjustments that would be in place for two years while CMS and the Institute of Medicine study these issues. CMS is replacing some of the data sources, such as using data from the American Community Survey (ACS) in place of HUD rental data and nonphysician employee compensation data. The Institute of Medicine submitted its first of three reports on geographic adjustment factors on June 1.

The proposed rule would implement the third year of a four-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 rule also includes proposed quality and cost measures that would be used to establish a new value-based modifier that would reward physicians for 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 January 1, 2015, and to apply the modifier to all physicians by January 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 agency is proposing to use CY 2013 as the initial performance year for purposes of adjusting payments in CY 2015.


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