It is estimated that physician fee schedule payments will be reduced by approximately 29.4 percent effective January 1, 2012 as a result of the Sustainable Growth Rate formula. As you know, in the past, Congress has routinely stepped in at the last minute to prevent these cuts from occurring. However, the enactment of the BCA and the sequestration trigger included in the legislation will make it more difficult for Congress to use the types of budgetary gimmicks it has used in the past to “pay for” a temporary SGR fix.

The problem Congress confronts each year when attempting to deal with the SGR is how to pay for a fix. The Congressional Budget Office (CBO) makes an estimate each year for future Medicare spending. Part of the model the CBO uses to calculate future spending assumes that the SGR related cuts will occur. So the current CBO projection for Medicare spending in 2012 assumes that the 29.4 percent reduction will occur.

CBO estimates that a permanent fix of the SGR formula, would cost more than $300 billion over the next 10 years. In other words, Medicare spending, in the aggregate will be $300 billion higher by 2021 than is currently projected if Congress eliminates the SGR formula and replaces it with something else (although we don’t know what that “something else” will be). Therefore, in order for Congress to fix the SGR, cuts totaling $300 billion over 10 years, would have to be enacted.

Under the BCA, tens of billions of dollars in cuts in future Medicare aggregate spending are mandated and these would be in addition to any cuts necessary to “pay for” an SGR fix.

While it is entirely likely that Congress will use the “reduction in the amount of the increase” mechanism to meet the BCA target, all of these reductions will have to come from future hospital payments, nursing home payments, home health payments and other Part A provider payments because there is no projected increase in Part B physician payments – only projected decreases due to the SGR.

Because of the timing of the SGR cut and the timing of the Congressional schedule for consideration of the Joint Committee’s spending reduction recommendations, it is anticipated that a major effort will be made to have the new Joint Committee address both the BCA cuts and the SGR situation as part of their deliberations.

Please keep reading the 4D Medical blogs, we are following the SGR issue closely and will report any news as it becomes available.

One of the more controversial provisions of the Patient Protection and Affordable Care Act (ACA) that is beginning to garner the popular media’s attention is the new Independent Payment Advisory Board (IPAB) mandated by the ACA. Although the majority of the criticism leveled at this new board has come from Republicans, several prominent Democrats are beginning to ask questions about the propriety of giving this new Independent Board powers and duties traditionally reserved to Congress.

Opponents of the IPAB argue that the Independent Board is unaccountable to the American people and will, for all intents and purposes, “create a system of rationing”. Supporters of the IPAB argue that a Board such as this is necessary because it will force Congress to make the tough decisions necessary to sustain the future of Medicare.

IPAB was created for the purpose of constraining growth in Medicare spending to specified target levels. The IPAB will be made up of 15 “experts” selected from such diverse backgrounds as physicians, health management, health economics, health finance and consumers. Individuals selected to serve on the IPAB will be full-time Board members, receive an annual salary from the federal government and serve a six year term on the Board. The Board is charged with making “recommendations” to Congress and submitting analytical reports with both short term and long term savings plans.

Proponents and opponents of IPAB do not agree on whether “recommendations” from the IPAB are truly recommendations.

Proponents of IPAB note that Board recommendations only have the potential to become law if the Board determines that long-term growth in Medicare spending will exceed targeted levels. Then, IPAB proponents argue, Congress has the authority to overturn any IPAB recommendation.

Opponents point out that if Congress does nothing, the IPAB’s recommendations have the force of law. In order for Congress to overturn an IPAB recommendation, the process is extremely difficult – some would argue it will be impossible for a future Congress to overturn an IPAB recommendation.

Therefore, opponents argue, it is highly likely that the “recommendations” of the IPAB will become law.

IPABs supporters maintain that this is exactly what is needed to control long-term Medicare spending. IPAB advocates maintain that Congress is ill-equipped to deal with complex health policy issues and so politicized and so beholden to outside persuasion (i.e. special interest groups like doctors, hospitals and billing companies) that it cannot make policy decisions in the best interest of the program and the American people. It is only the IPAB that will be able to rise above petty regional or local politics and make decisions that are in the best interests of us all.

Opponents say IPAB is not accountable and it’s too powerful and therefore dangerous. More importantly, some physician organizations continue to express concern that large cuts in physician payments – which appear possible under an IPAB controlled Medicare program – could drive many physicians to stop seeing Medicare patients or significantly limit the number of Medicare patients they see (see related story on “mystery shoppers”). In a recent letter to Congressional leaders, Cecil Wilson, the President of the AMA said, “The IPAB puts important health care payment and policy decisions in the hands of an independent body that has far too little accountability, major changes in the Medicare program should be decided by elected officials.”

It is unlikely that the controversy surrounding IPAB will be cooling down anytime soon especially since an election year is just around the corner. But proponents and opponents of IPAB are preparing for a major showdown in early 2013.

