The official copy of the 2008 Medicare Physician Fee Schedule Final Rule was published in the Federal Register on November 27, 2007. Provisions in the Final Rule are effective January 1, 2008, except for the amendments to § 409.17 and § 409.23 which are effective July 1, 2008, and the amendments to § 423.160 which is effective January 1, 2009.

The comment period for the Final Rule ends at 5 p.m. EST on December 31, 2007. Instructions for commenting are included in this newsletter.

Sustainable Growth Rate and the Conversion Factor
The majority of physician services provided to Medicare beneficiaries, with the exception of durable medical equipment (DME), lab and drugs are paid through the Medicare Physician Fee Schedule (MPFS). The MPFS was established by the Omnibus Budget Reconciliation Act (OBRA) of 1989, and became effective in January 1992.

The MPFS bases payment for each service on the resource costs necessary to provide the service as reflected by the assigned relative values (RVUs). Prior to the establishment of the MPFS, Medicare paid these services using customary, prevailing, and reasonable charges based on past payments for the service.

Further changes in the methodology for determining physician payments were included in the Balanced Budget Act of 1997 (BBA) when the Medicare Volume Performance Standard (MVPS) Conversion Factor (CF) update formula was replaced with the Sustainable Growth Rate (SGR) provision. The SGR formula was intended to control the growth in aggregate Medicare expenditures for physicians' services.  For a detailed report on the SGR and physician payments read the Centers for Medicare and Medicaid (CMS) Fact Sheet on the Sustainable Growth Rate and Conversion Factor 2008.

As discussed in Oplinc’s Best Practices Review Newsletter, Volume 3 Issue 4 the SGR sets the target expenditure for physician payments each year annually adjusting  payments up or down, depending upon whether actual spending is below or above the target.  If the SGR target is exceeded by actual expenditures the fee schedule update will subsequently be reduced resulting in a lower rate of payment. If expenditures are less than the target, the update is increased resulting in a higher rate of payment.

The many problems inherent in the SGR formula have resulted in a scheduled decrease in physician payments every year since 2002. Prompted by concerns that the decreased payments would result in access problems for Medicare patients Congress has intervened and stopped the decreases each year since 2003.

The table below chronicles the projected Medicare update, Congressional action taken, actual update realized and the resulting CF for each year from 2002-2007.  There is a scheduled negative 10.1% uptake for 2008 that will result in a CF of 34.0682. There is cautious optimism that Congress will again step in and prevent the scheduled cut to physician payments in 2008 although to date there is no formal legislation addressing Medicare payments.


Medicare Formula Calculated Update

Congressional Action

Actual Update After Congressional Action

Conversion Factor



No action taken





CMS required to correct past errors





MMA mandated positive update





MMA mandated positive update





Deficit Reduction Act froze Conversion Factor at 2005 rate for 1 year





Tax Relief and Health Care Act froze Conversion Factor for 1 year








Table 1
* Projected Conversion Factor unless Congress intervenes

Projected Conversion Factor Table

The following chart illustrates the changes in the Medicare CF for physician services from 2001-2008. While the Congressional action outlined in Table 1 helped to avert major cuts in physician payments for the past 5 years the chart below shows that the CF remains lower than it was in 2001.

Medicare Conversion Factor History Chart

Section 101 (d) of the Tax Relief and Health Care Act of 2006 (TRHCA) required the Secretary of the Department of Health and Human Services to establish a Physician Assistance and Quality Improvement Fund (PAQI) of $1.35 billion to be available for physician payment and quality improvement initiatives for services furnished during Calendar Year (CY) 2008. CMS has the option to use these funds to buy-down the negative update of the Physician Fee Schedule conversion factor (CF).

CMS addressed the SGR and the resultant decrease to the CF in the 2008 Medicare Physician Final Rule and their decision not to use the PAQI Fund to offset the negative 10.1% update to the CF. CMS reported that comments to their proposal in the Proposed 2008 Medicare Physician Rule to use the PAQI Fund for CY 2008 PQRI bonus payments were generally opposed to this use of the PAQI Fund, saying, “Almost all comments on this issue requested that we use the entire $1.35 billion to help offset the estimated negative 9.9 percent physician update for CY 2008.”

