Highlights of the 2007 Medicare Physician Fee Schedule Final Rule & The Tax Relief and Health Care Act of 2006
November 01, 2006 the Centers for Medicare and Medicaid Services (CMS) released the Medicare Physician Fee Schedule (MPFS) and Hospital Outpatient Prospective Payment System (OPPS) final rules for 2007. The provisions in the final rules became effective January 01, 2007.
December 20, 2006 President Bush signed the Tax Relief and Health Care Act of 2006 into law.
The following summary focuses on those issues of most interest to oncologists. Links to the MPFS Final Rule, OPPS Final Rule and the Tax Relief and Health Care Act of 2006 are provided under Resources below.
2007 Conversion Factor
Prior to Congress adjourning, several proposals to fix this formula were put forth. Nearly all of the proposals included a Pay for Performance (P4P) or Pay for Reporting program. The Centers for Medicare and Medicaid Services (CMS) has been actively developing P4P programs for several years. CMS states, “The foundation of effective pay-for-performance initiatives is collaboration with providers and other stakeholders, to ensure that valid quality measures are used, that providers aren’t being pulled in conflicting directions, and that providers have support for achieving actual improvement.”
On December 09, 2006 Congress passed the Tax Relief and Health Care Act of 2006 (H.R. 6111), President Bush signed the bill into law on December 20, 2006. Among other provisions the bill blocks the scheduled 5.0% negative update to the CF and sets the 2007 CF at the 2006 level of 37.8975.
However, payment rates for services in 2007 will vary from the 2006 payment rate due to the changes in the practice expense methodology, the relative value unit revisions, re-weighting of geographic adjustment factors, and the imaging provisions included in the Deficit Reduction Act (DRA).
Due to the change in the 2007 MPFS rates, CMS is extending the participation enrollment period to February 14, 2007. The participation enrollment period will run from November 15, 2006, through February 14, 2007. The effective date for any participation change is January 1, 2007.
The decrease on the TC of these additional imaging procedures was scheduled to increase to a reduction of 50% in 2007. However, due to the TC cap on imaging services and the revisions in the practice expense methodology, CMS has elected not to implement the 50% payment reduction scheduled in 2007 for these imaging procedures. The 25% reduction implemented in 2006 will remain effective in 2007.
In accordance with the Deficit Reduction Act of 2005 (DRA) physician payment rates for the technical component (TC) of certain imaging services performed in the physician office will be capped at the hospital outpatient rate. The cap will be applied after the 25% decrease for multiple imaging procedures performed on contiguous body parts. The decreases in reimbursement for imaging services performed in physician offices due to the cap are significant.
The Access to Medical Imaging Coalition (AMIC) was formed in response to the DRA mandated cap on imaging services performed in independent imaging facilities and physician offices. Visit their website for more information on the coalition’s efforts.
Five-Year Review of Relative Value Units
CMS is required under law to review physician work values every five years. The purpose of the 5-year review is to allow for a reassessment of the intensity of the physician work required for the service. Through this 5 year process CMS proposed to increase in 2007 the physician work RVUs for higher level evaluation and management (E/M) codes. The proposed increases have been accepted by CMS and will be effective for dates of service on or after January 1, 2007.
Sample Work RVU Increases:
However, the Omnibus Budget Reconciliation Act of 1989 requires that increases or decreases in RVUs for a year that result in a change of more than $20 million from what the Medicare expenditures would have been without the changes must be adjusted to ensure budget neutrality.
CMS reports that the increase in the work RVUs for E/M codes will increase Medicare expenditures by approximately $4 billion, thus triggering the budget neutrality adjustment. To maintain budget neutrality the work relative value of all services paid under the Medicare Physician Fee Schedule (MPFS) will be reduced 10.1% by multiplying the work RVUs of the service code by the Budget Neutrality Factor (BNF) of 0.8994.
Labs and drugs have their own fee schedule. They are not paid under the MPFS and therefore are not subject to the budget neutrality adjustment.
In the past, the formula for calculating fee schedule amounts for a service was:
Beginning January 01, 2007 the formula will include an additional step to include the Budget Neutrality Factor (BNF):
In the sample calculation for CPT 99215 we use the Medicare National Average Geographic Practice Cost Index (GPCI) of 1.0. Consult with your Medicare Carrier to find your GPCI.
