The Senate Finance Committee and the House Committee on Ways & Means on December 12, 2013 each approved versions of legislation that would reform the Medicare physician payment system.

Both committees propose to repeal permanently Medicare’s sustainable growth rate formula and to replace the current physician payment system with a value-based payment system. Payments to professionals under the physician fee schedule would be adjusted based on their performance on a single Value-Based Performance Incentive Program (VBP) that assesses quality, resource use, electronic health record (EHR) meaningful use and clinical practice improvement activities. Professionals who treat few Medicare patients or who receive a significant portion of their revenues from alternative payment models (APMs) that meet certain requirements would be excluded from the VBP.

In addition, the bills encourage professionals to participate in APMs by providing those professionals who receive a significant share of their revenues through qualifying APMs with an annual bonus payment equal to 5% for several years. Beginning in 2024 professionals participating in certain APMs would receive annual updates of two percent and other professionals would receive annual updates of one percent.

  • Other issues addressed in the legislation passed by both committees include:
  • Developing quality measures;
  • Establishing payment codes for complex chronic care management services;
  • Valuing services and identifying and revaluing misvalued services;
  • Establishing a program that promotes the use of appropriate use criteria for advanced diagnostic imaging;
  • Expanding the use of Medicare data for quality improvement activities; and
  • Making professionals’ utilization and payment data available on the Physician Compare website.

However, only the Senate Finance Committee addressed “extenders,” which are other healthcare time-sensitive provisions that Congress generally focuses on at the same time as the physician payment system. Notably, the Senate Finance Committee’s legislation revises payments for Medicare-covered outpatient therapy services by: (1) repealing the therapy payment caps upon enactment; (2) extending manual medical review (MMR) for services furnished above a $3,700 threshold through 2014 and repealing this requirement at the end of 2014; and (3) establishing a new targeted medical review program for outpatient therapy services that would become effective on January 1, 2015.

The Secretary of the Department of Health and Human Services (Secretary) would define the therapy services subject to the new medical review program by considering:

  • Providers with unusually high patterns of billing;
  • Providers with high claims denial percentages or who are not compliant with other applicable requirements;
  • Providers who are newly enrolled in Medicare;
  • Providers with questionable billing practices;
  • Services furnished to treat a type of medical condition;
  • Services identified by standardized data elements required to be reported;
  • Services furnished by a single provider or group that includes such providers; and

Other services as determined appropriate by the Secretary.

The Medicare administrative contractors or other review contractors would conduct prior authorization medical reviews for identified outpatient therapy services furnished to beneficiaries above certain thresholds established by the Secretary. Additionally, services not subject to prior authorization medical review could undergo pre-payment or post-payment review.

The Senate Finance Committee attempted to address a number of problems faced by therapy providers under the current MMR process. Similar to the current MMR process, providers would be permitted to submit information for medical review by fax and mail. However, under the new system, providers could also submit information electronically and within 24 months of enactment, the Secretary would be required to make available the electronic means necessary to receive information. Additionally, the Medicare contractors would be required to make prior authorization determinations within 10 business days of receiving the necessary documentation. If the prior authorization determination is not made within this timeframe, the services would be deemed to meet the applicable requirements for Medicare coverage.

In addition, the Senate Finance Committee proposes a new data reporting system for outpatient therapy services. The Centers for Medicare & Medicaid Services (CMS) would make available on its website within 6 months of enactment a draft list of standardized data elements that include the following domains: (1) demographic information; (2) diagnosis; (3) severity; (4) affected body structures and functions; (5) limitations with activities of daily living and participation; (6) functional status; and (7) other domains determined to be appropriate by the Secretary. CMS would develop and implement a system for therapy providers to report the standardized data elements for individuals receiving outpatient therapy services. Medicare payments would not be made for outpatient therapy services furnished to a beneficiary if a therapy provider does not report the standardized data elements for the beneficiary. Within 18 months of the data reporting system becoming operational, the Secretary would submit a report to Congress on the design of a new payment system for outpatient therapy services.

Other issues addressed in the Senate Finance Committee’s legislation include:

  • The work geographic adjustment;
  • Ambulance add-on payments;
  • Extension of the Medicare-Dependent Hospital Program;
  • Extension of Medicare inpatient hospital payment adjustment for low-volume hospitals;
  • Extension for specialized Medicare Advantage plans for special needs individuals;
  • Extension of Medicare reasonable cost contracts;
  • Quality measure endorsement and selection;
  • Extension of funding for outreach and assistance for low-income programs;
  • Extension of the Qualifying Individual program; Extension of Transitional Medical Assistance;
  • Extension of Medicaid and CHIP Express Lane option;
  • Extension of pediatric quality measure development;
  • Extension of Special Diabetes Program for type I diabetes and for Indians;
  • Abstinence-only education grants;
  • Personal Responsibility Education Program;
  • Family-to-Family health Information Centers;
  • Health workforce demonstration project for low-income individuals;
  • Commission on Patient Directed Health Care; and
  • Reducing improper Medicare payments.

The Senate Finance Committee’s markup materials are available by clicking here.

The House Committee on Ways & Means’ markup materials are available by clicking here.