On October 30, 2008, the Centers for Medicare & Medicaid Services (CMS) released the text of its final rule updating the Medicare physician fee schedule (MPFS) for calendar year (CY) 2009. As required under the “Medicare Improvements for Patients and Providers Act of 2008” (MIPPA), the rule increases physician payments by 1.1% in 2009, rather than the 5.4% cut CMS anticipated would result from the Sustainable Growth Rate (SGR) formula when it issued the July 7, 2008 proposed rule. Note that MIPPA did not amend the underlying SGR formula or modify payments for years after 2009; the Congressional Budget Office estimates that physician payment rates will be cut by 21% in 2010 unless Congress takes further action. In addition to making changes to physician payment rates, the sweeping rule includes many other policy changes, include the following.

  • CMS has adopted changes to the antimarkup rule for diagnostic tests billed by an ordering physician. In the proposed rule, CMS had offered two alternative approaches to reforming the anti-markup rules. Under the first approach, the anti-markup provision would apply if the professional component (PC) or technical component (TC) of a diagnostic test is ordered by a billing physician and is either: (i) purchased from an outside supplier, or (ii) performed or supervised by a physician who does not share a practice with the billing physician or physician organization. A supervising or interpreting physician could "share" a practice as an employee or contractor of the single physician or physician group billing the test; otherwise the anti-markup restriction would apply. Under the second alternative approach, CMS would maintain the current regulatory text that applies the anti-markup provisions to the technical and professional components of diagnostic tests performed outside the “office of the billing physician or other supplier,” but CMS would more broadly define the “office of the billing physician or other supplier” to include space in which diagnostic testing is performed provided that it is located in the same building in which the billing physician or other supplier regularly furnishes patient care. In the final rule, CMS provides that a billing physician or other supplier can avoid application of the anti-markup provisions by meeting either alternative 1 or, on a case-by-case basis, the “site-of-service” approach of alternative 2, both of which were subject to certain modification in the final rule. Specifically, under alternative 1, a performing physician "shares a practice" with the billing physician group if he or she provides at least 75% of his or her professional services through the billing physician group-- even if the physician works for one or more billing physician groups or other health care entities. There are no restrictions on the location where the services can be performed under alternative 1. If the performing physician does not meet the 75% test, the billing physician may avoid the anti-markup rule if the performing physician is an owner, employee or independent contractor and the services are performed in the billing physician’s office. The “office” means any medical office space (regardless of the number of locations) in which the ordering physician regularly furnishes patient care and includes space where the billing physician furnishes diagnostic testing if the space is located in the same building where the ordering physician regularly furnishes patient care.
  • CMS did not adopt its proposal to require any physician or nonphysician practitioners organization furnishing diagnostic testing services (except diagnostic mammography services) to enroll as an independent diagnostic testing facility (IDTF) and meet most IDTF performance standards. Instead, CMS cites a MIPPA provision requiring accreditation of entities furnishing certain advanced diagnostic testing procedures by January 1, 2012. CMS states that it may reconsider finalizing the IDTF standard in a future rulemaking. CMS did, however, adopt its proposal to require entities providing mobile diagnostic testing services to enroll in Medicare, comply with IDTF performance standards and bill Medicare directly for their services (although CMS is not requiring mobile testing entities to bill directly for the services they furnish when such services are furnished “under arrangement” with hospitals).
  • CMS did not finalize in the rule its proposed exception to the physician self-referral rule that would have protected remuneration provided by a hospital to physicians on its medical staff under incentive payment or shared savings programs under certain conditions. Instead, in order to finalize the exception(s) CMS is reopening the comment period and soliciting detailed information on 55 specific questions related to such issues as the definition of key terms, safeguards against patient or program abuses, and various aspects of program design.
  • The final rule expands the quality measures that eligible professionals may report to qualify for incentive payments under the Physician Quality Reporting Initiative in 2009thatequal to 2% of their total Medicare allowed charges. It also provides new PQRI reporting periods and provides for certain PQRI data to be submitted via clinical registries. In addition, as authorized by MIPPA, physicians and other eligible professionals who use a qualified electronic prescribing (e-prescribing) system to transmit prescriptions to pharmacies and submit required information on the claim may earn an incentive payment of 2% of their total Medicare allowed charges during 2009 (in addition to any PQRI incentive payment).
  • In the final rule, CMS is refining relative value units (RVUs), continuing the transition to a new “bottom up” methodology for practice expense RVUs, and applying the budget neutrality adjustment factor to the overall conversion factor (rather than applying the adjustment only to the physician work RVUs).