After the budget neutrality adjustment is applied, the 2007 Medicare payments for many of the evaluation and management services will still see an increase. The table below illustrates some of the increases and decreases in reimbursement on these services.*
Practice Expenses Calculations
This revision in the calculation of the practice expense along with the negative adjustment of 10.1% on the work RVUs results in a decrease in the majority of drug administration services. The table below illustrates the changes in the PE relative value units with the new PE methodology transitioned in at 25% in 2007.
Quality Improvement Efforts
CMS has identified the goals of the PVRP to include:
Participation in the PVRP in 2006 was voluntary and participating providers received no payment for participation. The quality measures available for reporting in 2006 were very limited, there were no oncology specific measures and therefore oncologists were largely unaware of the program.
The Tax Relief and Health Care Act of 2006 includes a provision to establish a bonus payment of up to 1.5% to eligible professionals who participate in a quality reporting program using the PVRP measures.
Eligible professionals would report the physician quality measures on the claim form with G-codes and/or CPT II codes. Providers must report on measures that are clinically relevant to their practice. The reporting period for the bonus payment will run from July 01, 2007 to December 31, 2007.
Providers who satisfy the participation and reporting guidelines will be paid a one-time bonus payment equal to 1.5% of the allowed charges for covered professional services furnished during the reporting period subject to a limit. The program will also be subject to an overall payment limit.
In early December CMS posted the 2007 Oncology Voluntary Reporting Program G Codes on their PVRP web page. The 68 G-codes listed are the same G-codes used to report disease status in the 2006 Oncology Demonstration Project, with some revisions in the descriptions.
There remain many questions regarding implementation and participation in this program. Monitor the CMS PVRP web page and your Medicare Carrier’s web site and newsletters for updates. You may also email questions about the program to CMS at PVRP@cms.hhs.gov or call the PVRP Help Desk at (866) 288-8912.
Recovery Audit Contractor Program
Section 306 of the Medicare Modernization Act of 2003 required the Secretary of the U.S. Department of Health and Human Services (HHS) to demonstrate the use of Recovery Audit Contractors (RACs) in identifying Medicare overpayments and underpayments and recouping Medicare overpayments.
In response, CMS began a demonstration project to determine whether RACs could identify past improper payments in Medicare fee-for-service, and whether they could provide information to CMS, Medicare contractors, Quality Improvement Organizations (QIOs) and Program Safeguard Contractors (PSCs) that could be used to prevent future improper Medicare payments.
The RAC program began in March 2005 in California, Florida and New York. The RACs analyzed claims data for improper payments including:
Excluded from review by the RACs:
On November 22, 2006, CMS published the RAC Status Document FY 2006: Status on the Use of Recovery Audit Contractors (RACs) in the Medicare Program. The 26 page document reported on the success of the RAC demonstration project citing a total of just over $300 million in improper payments identified through the RACs.
The table below summarizes the improper payments identified, underpayments paid back and overpayments collected. At the time of the report $54.1 million was returned to the Medicare Trust Funds and another $232 million was in the collection or repayment process.
In their report CMS concludes that the RAC demonstration program is cost effective - citing a 373% return on investment in FY 2006 - and successful in identifying improper Medicare payments, returning dollars to the Medicare Trust Funds, identifying monies that need to be returned to providers and preventing future overpayments.
In response to the reported success of the RAC demonstration project Section 302 of the Tax Relief and Health Care Act of 2006, directs the Secretary of Health and Human Services to expand the Recovery Audit Contractors (RACs) program to all states by January 01, 2010.
Section 302 also specifies that RACs may engage in recovery activities for a given fiscal year and “retrospectively (for a period of not more than four fiscal years prior to such fiscal year).”
The Deficit Reduction Act of 2005 (DRA) requires States to collect Medicaid rebates for certain physician administered drugs. Beginning January 01, 2007 States must collect National Drug Codes (NDC) for both single source drugs and the 20 multiple source physician-administered drugs identified by the Secretary of the Department of Health and Human Services (HHS) as having the highest dollar volume in Medicaid.
The Secretary’s list of the top 20 multiple source physician-administered drugs are organized in order of highest cost and volume under the Medicaid program. The list includes the drug name, HCPCS, labeler name & package size and corresponding NDC.
The list compiled using 2004-2005 Medicaid data includes the following drugs ranked in order of cost & volume:
Effective January 01, 2008, states that do not collect NDCs on these drugs will not receive Federal matching payments for the drugs unless the state applies for and receives a hardship waiver.