CMS responded to these comments and explained that the PAQI Fund is a fixed dollar amount of $1.35 billion. Once the Fund is spent there is no authority to pay any more than that. CMS estimates that the $1.35 billion would only reduce the negative update by approximately 2% and they cited their concern about potential oversight or other legal consequences in the event that the PAQI Fund is significantly exceeded or under-applied.

Relative Value Units
In 2007 CMS changed the methodology for determining direct practice expenses from a top-down methodology to a bottom-up approach. This change which is being phased in over four years resulted in a payment decrease for most drug administration codes in 2007.  In 2008 we will enter the second year of the four-year transition to the new method for calculating practice expense (PE) relative value units (RVUs). In 2008 the mix for calculating PE is 50% new method and 50% old method. 

Payments for anesthesia services receive a boost in 2008 as CMS increases the work component of anesthesia services by 32%. However, this increase triggers the budget neutrality (BN) requirement. Under the BN requirement CMS must offset any total payment increase in the Fee Schedule that exceeds 20 million dollars in order to make the increase budget neutral.

In 2007 the BN requirement was prompted by the increase in the work RVUs for Evaluation and Management codes resulting in a BN adjuster of 0.8994 and a decrease of the Work RVUs for all services paid under the Medicare Physician Fee Schedule by 10.1%. With the 32% increase in anesthesia services the BN adjuster decreases in 2008 to 0.8806 for a reduction of 11.94% to all Work RVUs. The increased reduction in payment prompted by the new BN adjuster will be most noticeable in those services that have higher physician work RVUs. 

Physician Quality Reporting Initiative 
Section 101 of the Tax Relief and Health Care Act of 2006 (TRHCA) authorized CMS to establish a physician quality reporting system. CMS titled the statutory program, which began in 2007, the Physician Quality Reporting Initiative (PQRI). The 2007 PQRI which runs from July 1, 2007 – December 31, 2007, is a voluntary quality reporting program. Physicians who participate in the PQRI and successfully meet the reporting thresholds may earn up to a 1.5% bonus on all services provided during the reporting period and paid under the Medicare Physician Fee Schedule. Drugs and labs are excluded from the bonus calculation as they are not paid under the MPFS. 

In the 2008 Final Rule CMS states that they will make the results of the 2007 PQRI, at the national level, available to the public but the disclosed information would not identify individual physicians or practices’ specific reporting or performance results.

As mentioned earlier, CMS will use the $1.35 billion PAQI Fund to pay for the 2008 PQRI bonus payments. CMS is estimating the 2008 bonus to be approximately 1.5% of total Physician Fee Schedule payments. The MPFS Final Rule includes provisions for this program and a 2008 PQRI Summary Sheet is available on the CMS Web site.

CMS has concluded that quality measures submitted through a registry or other means is not feasible in 2008, therefore the quality measures will be reported through claims-based submission as in 2007. However, CMS stated that they plan to test submissions based on registries and electronic health registries in 2008.

There are 119 measures in the 2008 PQRI, the measures and the Measure Specifications are available on the CMS Web site. 2008 Measures that may be of interest to cancer centers include:

2008 PQRI Measures

Measure #

Measure Description


Myelodysplastic syndrome (MDS) and acute leukemias: baseline cytogenetic testing performed on bone marrow


Myelodysplastic Syndrome (MDS): Documentation of Iron Stores in Patients Receiving Erythropoietin Therapy


Multiple myeloma: treatment with bisphosphonates


Chronic Lymphocytic Leukemia (CLL): Baseline Flow Cytometry


Hormonal therapy for stage IC-III ER/PR positive breast cancer


Chemotherapy for stage III colon cancer patients


Plan for chemotherapy documented before chemotherapy administered


Radiation therapy recommended for invasive breast cancer patients who have undergone breast conserving surgery


Breast cancer patients who have a pT and pN category and histologic grade for their cancer


Colorectal cancer patients who have a pT and pN category and histologic grade for their cancer


Appropriate initial evaluation of patients with prostate cancer


Inappropriate use of bone scan for staging low-risk prostate cancer patients


Review of treatment options in patients with clinically localized prostate cancer


Adjuvant hormonal therapy for high-risk prostate cancer patients
Three-dimensional radiotherapy for patients with prostate cancer


