Changes in Medicare Pay Rules Could Have a Redistributive Effect

Two days before the July 4 weekend, the Centers for Medicare & Medicaid Services (CMS) announced a series of proposed changes to the 2010 physician fee schedule. In so doing, the agency stirred a controversy that has been bubbling politely below the surface of the physician community for some time now.

For years, primary care physicians (PCPs) have grumbled, sometimes publicly and certainly among themselves, that Medicare's policies and payments favor proceduralists at the expense of PCPs. The effect, family physicians, general internists, and others argued, was to decenter primary care, resulting in less coordinated care and less preventive care and discouraging a generation of students from entering the profession.

For their part, specialists steadfastly supported calls to restore primary care, including proposals for CMS to boost the relative value units for evaluation and management (E/M) and other cognitive services. However, they were not in favor of this restoration if it resulted in a corresponding devaluing of their services. To make primary care "whole" again, specialists said at the American Medical Association (AMA) House of Delegates meeting last month, real savings needed to be wrung from an inefficient and often wasteful system. This could take a variety of forms, including fewer hospitalizations, fewer inpatient readmissions, lower prescription drug costs, and so on.

What prevented these differences from breaking out into open warfare — PCPs on one side, proceduralists on the other — was not simply physicians' traditional bonhomie, although that was certainly a big factor. It was also the 2 groups' united opposition on another front — the complex, and many would say flawed, methodology that CMS uses each year to update the physician fee schedule. In short, if PCPs and specialists were not always on the same page on some matters, neither side has ever had a good word to say about the Sustainable Growth Rate formula, which, as CMS itself points out, "has yielded negative updates every year beginning in...2002."

Changes May Correct Imbalance

The proposed payment and policy changes do nothing to fix the Sustainable Growth Rate formula, which would take congressional action to accomplish — action that may, in fact, be forthcoming as healthcare reform makes its way through both the House and Senate — but, according to some experts, they do address, if not fully correct, the economic imbalance that PCPs have chafed under for years.

"This is an attempt to make primary care whole again in order to get it back to its rightful position at the center of our healthcare system," Ted Epperly, MD, FAAFP, president of the American Academy of Family Physicians and a family physician in Boise, Idaho, told Medscape Medical News. Dr. Epperly is emphatic, however, that the proposed changes should not be seen as an instance of robbing Peter to pay Paul. "The idea is not to increase one type of physician and decrease another type," he said.

Still, in its report to Congress in March, the Medicare Payment Advisory Commission (MedPAC) noted that any increase in payments for primary care, a step it fully endorsed, "would be budget neutral within the fee schedule." For specialists, this could not have come as welcome news: If the Medicare pie, as MedPAC said, was not getting bigger, then any plans to cut a somewhat larger slice for one group would necessarily mean a reduction for other groups.

Redistributing the Medicare Pie

In fact, this is precisely the effect of the proposed changes announced by CMS on July 1. Through these changes, the agency has taken steps to redistribute the Medicare pie, cutting back on what specialists have traditionally received to give a somewhat bigger slice — 6% to 8% bigger, before the annual update and other changes — to physicians in primary care.

The agency has proposed to do this in 3 major ways.

First, it has taken a harder look at the practice expense component of physician fees, using a new survey designed and conducted by the AMA. The upshot is that, if the proposed rule stands, some groups will see their practice expenses for certain services go down, with a corresponding decrease in fees, and some will see expenses go up, with a corresponding increase in fees. As a result of these changes (and others in the cost of professional liability insurance), for instance, radiologists could see an 11% dip in their fees.

"There are huge radiology expenses not captured in the AMA survey that CMS is using," Bibb Allen, MD, chair of the American College of Radiology Economics Commission, told Medscape Medical News. Among other things, Dr. Allen recommends that CMS "blend" the AMA results with data from the American College of Radiology's own expense surveys, which he says are more representative.

Second, CMS has proposed eliminating payments for consultation codes that, the agency says, are typically billed by specialists at higher rates than the equivalent E/M services. In a trade-off that could end up increasing the value of E/M services provided by PCPs, specialists billing for consultations would be required to use current E/M service codes. The resulting savings from this proposal, CMS says, would be redistributed to boost payments for existing E/M services, a boon for PCPs.

Third, CMS has proposed a change in the way that the Medicare fee schedule "recognizes the cost of professional liability insurance." In much the same way that proposed changes in the expense component would affect physicians' fees, physicians with lower liability insurance costs would see a slight reduction in their fees, and physicians who pay higher professional liability premiums — obstetricians, for example — would see a slight increase in their fees. "While these changes would have a modest impact," CMS says, "they will promote payment equity."

One other proposed change should also be noted. Concerned about what it calls the "rapid growth in high cost imaging services," CMS has proposed reducing payments for such services and redistributing "the resulting savings to increase payments for other services, including primary care services."

The rationale for this proposed action rests on a series of revised assumptions. Currently, CMS assumes, and the fee schedule reflects the fact, that physicians who own the equipment to provide these high-cost services will use it 25 hours a week, or roughly 50% of their weekly office time. In fact, says CMS, surveys show that such equipment is being used much more often, resulting in economies of scale that push per treatment costs lower, "making a reduction in payment appropriate." Following a MedPAC recommendation, CMS proposes that for equipment priced at more than $1 million, it will now assume a 45 hour/week or 90% utilization rate, with a corresponding reduction in fees for such services.

The American College of Radiology, for one, has estimated that that change alone would reduce the technical component fee for computed tomography imaging, magnetic resonance imaging, and intensity-modulated radiation therapy by as much as 40% for 2010.

Source : http://www.medscape.com/viewarticle/705551?src=mpnews&spon=34&uac=133298AG