California Physician

CMS Publishes 2007 Medicare Payment Rule; Unless Congress Acts, Some Specialties Will See Cuts of Up to 20%
[Posted 11/09/06]

Depending on your specialty, your Medicare reimbursement could drop by six to 20 percent next year, a combined result of the five percent sustainable growth rate (SGR) cut and other physician payment changes announced last week by the Centers for Medicare and Medicaid Services (CMS).

As you know, the five percent cut is the result of the flawed SGR formula that was supposed to establish a “sustainable” growth rate for spending on doctors’ services. The formula allows Medicare spending on physician services to grow at the rate of the gross domestic product (GDP), but it actually penalizes physicians because the cost of physician services rises more rapidly than the GDP. AMA and CMA have been working vigorously to convince Congress to change the formula and reverse the 5 percent cut scheduled to take effect January 1.

The other payment changes are the result of the new practice expense methodology and changes in work relative value units (RVUs) stemming from the recently completed five-year review. CMS is mandated under law to review physician work RVUs every five years to maintain relativity of the physician fee schedule.

The new Medicare work RVUs are largely a product of the AMA/Specialty Society RVS Update Committee (RUC), with CMS accepting 95 percent of the committee’s recommended work values. The RUC is an extremely diverse committee with voting representatives from a majority of the medical specialty societies. The changes place a stronger emphasis on primary care, with significant increases to the work values for evaluation and management (E&M) services, including postoperative surgical care. For 90-day global services, this can be a significant payment increase. The new RUC-recommended work values also include increases for cardiothoracic and orthopaedic surgery procedures and other services.

However, because the SGR cut reduces payment for all physician services, only four specialties will see net increases in 2007, infectious disease (+4%), emergency medicine (+2%), pulmonary disease (+1%), and endocrinology.

The estimated economic impact of the new work values is $4 billion. By law, proposed payment changes over $20 million must be budget neutral. In the absence of Congressional action, CMS was forced to apply a budget neutrality factor to the RVUs. This means that payments for some services will be cut by as much as 14 percent, on top of the 5 percent across the board SGR cut.

As required by the Deficit Reduction Act of 2005, the physician payment rule decreases payments for imaging services done in physician offices if the office payment rate is higher than the rate for the same procedure done in an outpatient hospital setting. A bit of good news: because of AMA/CMA advocacy, the cut will be 25 percent, rather than the 50 percent cut originally proposed by CMS.

If reimbursement for physicians were calculated using the Medicare Economic Index (MEI), as it is for all other Medicare providers, almost all primary care physicians and most surgical specialties would see net payment increases. CMA has for years been advocating that physicians should be paid — as are health plans, hospitals, and nursing homes — according to the MEI, which is a market index of actual medical practice costs. Even with the imaging cuts, cardiology would have a net change of zero if the MEI were used to calculate physician payments.

These are the most sweeping changes to the Medicare fee schedule in years. CMA is extremely angry that physicians will be experiencing such changes on top of the 5 percent SGR payment cut.

“CMA will not back down. We will continue our work with the new Congress to enact a long-term, fair payment system,” says CMA president Anmol S. Mahal, M.D. “CMA will continue to fight for a Medicare fee schedule that accurately reflects increases in practice costs. And we will not give up until we have achieved a better system.”

Physicians are urged to contact their members of Congress and tell them they must stop these cuts. Call AMA's grassroots hotline at 800/833-6354, enter your zip code, and you will be automatically connected with your member of Congress.