Screening mammography


Colorectal cancer screening


Inquiry regarding tobacco use


Advising smokers to quit


Chronic Kidney Disease (CKD): Laboratory Testing (Calcium, Phosphorus, Intact Parathyroid Hormone (iPTH), and Lipid Profile)


Chronic Kidney Disease (CKD): Blood Pressure Management


Chronic Kidney Disease (CKD): Plan of Care: Elevated Hemoglobin for Patients Receiving Erythropoiesis – Stimulating Agents (ESA)


HIT – Adoption/use of health information technology (electronic health records)


HIT – Adoption/use of e-prescribing

In the 2008 PQRI Measure Specifications Release Notes, Version 1.0 CMS details the changes made from the 2007 PQRI Specifications.  If you plan to participate in the PQRI monitor the PQRI Web page regularly as CMS states that additional changes to the Measure Specification may occur until the start of the reporting period in 2008.

Changes to the Measures of particular interest to hematology and oncology include:

Measure Specification Revisions

Measure #

Changes to the Measure Specifications


  • Added to Instructions, “all MDS” in the first sentence
  • Added Numerator Note: The correct combination of numerator codes must be reported on the claim form in order to properly report this measure. The "correct combination" of codes may require the submission of multiple numerator codes.


  • Clarified the Description and Numerator Statement to read “…within the 12 month reporting period” instead of “within 12 months”
  • Added to Instructions, “not in remission”


  • Multiple specification updates with revised coding
  • Added Numerator Note: The correct combination of numerator codes must be reported on the claim form in order to properly report this measure. The "correct combination" of codes may require the submission of multiple numerator codes.


  • Multiple specification updates with revised coding
  • Added Numerator Note: The correct combination of numerator codes must be reported on the claim form in order to properly report this measure. The "correct combination" of codes may require the submission of multiple numerator codes.


  • Multiple specification updates with revised coding

The following 2007 PQRI Measure Specifications of particular interest to hematology and oncology will be retired effective January 1, 2008:

Retired Measures

Measure #

Measure Title


Melanoma: Patient Medical History


Melanoma: Complete Physical Skin Examination


Melanoma: Counseling on Self-Examination


Hematocrit Level in End Stage Renal Disease (ESRD) Patients

In 2006, CMS established a temporary preadministration-related service payment (G0332), for physicians and hospital outpatient departments, to cover the costs associated with locating, acquiring and preparing an infusion of Intravenous Immune Globulin (IVIG) product. The temporary additional payment was created in response to market volatility for IVIG and to ensure patient access to these drugs.  Payment for G0332 was continued in 2007.

CMS will continue to make the additional payment for G0332 Preadministration-Related Services for Intravenous Infusion of Immunoglobulin in 2008. In the Final Rule CMS says the 2008 payment for G0332 will be based on the 2007 PE RVUs. The national payment rate for this code was $74.66 in 2007, however if the Conversion Factor decreases to the scheduled 34.06820 this will drop to $67.11.

Important Billing Reminder:

  • HCPCS code G0332 - Preadministration-Related Services for Intravenous Infusion of Immunoglobulin, is to be billed in conjunction with administration of immunoglobulin.
  • You can bill for only one IVIG preadministration per patient per day of IVIG administration.
  • The service must be billed on the same claim form as the IVIG product, and have the same date of service as the IVIG product and a drug administration service.
  • Claims for preadministration-related services (G0332) will be rejected if more than 1 unit of service of G0332 is indicated on the same claim for the same date of service.

Average Sales Price Issues
In the Final Rule, CMS addressed the issue of bundled price concessions defining a “bundled arrangement” for ASP purposes as:

“An arrangement, regardless of physical packaging under which the rebate, discount, or other price concession is conditioned upon the purchase of the same drug or biological or other drugs or biologicals or some other performance requirement (for example, the achievement of market share, inclusion or tier placement on a formulary, purchasing patterns, prior purchases), or where the resulting discounts or other price concessions are greater than those that would have been available had the drugs or biologicals sold under the bundled arrangement been purchased separately or outside of the bundled arrangement.”

