Summary of the 2008 Medicare Physician Fee Schedule Final Rule

Summary of the Final Rule on the 2008 Medicare Physician Fee Schedule

The Centers for Medicare and Medicaid Services released the 2008 Medicare Physician Fee Schedule Final Rule later in the day on November 1, 2007. The federal register copy will not be published until November 27, 2007. Following are the highlights of how CMS responded to ACR’s comments on the proposed rule.

Conversion Factor Update for 2008

The 2008 rule includes a 10.1 percent cut in the conversion factor for physician-related services which is required by law under the sustainable growth rate formula (SGR). CMS is required to implement this negative update by January 1, 2008 unless Congress passes legislation this session to negate or offset this reimbursement cut. This table out of the final rule shows the breakdown of how the conversion factor will be calculated for 2008:

TABLE 34: Calculation of the CY 2008 Conversion Factor

CY 2006 Conversion Factor	$37.8975
Pre-MIEA-TRHCA CY 2007 CF Update	-5.0 percent (0.94953)
CY 2007 Pre-MIEA-TRHCA Conversion Factor	$35.9848
2008 MEI	1.8 percent (1.018)
2008 Update adjustment factor	-7.0 percent (0.930)
CY 2008 Update	-5.3 percent (0.94674)
CY 2008 Conversion Factor Update	-10.1 percent (0.89896)
CY 2008 Conversion Factor	$34.0682

Budget Neutrality – Further 5 Year Review Adjustments

CMS has finalized its 32% increase for anesthesiology physician work values as part of the third 5 year review. The physician work adjustor will cause the 10.1% cut in physician work values for 2007 (with a work adjustor of .89896) to be increased to a 11.94% cut (changing the work adjustor to .8816) to all physician work values in the physician fee schedule for 2008.

The 5 year review is a budget neutral process meaning that neither Congress nor Medicare allows further funding to account for the increases in physician work value as a result of this process. Instead it must be a budget neutral process where when some codes win, others must lose. Traditionally in the past CMS has applied the budget neutral adjustment to the conversion factor. ACR commented last year and in this most recent proposed rule that the budget neutral adjustments should continue to be applied to the conversion factor. However, for the second year in a row, CMS will make the adjustments to the payment for the physician work values across all of the fee schedule. The physician work values themselves are not changed in the physician fee schedule because Medicare recognizes that the relative values are used for other purposes (i.e. productivity measures). Therefore the adjustment is made by the Medicare carriers in their electronic payment system under the following formula:

(RVUpw x GPCIpw x .8816) + (RVUpe x GPCIpe) + (RVUmp x GPCImp) = PC

This is important because most of the concerns that ACR has heard about with respect to cuts in reimbursement have been as a result of this budget neutral adjustment and its direct impact on the practice expense values which have on average reduced the PC by 7.5% for 2007.

Practice Expense

Equipment Utilization and the Interest Rate

CMS finalized that it will make no change in the equipment utilization or interest rates in the practice expense methodology until there is further data to justify the changes. Changes to the equipment utilization and interest rates can cause significant shifts in the technical component for those specialties that incur expensive equipment costs. Therefore the ACR supports a delay in any changes until they can be justified by supporting data.

Practice Expense Per Physician Hour

CMS has finalized its intent to increase the radiology practice expense per physician hour from $174 to $204 as a result of ACR’s efforts to ask CMS and the Lewin Group to correct the weighting of the ACR SMS supplemental survey data collected on practice costs. The changes to radiology’s practice expense per physician hour equate to an approximate $100 million shift in practice expense dollars to radiology. This does not translate to huge increases in radiology’s practice expense values but does represent an accurate representation of the outcome of the data collected by the ACR for this formula. It also may help to offset some of the negative effects in this rule such as the budget neutrality adjustments discussed above.

Malpractice Relative Values

ACR commented that it was opposed to suggestions by the RUC and other societies that the malpractice values in the technical component be set to zero and suggested that if they must be changed that they should at least equal the value of the professional component. CMS responded in the final rule that it will not change the malpractice values because it has no analysis to prove that this change is warranted. CMS will continue to study this issue and will propose any changes in future rule makings.