The Medicare Payment Advisory Committee (MedPAC) recommended in its June report to Congress that imaging services such as X-Rays, and MRIs, undergo fee reductions. The report also recommended that physicians who prescribe a higher volume of imaging services than their peers be subject to prior approval.

While the MedPAC report acknowledges that use of in-office ancillary imaging devices allows physicians to operate with greater speed and precision AND with greater convenience to the patient, the report cites “strong evidence” that physicians who own their own imaging equipment generate more service volume. In the end, MedPAC concludes that controlling rapid volume growth, which the Commission maintains contributes to Medicare’s growing financial burden, is more important than getting imaging results sooner and with greater patient convenience.

Physician organizations opposed these recommendations arguing that lowering the fees of imaging services will discourage coordinated care. An American Medical News article pointed out that MedPAC seems to be making recommendations on outdated data claiming that the volume of imaging services rose by 6.3% annually from 2004 to 2008 but by only 2% from 2008 to 2009.

Shortly after the MedPAC report was released, the Chairman of the Senate Finance Committee proposed to enact the MedPAC imaging recommendations and use the money “saved” by the fee reductions to offset the cost of providing “trade adjustment assistance” to workers who might lose their jobs as a result of the South Korean Free Trade Agreement. This proposal was roundly criticized and ultimately withdrawn before it came to a vote in Committee.

Physician organizations argue that adoption of the MedPAC recommendation requiring high-use physicians to submit clinical information whenever they order advanced diagnostic imaging, would place an unnecessary administrative burden on providers. The American College of Radiology and other physician organizations believe that there are better ways to promote the proper use of imaging services such as creating appropriate use criteria that would be less of an administrative burden on providers.

MedPAC believes that it will take years to develop a new payment system that better reflects the cost, quality and value of services and recommended that the following policies be adopted sooner:

1. The Secretary of HHS should accelerate efforts to combine multiple discrete services into a single payment rate (i.e. bundled payments). The payment rates should reflect efficiencies in physician work and practice expense when two or more services are provided together.

2. Congress should direct the Secretary to account for efficiencies that occur when multiple imaging services are provided to the same patient by a single practitioner, thereby reducing the rate for the second and subsequent imaging services. (see article above regarding physician fee schedule proposed rule)

3. Congress should have the Secretary reduce the physician work component of diagnostic tests that are ordered and performed by the same practitioner

In an effort to provide consumers with more information and accelerate the transition to better health insurance coverage, the Obama Administration has issued new guidance that will eliminate the ability of new, so-called “mini-med” plans that offer limited annual coverage to apply for a yearly wavier. In addition, these limited benefit plans will have to provide more information to consumers about the limited coverage available under these plans.

Typical mini-med health insurance plans are insurance policies that cover routine, inexpensive health care but not catastrophic care. It is not unusual for these mini-med plans to have annual limits as low as $10,000. Mini-med insurance policies are commonly purchased by poor and hourly paid workers who cannot afford to pay the premiums for more expensive health insurance policies. It has been estimated that nearly 3 million people had mini-med insurance policies in 2010.

Under the Patient Protection and Affordable Care Act (ACA), health insurance policies are required to offer minimum benefits that are typically far better than those offered by the mini-med plans. The ACA generally prohibits group health plans and health insurance issuers offering group or individual health insurance coverage from imposing lifetime or annual limits on the dollar value of health benefits. The ACA regulations provide that the mandated annual limits may be waived by the Secretary of Health and Human Services (HHS) if compliance with the regulation would “result in a significant decrease in access to benefits or a significant increase in premiums.”

Under the previous guidance, mini-med plans were able to obtain a waiver of the minimum benefit requirements until the end of 2013. Under the new guidance, beginning in September, 2011 no new applications for waivers will be accepted and mini-med plans with a waiver that expires before December 31, 2013 will not be granted an extension. The waivers already approved by CMS allow plans to establish annual coverage limits far below the ACA mandated level of $750,000.

In addition to the new limitation on waivers, CMS has mandated greater transparency by issuing restrictions to mini-med plans. Those that qualify as a mini-med must now provide beneficiaries with information written in plain language to inform the beneficiary of the impact if he or she were to be hospitalized or become seriously ill. A list of those mini-med plans that have been approved or denied the waivers has published on the CMS website.

Senators Orrin Hatch (R-Utah), Max Baucus (D-Montana), Herb Kohl (D-Wisconsin), Bob Corker (R-Tennessee), and Chuck Grassley (R-Iowa) sent letters, to the Department of Health and Human Services (HHS) Office of the Inspector General (OIG), and the Center for Medicare and Medicaid Services (CMS) asking that they conduct an investigation regarding the potential conflicts of interest inherent in physician owned distributorships (POD).