CMS proposed regulatory language changes in the Physician Fee Schedule (PFS) Proposed Rule that would have established a specific methodology that manufacturers would have been required to use when calculating the Average Sales Price (ASP) of drugs sold under a bundled arrangement.  However, in the Final Rule CMS declined to finalize the proposed regulatory language changes.

CMS reiterated their concern regarding the treatment of bundled price concessions in the ASP calculation and the integrity of the ASP payment methodology stating they will continue to monitor the issue and may provide more specific guidance in the future through rulemaking or through program instruction or other guidance.

CMS is encouraging public comments and the submission of additional information on bundled price concessions.

Through the Medicare Modernization Act (MMA) the Office of Inspector General (OIG) is mandated to conduct studies and to compare the ASP for drugs and biologicals with the widely available market price (WAMP) and the average manufacturer price (AMP).

Under Section 1847A (d) (3) (A) of the Act CMS may disregard the ASP for a drug or biological that exceeds the WAMP or the AMP by a specified threshold percentage and substitute a payment method based on either WAMP or AMP.  The threshold percentage will be 5% in 2008 as it has been since the start of the ASP payment methodology in 2005.

CMS acknowledged receiving numerous comments on the ASP payment methodology and other issues related to Part B drugs including:

  • Requests for billing codes for specific products;
  • Whether alternative payment methodologies or exceptions to the ASP-based payment should be considered;
  • Variation in local coverage and payment policies, including use of least costly alternative policies and invoice pricing for compounded drugs;
  • Excluding prompt pay discounts from the calculation of ASP; and
  • Whether coverage under Part B should be expanded to include certain vaccines.

CMS responded that the comments were outside the scope of this rulemaking (the MPFS Proposed Rule) and therefore will not be addressed in the Final Rule.

Drug Compendia - Off-Label Uses of Drugs and Biologicals in an Anti-Cancer Chemotherapeutic Regimen
Under Medicare statute there are three drug compendia that may be used in determining the medically-accepted indications of drugs and biologicals used in cancer chemotherapy regimens:

  • American Hospital Formulary Service-Drug Information (AHFS-DI)
  • American Medical Association Drug Evaluations (AMA-DE)
  • United States Pharmacopoeia-Drug Information (USP-DI)

Section 1861(t) (2) of the Act gives CMS the authority to revise the list of compendia for determining medically-accepted indications for drugs. CMS notes changes in the pharmaceutical reference industry has resulted in a decrease in the number of statutorily named compendia as the AMA-DE is no longer published and the USP-DI has been purchased by Thomson Micromedex and will be published under a new name.

In the Final Rule CMS did not revise the list of compendia used to determine the covered off-label use of drugs choosing instead to define a process for considering requests for changes to the list beginning January 2008.

Process for Listing Compendia for Determining Medically-Accepted Uses of Drugs and Biologicals In Anti-Cancer Treatment:

  • Receives formal written requests for changes to the list of compendia during a 30 day window beginning on January 15th each year.
  • Publishes a listing of the timely, complete requests by March 15th and solicits public comment on the requests for 30 days. The listing identifies the requestor and the requested action.
  • Considers a compendium’s attainment of the MedCAC (Medicare Evidence Development and Coverage Advisory Committee, previously known as the MCAC-Medicare Coverage Advisory Committee) recommended desirable characteristics of compendia (including explicit listing and recommendations) in reviewing requests. CMS may consider additional reasonable factors.
  • Considers a compendium’s grading of evidence used in making recommendations regarding off-label uses and the process by which the compendium grades the evidence.
  • Publishes its decision no later than 90 days after the close of the public comment period.

Exception:  In addition to the annual process outlined above CMS may internally generate a request for changes to the list of compendia at any time.

CMS addressed commenters’ concerns that the deletion of a publication from the list of compendia could cause a beneficiary to lose coverage of an off-label treatment regimen already begun with the reminder that local contractors have additional authority to make medically-accepted off-label determinations. CMS cited Section 1861(t)(2)(B)(ii)(II) of the Act which provides that local contractors use “supportive clinical evidence in peer-reviewed medical literature” to aid in making determinations of “medically-accepted” off label treatment regimens when appropriate.