IDTF

Revised Standards

CMS proposed a requirement that an IDTF must list their designated contractor as a Certificate Holder on the comprehensive liability insurance policy and have a comprehensive liability insurance policy in the amount of at least $300,000 per location that covers both the supplier's place of business and all customers and employees of the supplier and ensures that this insurance policy must remain in force at all times. CMS has finalized the $300,000 as an adequate amount of insurance per location and agrees that the designated contractor should not be included as a Certificate Holder on the IDTF’s comprehensive liability insurance policy. Instead CMS has state that “it is essential that a Medicare fee-for-service (FFS) contractor be allowed to verify information contained in the comprehensive liability insurance policy.”

Supervision of Sites Restrictions

The ACR agrees with the CMS proposal to delete the requirement that the supervising physician is responsible for the overall operation and administration of an IDTF. The ACR also requested a delay in the implementation of limiting a physician to supervise more than 3 IDTF sites.

CMS did finalize their proposal to delete the requirement that the supervision physician is responsible for the overall operation and administration of an IDTF. CMS also did finalize its restriction that a physician can supervise up to 3 sites including fixed and mobile sites. This limit applies only to general supervision.

New Performance Standard

CMS proposed to prohibit IDTFs from sharing space, equipment or staff with, or subleasing its operations to, another individual or organization. CMS would have prohibited IDTFs from entering into part-time leases, even if those complied with the anti-kickback and Stark exceptions. The ACR supports the prohibition of IDTFs being able to enter into part-time leases.

In the final rule CMS moves forward with prohibiting the leasing or subleasing of an IDTF practice location, as well as diagnostic equipment that are used in taking the initial diagnostic test. In addition, CMS is prohibiting leasing and subleasing of such locations to a third party. However, CMS decided not to prohibit IDTFs from sharing staff.

CMS states that they do not believe that it is appropriate for IDTFs to share common practice locations or diagnostic testing equipment. However, they believe that it is appropriate to establish two exceptions to the prohibition associated with sharing space and clinical equipment. These exceptions apply to mobile IDTFs or IDTFs that are co-located within a hospital. The rationale is that prohibiting those types of IDTFs from sharing space and equipment may limit beneficiary access to necessary mobile IDTF services and increase the costs of providing necessary diagnostic care. In addition, CMS believes that sharing space may be appropriate for hospital-based IDTFs because it is inherently located within a larger facility which allows it to operate more efficiently with little additional risk to the Medicare program or its beneficiaries. Notably, CMS agrees that ownership or investment interests that radiologists or radiology groups hold in an imaging IDTF does not constitute “sharing” for purposes of the new prohibition.

CMS clarifies that it is not banning IDTFs from sharing space and equipment that they use exclusively during a lease term. Nor does CMS prevent IDTFs from leasing any part of its practice location or equipment used in doing an initial diagnostic study to another non-Medicare-enrolled individual or group to conduct diagnostic testing activities. The sharing space restrictions apply to new IDTF sites as of Jan. 1, 2008 and allow a one-year grace period for IDTFs that are currently enrolled and are sharing a practice location with another Medicare individual or organization.

Reassignment Rule and Self-Referral

In the final rule, CMS finalized its position with respect to the anti-markup provisions that any professional fees (PC) or technical costs (TC) negotiated for diagnostic tests that are below the payment rates in the Medicare physician fee schedule must also be the rates submitted to Medicare for reimbursement. The anti-markup rule now will apply to arrangements in which the TC or PC is ordered by the billing supplier, if the TC or PC is purchased by the billing supplier, or the TC or PC is performed outside of the office of the billing supplier. Therefore, the billing supplier cannot keep the balance as a profit of the negotiated arrangement. The ACR strongly supported this proposal. CMS did not adopt ACR’s recommendation to specifically exempt from the anti-markup provision radiologists who serve as exclusive contractors or part-time employees of a group practice. However, CMS agreed that applying the anti-markup rule should not hinge on the employment status of the individual who performs the TC or PC. CMS will not subject to the anti-markup provisions diagnostic imaging services that part-time employees of a billing physician group practice and independent contractors furnish in the billing group’s office, unless the contractor’s services are billed as a purchased diagnostic test. This means that traditional part-time employment arrangements by radiologists may continue under the final rule.