A POD is an arrangement where a physician investor purchases ownership shares in an entity that then serves as a medical device distributor for products the physician utilizes in surgery. The issue came to light after a report from the Senate Finance Committee staff documented a spike in the utilization of medical procedures by physicians invested in these entities. The Senators were particularly concerned about the lack of guidance or regulation on the matter considering what they view as the potential of PODs for unethical behavior.

“Patients should have peace of mind that a doctor’s recommendation for treatment or care is in the patients best interest and isn’t just a way of making money,” said Hatch. “The financial incentives created by these entities set a dangerous precedent that, as indicated in this report, can lead to serious over-utilization and force unnecessary, invasive procedures for patients.  This arrangement demands further scrutiny and should be investigated.”

The letters noted that the existing guidance and regulation established in the Federal Anti-Kickback law is largely focused on physician-owned providers of ancillary healthcare services and does not protect against the risk of POD abuse. The Senators pointed out that “physician ownership of medical device manufacturers and related businesses appear to be a growing trend in the medical device sector.” The Wall Street Journal recently reported that PODs now exist in at least 20 states, with more than 40 operating in California alone. The Senators found “abundant evidence that PODs have proliferated in the last several years” particularly in the spine and total joint area. They then cited a study that showed a fifteen fold increase in the number of spinal fusion surgeries from 2002-2007 and that there was significant financial incentive for hospitals and surgeons to perform these complex fusions.

The letter recognizes that the medical community remains divided over the legality of the POD model. It contends that there is just as much confusion within the OIG as there is in the health care community and that clarity is needed to stop the growth of PODs. The Senators feel that the use of PODs may have been enabled by the absence of policy statements, guidance or visible enforcement. The letter argues that surgeons are inclined to join PODs because there is an absence of guidance or any legal impediment specifically relating to POD ventures and that many of these ventures are being structured haphazardly as a result. They did admit that some POD models attempt to comply with existing legal framework but that the majority of PODs seem to be operating in an unethical matter.

The Senators conclude by stating their desire to regulate PODs and have asked the OIG to conduct a review of PODs and report back to Congress with results, and recommendations for further action. The report is due August 12, 2011.

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), authorized the Secretary of HHS to establish a program to encourage the adoption and use of electronic-prescribing (e-Rx) technology. Since 2009, providers who e-prescribe have been eligible for a bonus payment on their Medicare physician fee schedule payments. Beginning in 2012, certain health professionals who do not e-prescribe could be subject to a payment reduction, unless the provider qualifies for an exemption.

On June 1, CMS published a proposed rule that would allow physicians and other Eligible Professionals (EPs), to apply for several new e-Rx penalty exemptions through a Web-based portal. That portal is under construction and not yet available for review. EPs would have to apply for an exemption by October 1, 2011 to avoid the penalty.

E-prescribers are required to use a qualifying e-Rx system and report the proper G Code on at least 10 Medicare Part B claims from Jan. 1–June 30, 2011, to avoid the 2012 penalty. However, EPs who find it difficult to meet the 10 e-script requirement can apply for one of the following exemption categories by Oct. 1 of this year:

* Their practice is located in a rural area without high-speed internet access.
* Their practice is located in an area without sufficient available pharmacies for e-Rx.
* They are registered to participate in the Medicare or Medicaid Electronic Health Record (EHR) Incentive Program and have adopted certified EHR technology.
* They are unable to electronically prescribe due to local, state or federal law or regulation (such as prescribing controlled substances).
* They prescribe infrequently (for example, they prescribed fewer than 10 prescriptions between Jan. 1 and June 30).
* There are insufficient opportunities to report the e-Rx measure due to program limitations (for example, a surgeon e-prescribes but not on the date of the patient encounter in accordance with the program requirements).

CMS will finalize its changes to the e-Rx penalty program sometime this summer.

In early June, the Obama administration announced plans to use “mystery shoppers” to determine how hard it is to see a primary care doctor. The plan drew immediate criticism from several physician organizations and Members of Congress. Due to the criticism, the Obama Administration recently announced that it was canceling the project. A statement released by the Department of Health and Human Services, says, “We have determined that now is not the time to move forward with this research project.”

Under the original proposal, the government was going to hire individuals to pose as patients and call doctors’ offices and request appointments, some for potentially serious health problems and others for routine care. According the news reports describing the project, doctors’ offices targeted for the study would be called at least twice, with a “mystery patient presenting the same clinical scenario but indicating different types of insurance coverage (i.e. Medicare, Medicaid, commercial or uninsured) to determine whether the physician was willing to take in new patients with private insurance while telling participants in government health programs or no health insurance at all, to look elsewhere.

One critic of the study, stated, “Doctors should be able to spend their time focusing on providing the highest level of quality care to their patients, not wondering when Uncle Sam might be calling to spy on them”.