Reporting Anemia Quality Indicators
Section 110 of the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act (MIEA-TRHCA) requires each Medicare Part B claim for a drug to treat chemotherapy-related anemia to include information on the patient’s hemoglobin or hematocrit level. The requirement, effective January 1, 2008, is to report the “most recent” hemoglobin or hematocrit level preceding the anti-anemia drug administration.

CMS states that they are not directing physicians as to how often or when to draw the hgb or hct.  CMS also clarified that the requirement is not limited to use of erythropoiesis stimulating agents (ESAs), but applies to any drug administered to treat chemotherapy-related anemia. CMS states that the reporting of anemia quality indicators for Part B anti-anemia drugs will facilitate assessment of the quality of care for chemotherapy-related anemia.  CMS said they will use the Change Request process to issue implementation instructions to the Medicare contractors including requirements for provider education.

In the Final Rule CMS states their intention to broaden the hgb or hct reporting requirement to include all ESA claims saying, “in light of the potential adverse events from ESA use and in accordance with our reading of Congressional intent, we believe it is appropriate to require reporting of the hemoglobin or hematocrit with respect to all ESA claims, and therefore, we have revised the regulations text to reflect this policy in this final rule with comment period.”

Competitive Acquisition Program
The Competitive Acquisition Program (CAP) was established in Section 303 (d) of the MMA as a voluntary alternative to the ASP methodology of purchasing and billing for certain Part B drugs administered in the physician office.  Participating CAP providers acquire the drugs from the approved CAP vendor, BioScrip, www.bioscrip.com, the provider bills for the administration of the CAP drug and the CAP vendor bills for the CAP drug.

The CAP was launched in mid 2006 and has not proven to be popular with oncologists. CMS continues to revise the CAP in an effort to improve the program and increase provider enrollment.  Changes to the CAP in the 2008 Final Rule include:

  • CMS  increased the time a CAP physician has to file claims after the CAP drug has been administered  from 14 days to 30 days
  • Changes to the CAP claims processing methodology allowing for payment to the approved CAP vendor for drugs and biologicals upon receipt of the claim for drug or biological supplied for administration to a beneficiary
  •  Establishment of the post-payment review process
  • CMS finalized the elements required to document the verification of CAP drug administration:
    • Beneficiary’s name.
    • Health insurance number.
    • Expected date of administration.
    • Actual date of administration.
    • Identity of the participating CAP physician.
    • Prescription order number.
    • Identity of the individuals who supply and receive the information.
    • Dosage supplied.
    • Dosage administered.

The 2008 CAP Physician Election Period began on October 1, 2007 and ended on November 15, 2007. The 2008 CAP runs from January 1, 2008 through December 31, 2008.

Physicians who are new to Medicare may submit a CAP application during the first 90 days of their Medicare participation or they may enroll during the regular fall election period.

Physicians who have elected to participate in the CAP may choose another CAP vendor or opt out of the CAP mid-year based on “exigent circumstances.” In the Final Rule CMS declined to specify a list of “exigent circumstances” instead stating, “We intend to take a broad view of what would constitute a burden to the practice resulting in an “exigent circumstance.”

CMS outlined a two-tier process under which a physician can terminate their participation in the CAP:

  • CMS will allow physicians to terminate CAP participation in the first 60 days following CAP election as a result of exigent circumstances. Under this provision, physicians whose election agreement was effective on January 1, 2008 will have until March 1, 2008 to request termination of participation if participation in the program proves to be a burden on the practice.  Burdens practices would be expected to identify in the first 60 days include:
    • Difficulties with CAP billing,
    • Difficulties with drug ordering requirements, or
    • Documentation that the practice’s initial understanding of these requirements was based on inaccurate information provided by a third party.
  • Physicians will be allowed to terminate their participation at any time after the first 60 days if they can show that a change in circumstances, not known to the practice previously, results in a burden to the practice. CMS provides the following examples of burdens that might arise after the initial 60 days:
    • A change in practice personnel,
    • A change in patient population,
    • A change in computer systems, or
    • Vendor behavior that makes it harder to participate in the program.

CMS did not finalize a policy allowing CAP drugs to be transported from the site at which they are received to another site for administration. CMS stated that they expect to make a specific proposal allowing transport of CAP drugs by next year.  CMS said the proposal would be structured to comply with all applicable state and federal laws and regulations and product liability requirements.

