On July 1, 2011, CMS issued proposed regulations that would update the Physician Fee Schedule and Outpatient Prospective Payment System (OPPS) rules for calendar year (CY) 2012.  These proposed changes would be applicable to services furnished on or after January 1, 2012.

Proposed Changes to the Physician Fee Schedule – The proposed changes to the Physician Fee Schedule would update payment policies and rates for physicians and nonphysician practitioners for services paid under the Medicare Physician Fee Schedule in CY 2012.  With respect to the potential 30%  Medicare payment reduction based on the current formula - the Sustainable Growth Rate - that was adopted in the Balanced Budget Act of 1997, CMS Administrator Dr. Donald M. Berwick said that, “[t]his payment cut would have serious consequences and we cannot and will not allow it to happen.” Significant changes in the proposed Physician Fee Schedule include, among others:

  • Expansion of the Potentially Misvalued Code Initiative:  CMS has conducted a broad review of its misvalued code initiative in an effort to ensure that Medicare is paying accurately for physician services and closely managing payments.  Instead of targeting specific codes for review as it has done in the past, CMS is focusing on the highest volume and dollar codes billed by physicians to determine whether such codes are overvalued and if evaluation and management codes are undervalued.
  • Payment for Geographic Variation:  CMS is replacing some of its data sources in order to improve how it adjusts payment for geographic variation, in addition to implementing other adjustments requested in prior year public comments.  These proposals result in minor changes to the indices.
  • Health Risk Assessment Criteria:  Coverage for a health risk assessment to be used in conjunction with Annual Wellness Visits began January 1, 2011, under the Affordable Care Act, and CMS proposes criteria for such assessment in order to support a systematic approach to patient wellness.
  • Expansion of Services Through Telehealth:  CMS proposes to expand the list of telehealth services including smoking cessation services.  If adopted, this change would impact the services proposed for the telehealth list in CY 2013.
  • Quality and Cost Measures:  Proposed quality and cost measures would be used in establishing a new value-based modifier that would reward physicians for providing higher quality and more efficient care.  Under the Affordable Care Act, CMS is required to begin making payment adjustments to certain physicians and physician groups on January 1, 2015, and to apply the modifier to all physicians by January 1, 2017.

Proposed Changes to the OPPS – The proposed changes to the OPPS would update payment policies and rates for both hospital outpatient departments and ambulatory surgical centers (ASCs) for CY 2012.  Key proposed changes to the rule include, among others:

  • Supervision of Outpatient Therapeutic Hospital Services:  CMS proposes using the Federal Advisory APC Panel to evaluate supervision standards for outpatient therapeutic services.  The default rule is “direct” supervision, which means physically present, interruptible and immediately available. 
  • New Diabetes Outpatient Quality Measures Proposed for CY 2014:  The proposed quality measures for diabetes outpatient services for CY 2014 (using 2012 data) include hemoglobin A1c management, low density lipoprotein cholesterol management, blood pressure management, eye exam, and urine protein screening.
  • New Outpatient Quality Measures Proposed for CY 2014:  The new quality measures related to outpatient services (using CY 2012 data) include referral of cardiac rehabilitation from outpatient hospital settings; currently, only 18 % of eligible patients are referred.  Additional measures include use of a safe surgery checklist and reporting volumes of outpatient surgery categories (cardiovascular, eye, gastrointestinal, genitourinary, musculoskeletal, nervous system, respiratory, and skin).
  • Physician-Owned Hospital Provisions:  The proposed regulations address how physician-owned hospitals may request an increase in the number of operating rooms, procedure rooms and inpatient/outpatient beds.
  • Outpatient Notification Regarding No Physician On Site:  The regulations include a proposal to reduce the categories of outpatients who must be notified if a hospital does not have a physician on site 24 hours per day/7 days per week.  The hospital would provide written notice only to those outpatients receiving observation, surgery or services involving anesthesia. Notice to emergency department patients could be posted conspicuously in the emergency department.

CMS proposes to implement ASC Quality Reporting Program beginning with the CY 2014 payment determinations, and CMS’s stated goal with respect to its proposed changes to the ASC quality reporting program is to harmonize standards across care settings.  Data collection will begin in CY 2012.  CMS will propose any additions or revisions to the measures in CY 2013 or CY 2014 rulemaking cycles, for CY 2014 or future payment determinations.

The Physician Fee Schedule proposed rule is available here and the OPPS proposed rule is available here.