  • CMS is codifying changes to the Part B drug average sales price payment methodology resulting from the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) that went into effect April 1, 2008, including the use of a volume-weighted methodology and revised payment rules for certain inhalation drugs. CMS had proposed several changes to the competitive acquisition program (CAP), which offers physicians the option to acquire certain injectable and infused Part B drugs from an approved CAP vendor rather than buying and billing the drugs directly. On September 10, 2008, CMS announced it was postponing the 2009 CAP indefinitely. In light of this postponement, CMS is not adopting changes in the CAP at this time, but the agency continues to solicit public feedback on a range of CAP issues.
  • The final rule updates the End Stage Renal Disease (ESRD) facility wage index, implements a MIPPA provision providing a 1% increase to the ESRD composite rate and establishing a site-neutral base composite rate for hospital-based and independent dialysis facilities, and provides no update to the drug add-on payment.
  • CMS has adopted a series of enrollment and documentation-related changes. Currently, newly enrolled physicians and non-physician practitioners may retroactively bill Medicare for up to 27 months prior to the effective date of their enrollment. The new enrollment rules will significantly limit retroactive billing by physicians and non-physician practitioners to no more than 30 days prior to the effective date of enrollment. In addition, the rule requires physicians and nonphysician practitioners to report to their carrier any changes of ownership, adverse legal actions, or change in practice location within 30 days (versus the current 90 days) or face revocation of Medicare billing privileges and the recoupment of Medicare payments from the date of the reportable change. Physicians and non-physician practitioners are barred from billing for services furnished after certain adverse actions. The final rule also requires providers and suppliers to maintain ordering and referring documentation (including the referring physician’s National Provider Identifier) for 7 years (rather than the proposed 10 years) years from the date of service, and it requires physicians and nonphysician practitioners to maintain written ordering and referring documentation for 7 years (rather than 10 years) from the date of service. CMS also clarifies the effective date of Medicare billing privileges.
  • The final rule implements a MIPPA provision related to Medicare coverage of oxygen equipment. Specifically, MIPPA repeals a requirement that a supplier of oxygen equipment transfer title of the equipment to the beneficiary at the end of a 36-month rental period. Medicare payment for oxygen equipment will continue to be capped at 36 months (although payment will continue to be made for the oxygen contents). MIPPA requires the supplier that furnishes oxygen equipment during the 36-month rental period continue to furnish the equipment after the rental period ends for any period of medical need for the remainder of the “reasonable useful lifetime” of the equipment, even if the beneficiary moves out of the supplier’s normal service area. In addition, if a break in medical need occurs following the 36-month rental period, the supplier must resume furnishing the oxygen equipment when the beneficiary once again has a medical need for the oxygen equipment. While MIPPA authorizes CMS to make maintenance and servicing payments for non-routine maintenance and servicing of supplier-owned oxygen equipment, CMS has determined that it is not reasonable and necessary to make such payments. However, for CY 2009 only, CMS will make payments when the supplier performs a routine maintenance and servicing visit (but not replacement parts) for oxygen concentrators and transfilling equipment following each period of continuous use of 6 months after the 36-month rental period ends. CMS welcomes comments on this issue, especially regarding whether these payments should continue past CY 2009.
  • The final rule includes numerous other policy and payment changes, including provisions to address: potentially misvalued services; an expansion of the procedures subject to the multiple imaging procedure payment reduction; updates to the telehealth policy; potential refinements to geographic practice cost indices; revisions to the conditions of participation and other requirements affecting comprehensive outpatient rehabilitation facilities; changes to rehabilitation agency requirements, including provisions related to extension locations and emergency care; a prohibition on payment to suppliers of a continuous positive air pressure device when the supplier or its affiliate is directly or indirectly the provider of the sleep test that is used to diagnose a Medicare beneficiary with obstructive sleep apnea (although in the final rule CMS provides an exception for attended facility-based polysomnography); a new payment methodology for therapeutic shoes; and codification of other MIPPA self-implementing provisions, including an extension of the therapy cap exceptions process and changes to payments for clinical laboratory and ambulance services, among others.

CMS has released the advanced text of the rule, and the official version is scheduled to be published in the Federal Register on November 19, 2008. CMS is accepting comments on a limited number of provisions until December 29, 2008, including the exception for incentive payment and shared savings programs; certain MIPPA provisions, interim RVUs and pricing information for selected codes; and physician self-referral designated health services codes.