CMS Releases Outpatient Payment Rules for Physicians and Hospitals

Crystal Kuntz, MPA

November/December 2010, Vol 1, No 6 - Health Policy


On November 2, 2010, the Centers for Medicare & Medicaid Services (CMS) issued its Physician Fee Schedule and Hospital Outpatient Prospective Payment System final rules for 2011. These CMS regulations are important for all providers of care in the Medicare program, as they set the payment parameters for the upcoming year.

Payment to physicians under Medicare remains an unresolved and complicated issue. Under these new regulations, physicians would see a 24.9% overall pay cut beginning January 1, 2011 unless Congress takes action to stop it. The reasons for the payment cut are complex but stem fromwhat iswidely seen as flaws in the set physician reimbursement since 2002. Every year, this formula leads to physicians in Medicare facing significant cuts in their reimbursement. However, Congress typically steps in and temporarily “fixes” the cut.

It is widely expected that Con gress will do so again to ensure that physician payments under the Medi care program remain stable in 2011. Nevertheless, there is widespread agreement that the current payment system needs to be overhauled and a long-term fix enacted. But because of the complexities entailed in making any changes, there is disagreement in Congress and among stakeholders over the best strategy.

Numerous technical issues also exist regarding Medicare reimbursement for specific physician services. For example, Medicare is using new data from the American Medical Association’s Physician Practice Information Survey (PPIS) to estimate “practice expense” costs for various services. Practice expense includes items such as rental of office space or the cost of equipment. Some groups have voiced concern that the PPIS data is flawed and fails to adequately reimburse physicians for the cost of providing care. This is another area of longstanding controversy in the Medicare program with no clear path for moving forward.

On the drug payment side, reimbursement in physician office and hospital outpatient settings remains stable—Medicare will continue to reimburse drugs at average sales price (ASP) + 6% in the physician office setting, whereas separately paid drugs in hospital outpatient departments will see their reimbursement increase from ASP + 4% in 2010 to ASP + 5% in 2011.

Prevention Coverage Boosted
The new Medicare rules also implement provisions of high importance to Medicare beneficiaries. Today, beneficiaries face a Part B deductible and 20% cost sharing for most preventive services, unless they have Medigap coverage that supplements Medicare. Under the new rules, which stem from requirements in the Affordable Care Act, Medicare beneficiaries will no longer have to pay cost sharing for preventive services with a Grade A (coverage “strongly recommended”) or Grade B (coverage “recommended) rating by the US Preventive Services Task Force.

Thus, beneficiaries in 2011 will have no cost sharing for preventive services for certain screening tests for cancer: screening mammography, screening pap smear, and screening pelvic exam; colorectal cancer screening tests, and prostate specific antigen (PSA) tests. The importance of this provision could grow in the future if additional preventive services are added to Medicare that have Grade A or Grade B recommendations.

One of the most notable aspects of the newly released rules may be what they do not include. The Affordable Care Act grants the CMS with a host of new authorities aimed at developing innovative ways for paying providers, including establishing integrated health systems and bundling payments for inpatient and postacute care. As these efforts begin to unfold over the coming months, we could see significant implications for all stakeholders in oncology care