In response to commenters concerned that participation in the CAP would conflict with the Clinical Trials National Coverage Decision (NCD) CMS stated that standard-of-care drugs used in the control group of a clinical trial may be ordered from the CAP vendor when available.  If the drug is not available through the CAP program, the physician may buy and bill for it under the ASP system.

To be considered comments must be received by CMS at one of the addresses provided below, no later than 5 p.m. EST on December 31, 2007. In your comments refer to file code CMS-1385-FC

Comment in one of three ways:

Submit electronic comments on specific issues in the regulation. Click on the link “Submit electronic comments on CMS regulations with an open comment period, “ then click on “CMS-1385-FC.”

Attachments must be in Microsoft Word, WordPerfect, or Excel; Microsoft Word is preferred.

By mail:
Mail written comments (one original and two copies) to the following address ONLY:

Centers for Medicare & Medicaid Services,
Department of Health and Human Services,
Attention: CMS-1385-FC,
P.O. Box 8020
Baltimore, MD 21244-8020.

Mailed comments must be received by 5 p.m. EST on December 31, 2007.

By express or overnight mail:
Send written comments (one original and two copies) to the following address ONLY:

Centers for Medicare & Medicaid Services,
Department of Health and Human Services,
Attention: CMS-1385-FC,
Mail Stop C4-26-05,
7500 Security Boulevard,
Baltimore, MD 21244-1850.

Self-Referral Rules

CMS did not finalize the proposed self-referral rules with the exception of the proposed anti-markup provision for diagnostic tests.  CMS said they have enough information to finalize the self-referral regulations and will be publishing a final rule.

The anti-markup provisions finalized in the 2008 MPFS Final Rule apply when a physician or other supplier bills for the professional component (PC) or technical component (TC) of a diagnostic test, and the test was ordered by the physician, supplier, or a party related to the billing physician or supplier by common ownership or control and if:

  • The test is purchased from an outside supplier, or
  • If either the professional or technical component of the test is performed at a site other than the office of the billing physician or other supplier.

Under the anti-markup provision, Medicare payment to the physician for a purchased diagnostic test, or the PC or TC  of a diagnostic test performed at a site other than the physician’s or supplier’s office cannot exceed the net charge the physician paid for it.  

CMS states that the anti-markup provisions are designed to reduce overutilization of diagnostic tests. CMS says the anti-markup provisions will ensure that tests are ordered because they are medically necessary and are not ordered because a profit can be made on each test.


Risë Marie Cleland

315 W. Mill Plain Blvd., Suite 204
Vancouver, WA 98660
360.695.1608 office
360.695.6937 fax


Comments and suggestions for future issues are welcome, please forward correspondence to Risë Marie Cleland by email at: Rise@Oplinc.com


Volume 3 Issue 5
Volume 3 Issue 4
Volume 3 Issue 3
Volume 3 Issue 2
Volume 3 Issue 1
Volume 2 Issue 7
Volume 2 Issue 6
Resource Guide Issue 5
Volume 2 Issue 4
Volume 2 Issue 3
Volume 2 Issue 2
Volume 2 Issue 1


Risë Marie Cleland is the founder and President of Oplinc, a national organization of oncology professionals. Through Oplinc Ms. Cleland publishes the weekly Oplinc Fax Tracts focusing on the timely dissemination of information pertaining to billing, reimbursement and practice management in the oncology office and Oplinc’s Best Practices Review, which provides a more in-depth look at the issues and challenges facing oncology practices. Ms. Cleland also works as a consultant and advisor for physician practices, pharmaceutical companies and distributors.


Please note that this newsletter is presented for informational purposes only. It is not intended to provide coding, billing or legal advice. Regulations and policies concerning Medicare reimbursement are a rapidly changing area of the law. While we have made every effort to be current as of the issue date, the information may not be as current or comprehensive when you review it. Please consult with your legal counsel for any specific reimbursement information. For Medicare regulations visit: www.cms.hhs.gov.

CPT® is a Trademark of the American Medical Association Current Procedural Terminology (CPT) is copyright 2007 American Medical Association. All Rights Reserved. No fee schedules, basic units, relative values, or related listings are included in CPT. The AMA assumes no liability for the data contained herein.

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