The announcement issued by HHS suggests that this is a study that could resurface at some point when the time would be right to move ahead with this type of research project.

Medicare officials have been so pleased with the results of the Medicare Recovery Audit Contractor (RAC) program that they have mandated that each state establish a Medicaid Recovery Audit Contractor program modeled after the Medicare initiative.

As with the Medicare RAC, the purpose of the Medicaid RAC is to reduce improper Medicaid payments by directing states to hire auditors to review Medicaid claims. Similar to the Medicare RACs, these auditors would identify overpayments or underpayments and the States would pay these auditors with funds recovered through the program.

On July 1, the Centers for Medicare and Medicaid Services (CMS) released a notice of proposed rulemaking (NPRM) outlining proposed changes for the 2012 Medicare physician fee schedule (MPFS).

Perhaps the most anticipated part of the announcement was the projected change in the update factor for the physician fee schedule. According to the notice, absent Congressional intervention, the Conversion Factor (CF) must be adjusted downward by 29.5 percent due to the Sustainable Growth Rate formula.

In making this announcement, CMS Administrator Donald Berwick, MD said, “This payment cut would have serious consequences and we cannot and will not allow it to happen. We need a permanent SGR fix to solve this problem once and for all. That’s why the President’s budget and his fiscal framework call for averting these cuts and why we are determined to pass and implement a permanent and sustainable fix.” It should be noted that although Dr. Berwick calls for a permanent fix to the SGR problem, the budget the President submitted to Congress only sought a two-year fix.

In addition to the fee schedule adjustment, the NPRM proposes to update other payment policies and rates for physicians and non-physician practitioners (NPPs) for services paid under the Medicare Physician Fee Schedule (MPFS) in calendar year (CY) 2012. More than 1 million providers – physicians, limited license practitioners and Non-Physician Practitioners – are paid under the MPFS. CMS projects that total payments under the MPFS in CY 2012 will be $80 billion.

CMS must issue a proposed rule that reflects current law. Under current law, providers would face a steep across-the-board reduction in payment rates, based on the Sustainable Growth Rate (SGR) formula. Unless Congress intervenes to prevent this cut – which it has in the past – Medicare payment rates are projected to be reduced by 29.5 percent for services delivered on or after January 1, 2012.

This year, the NPRM shines a light on high volume and high dollar codes billed by physicians. CMS seeks 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.

Other changes in the proposed rule include:

• Expanding the multiple procedure payment reduction to the professional interpretation of advance imaging services to recognize the overlapping activities that go into valuing these services.

• New criteria for a health risk assessment (HRA) to be used in conjunction with the Annual Wellness Visits for which coverage began Jan. 1, 2011.

• Expanding the list of services that can be furnished through telehealth to include smoking cessation services. CMS is also proposing to change the way additional services are added to the telehealth list that would focus on the clinical benefit of making the service available through telehealth. If adopted, this change would affect services proposed for the telehealth list in CY 2013.

• Updating a number of physician incentive programs including the Physician Quality Reporting System, the e-Prescribing Incentive Program and the Electronic Health Records Incentive Program.

• New quality and cost measures that would be used in establishing a new value-based modifier that would reward physicians for providing higher quality and more efficient care.

• Implementing the third year of a 4-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 Patient Protection and Affordable Care Act requires CMS to make quality adjustments to certain Medicare physician payments beginning January 1, 2015, and to apply the modifier to all physicians by January 1, 2017. According to a press release issued by CMS, the agency 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. CMS is proposing to use CY 2013 as the initial performance year for purposes of adjusting payments in CY 2015.

Individuals and organizations wishing to comment on the Proposed Rule must submit their comments to CMS by August 30, 2011.

Beginning in January, 2012, eligible professionals who are not using electronic prescriber software (eRx) based on claims submitted between January 1, 2011 and June 30, 2011, may be subject to a payment adjustment on their Medicare Part B Physician Fee Schedule (PFS) covered professional services.

In 2012, the payment adjustment for not being a successful eRx will result in an eligible professional or group practice receiving 99% of their Medicare Part B Physician Fee Schedule (PFS) amount that would otherwise apply to such services. In 2013, an eligible professional or group practice will receive 98.5% of their Medicare Part B PFS covered professional services for not being a successful eRx.

In 2014, the payment adjustment for not being a successful eRx is 2%, resulting in an eligible professional or group practice receiving 98% of their Medicare Part B PFS covered professional services.

Group Practices – For group practices that are participating in eRx GPRO I or GPRO II during 2011, the group practice MUST become a successful eRx. Depending on the group’s size, the group practice must report the eRx measure for 75-2,500 unique eRx events for patients in the denominator of the measure.

For additional information, you are encouraged to visit the section of the CMS website dedicated to e-prescribing information: http://www.cms.gov/erxincentive