CMS declined to implement any of its proposed restrictions on leases. But CMS imposed anti-markup restrictions on the TC or PC furnished in an exclusive or time-block lease of space that is not ‘in the office of the billing physician or supplier.’ CMS reasoned that since physicians do not furnish patient care regularly at the leased space, e.g., an imaging center, they do not meet the ‘in the office’ standard for avoiding the anti-markup restriction. Thus, a physician group practice cannot profit from leasing arrangements in which radiologists interprets for the group at another site apart from the group’s office , e.g., an imaging center -- even if that arrangement otherwise met the Stark in-office ancillary services exception.

CMS received many comments regarding physician self-referral of imaging services and has decided to not implement any of the items discussed in the proposed rule except for the proposal for anti-markup provisions for diagnostic tests. In the final rule CMS states:

“However, given the number of physician self-referral proposals, the significance of the provisions both individually and in concert with each other, and the volume of public comments, we do not believe it is prudent to finalize any of the proposals in this rule (except for the proposal for anti-markup provisions for diagnostic tests, as discussed below in this section). Although we are not finalizing the proposed revisions to the other physician self-referral regulations in this final rule with comment period, we are confident that we have sufficient information, both from the commenters and our independent research, to finalize revisions to the physician self-referral regulations without the need for new proposals and additional public comment. We intend to publish a final rule that addresses the following proposals:

Burden of proof;
Obstetrical malpractice insurance subsidies;
Unit-of-service (per-click) payments in lease arrangements;
The period of disallowance for noncompliant financial relationships;
Ownership or investment interests in retirement plans;
“Set in advance” and percentage-based compensation arrangements;
“Stand in the shoes” provisions;
Alternative criteria for satisfying certain exceptions; and
“Services furnished under arrangements.” “

With respect to the in-office ancillary services exception, CMS did not finalize anything for the 2008 Medicare Physician fee schedule because they merely asked for comments on the issue but did not formally propose any changes. In the final rule, CMS states:

“Because we did not make a specific proposal regarding the in-office ancillary services exception, but rather merely solicited comments regarding its scope and application, any revisions to the exception in 則411.355(b) will be accomplished through a future notice of proposed rulemaking with provisions for public comment. A measured, thoughtful approach to the final physician self-referral rules is critical. We believe that the future rulemaking will address the public comments and present a coordinated, comprehensive approach to accomplishing the goals described in the proposed rule, namely, minimizing the threat of program and patient abuse while providing sufficient flexibility to enable those who are parties to financial arrangements to satisfy the requirements of, and remain in compliance with, the physician self-referral law and the exceptions thereto.”

RUC Recommendations

CMS agreed with all of radiology related RUC recommendations including new codes for G and J tubes, cardiac MR and PET.

PQRI elements of MPFS final rule

Selection of measures for 2008

The MPFS Final Rule does not include a number of measures developed through the AMA PCPI process and approved by the AQA as required by statute. The Final Rule states that measures not identified in the MPFS proposed rule but recommended for inclusion via the comment period cannot be included in the 2008 list because there was not opportunity for public comment within the rulemaking process. Several medical specialties developed and finalized numerous measures after the proposed rule was published with the expectation that their measures WOULD be included in the 2008, if approved by AQA before issuance of the final rule. The eight new radiology measures fall into this category, as do measures for oncology, dermatology, eye care and back pain. Much work went into the completion of these measures that address numerous gaps in care and that if implemented would likely improve quality of care and also afford many more physicians the opportunity to participate in the bonus program. This is particularly important at a time where huge Medicare physician pay cuts loom and the ever increasing demand for value and quality-based reimbursement.

Registry based reporting for 2008 PQRI

The final rule states that medical registry reporting of PQRI measures will only be done for testing purposes in 2008. Quality data must continue to be submitted through the claims process to qualify for the PQRI incentive bonus. Five options for registry reporting were identified in the proposed rule; two of the options will be tested in 2008 (identified in proposed rule as Options 2 and 3; ACR supported option 3). Under option 2 a registry would provide quality data codes, diagnosis codes and beneficiary information. CMS would need to calculate a practitioner’s reporting and performance rates. Under option 3 a registry will calculate and submit reporting and performance rates for various measures to CMS. This would require a validation process by CMS.

There were a number of comments that registries are proprietary, charge a fee, the creation or modification of such registries could be burdensome and costly. CMS responded that the use of registries for reporting is viewed as a voluntary alternative for practitioners.

The ACR will be submitting comments on the Medicare Physician Fee Schedule for 2008. Any ACR member who has comments or questions may call Angela Choe at (800) 227-5463 x 4556.