For more information on the Medicaid Drug Rebate Program see the Oplinc Best Practice Review Newsletter Volume 2 Issue 3.
CMS continues to study IVIG access and availability and will discontinue the additional payment in calendar year 2007 if they determine it is no longer necessary. The national average payment in the physician office for G0332 is $74.66. Access CMS Transmittal 1140 for details.
Average Sales Price
CMS also chose not to provide specific guidance on fees paid to Pharmacy Benefit Managers (PBM) and Group Purchasing Organizations (GPO) other than to say that if they meet the definition of a bona fide service fee they are excluded from ASP calculation.
CMS acknowledged that the fees paid to PBMs and GPOs may have implications for the integrity of the ASP payment methodology. They left open the possibility of more specific guidance on this issue in the future stating, “We are continuing to develop our understanding of the variety of agreements made with entities such as PBMs and GPOs and the possible effects of these arrangements on the calculation of ASP and provider acquisition costs.”
Similarly, CMS declined to issue further guidance to manufacturers on the treatment of bundled sales in the ASP calculation due to the wide range and complexity of the bundling arrangements. CMS stated they would pay close attention to this issue and may provide more specific guidance in the future.
Section 6001(c) of the Deficit Reduction Act (DRA) modified the definition of Average Manufacturers Price (AMP) to remove prompt pay discounts paid by manufacturers to wholesalers from the calculation of the AMP as of January 1, 2007. However, these prompt pay discounts are still included in the calculation of ASP.
Although the oncology community continues to push for the removal of prompt pay discounts from the calculation of ASP, CMS states that their inclusion is mandated by statute in the Medicare Modernization Act of (MMA) § 303(c) and that Congress must act to remove them.
Section 110 of the Tax Relief and Health Care Act of 2006 amends Section 1842 of the Social Security Act (42 U.S.C. 1395u) with the following subsection:
Geographic Practice Cost Index (GPCI)
The floor scheduled to end December 31, 2006, has been extended for one year through passage of the Tax Relief and Health Care Act of 2006. The extension of this payment floor in 2007 averts payment reductions in 53 states and localities where the geographic adjustment was about to expire.
2007 Hospital Outpatient
There will be a 3.4% inflation update for services paid under the hospital outpatient perspective payment system (HOPPS). CMS decided not to tie the increase in the market basket to the reporting of quality measures in 2007. Instead, CMS will develop quality measures specifically for hospital outpatient care and will require hospitals to report these measures beginning in 2009.
Drugs will continue to be reimbursed at 106% of ASP rather than the proposed 105% of ASP. Drugs costing $55 or more per day will be reimbursed separately (with the exception of most of the antiemetics which will continue to be paid separately); in 2006 the threshold for payment was $50.
Radiopharmaceuticals will be paid at charges adjusted to cost using hospital specific cost to charge ratios. Radiopharmaceuticals costing less than $55 per day will not be separately payable.
The temporary add-on payment for IVIG will be temporarily continued for the hospital as it is in the physician office. Payment for G0332 will be approximately $75 in the hospital outpatient department.
New 2007 CPT Codes
99363 Anticoagulant management for an outpatient taking warfarin, physician review and interpretation of International Normalized Ratio (INR) testing, patient instructions, dosage adjustment (as needed), and ordering of additional tests; initial 90 days of therapy (must include a minimum of 8 INR measurements)
99364 Anticoagulant management for an outpatient taking warfarin, physician review and interpretation of International Normalized Ratio (INR) testing, patient instructions, dosage adjustment (as needed), and ordering of additional tests; each subsequent 90 days of therapy (must include a minimum of 3 INR measurements)
96040 These services are provided by trained genetic counselors and may include obtaining a structured family genetic history, pedigree construction, analysis for genetic risk assessment, and counseling of the patient and family. These activities may be provided during one or more sessions and may include review of medical data and family information, face-to-face interviews, and counseling services.
These services (99363, 99364 & 96040) are not separately payable by Medicare as they are classified as Status B or Bundled Codes: Payment for covered services are always bundled into payment for other services not specified. There will be no RVUs or payment amount for these codes and no separate payment is made. When these services are covered, payment for them is subsumed by the payment for the services to which they are incident. However, they may be payable by private payers.
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